It’s not easy being green (or an economist for that matter)

Old habits are hard to beat. When economists see a market failure, the reaction is a wish to correct them. For instance, when we think we spot a case of tragedy of the commons (resulting in overfishing, overgrazing, (over)polluting) we want to introduce property rights, regulation or incentives. Over the years, however, research in the field of behavioural economics have shown us that we may want to slow down and think differently. It turns out that users of commons (such as grazing lands) often invent complex social schemes that work and that don’t require outside interference from incentives or regulation. Indeed, sometimes incentives can have negative consequences, because they displace (crowd out) other motivations and disturb a fragile social and economic balance. Examples of this being the case come from a as diverse fields as the use of penalties for parents arriving late to collect their children from kindergarten, paying parents in poor countries to send their children to school, and the management of communal cattle grazing lands (good sources for further information on these cases include Sam Bowles (The Moral Economy), Daniel Kahnemann (Thinking Fast and Slow) and Kate Raworth (Doughnut Economics))

So, research in the field of behavioural economics has shown us that human beings don’t necessarily respond as predicted to incentives and are motivated by a lot more than just money (such as reciprocity, social standing, altruism). Economists (and everyone else!) have sort of known this for a long time but we haven’t changed our policy prescriptions accordingly. The stickiness in our response to the new research can be explained by a variety of reasons: it’s always painful to rejig explanations and recommendations, it takes time and patience to convince the audience (policy makers, the public) and the new paradigm is typically more complicated and situation-dependent than the old standardised response we built around homo economicus.