Ecological Economics 32 2000 43 – 61
METHODS
Alternative models of individual behaviour and implications for environmental policy
Jeroen C.J.M. van den Bergh
a,
, Ada Ferrer-i-Carbonell
b
, Giuseppe Munda
c
a
Department of Spatial Economics, Free Uni6ersity, De Boelelaan,
1105
,
1081
HV Amsterdam, Netherlands
b
Foundation of Economic Research SEO
, Uni6ersity of Amsterdam, Roetersstraat
11
,
1018
WB Amsterdam, Netherlands
c
Department of Economics and Economic History, Uni6ersitat Autonoma de Barcelona, Edifici B,
08193
Bellaterra, Barcelona, Spain
Received 2 November 1998; received in revised form 26 April 1999; accepted 14 July 1999
Abstract
Most insights of environmental economics are in line with the standard neoclassical economic model of rational behaviour, formulated in terms of maximization of utility in general, or of profits in particular. The standard theory
of environmental policy is a case in point. However, the maximization hypothesis and its methodological foundation have been criticized on many grounds related to a lack of either logical or empirical content. Moreover, over the years
a great many alternative models of behaviour have been proposed. Both criticism and alternatives are surveyed here. Attention is devoted to relevant insights from the philosophy of science, the notion of methodological individualism,
and other criticism. The alternative behavioural models include bounded rationality and ‘satisficing’, lexicographic preferences, habitual behaviour, incommensurability and multicriteria evaluation, and various models of behaviour
under uncertainty. Major implications of the criticism and alternative models of individual behaviour for environmen- tal policy theory are outlined. © 2000 Elsevier Science B.V. All rights reserved.
Keywords
:
Maximizing behaviour; Methodology; Social context; Bounded rationality; Satisficing; Lexicographic preferences; Habitual behaviour; Endogenous preferences; Risk and uncertainty
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1. Introduction
Most insights of environmental economics are based on the standard neoclassical model of ratio-
nal behaviour: constrained maximization of utility or of profits. However, the maximization hypoth-
esis and its methodological foundation have been criticized on many grounds.
1
Moreover, there ex-
Corresponding author. Tel.: + 31-20-4446164-090; fax: + 31-20-4446004.
E-mail address
:
jberghecon.vu.nl J.C.J.M. van den Bergh
1
For a critique in the realm of Ecological Economics see Daly and Cobb 1989 who have used the terminology ‘‘mis-
placed concreteness of Homo Economicus’’. 0921-800900 - see front matter © 2000 Elsevier Science B.V. All rights reserved.
PII: S 0 9 2 1 - 8 0 0 9 9 9 0 0 0 8 8 - 9
ist many alternative models of individual be- haviour. In this paper we examine the criticism
and consider the implications of alternative mod- els for environmental economics. Two main areas
of research in environmental economics are domi- nated by the standard behavioural model. The
first one is economic valuation, dealing with de- velopment and application of methods for esti-
mating individuals’ values for environmental changes, based on revealed and stated preferences.
The other is the theory of environmental regula- tion, where efficiency is the guiding principle for
selecting environmental policy instruments. The discussion here will focus on the implications of
alternative theories of individual behaviour for environmental policy theory.
We will not argue that neoclassical behavioural theory should be rejected, in spite of doubts about
its realism, accuracy, and predictability. Instead, we present a pluralist approach by considering
alternative behavioural assumptions on an equal level. Many authors in ‘ecological economics’
have expressed a discomfort with the neoclassical behavioural model, and some have even pointed
out that it is partly responsible for setting the wrong agenda for environmental policy-making
Costanza, 1991. But although ecological eco- nomics is prospering as a field of integrated re-
search, it has generated few new insights about the link between behaviour, environment and
policy.
The organization of this paper is as follows. Section 2 summarizes the main assumptions of the
standard microeconomic theory of consumer and producer behaviour. Section 3 provides a concise
review of the essential criticism of the maximiza- tion hypothesis. Section 4 introduces several alter-
native models of behaviour. Section 5 outlines the implications for environmental policy theory of a
relaxation of neoclassical behavioural assump- tions and a replacement by alternative assump-
tions. Section 6 presents conclusions.
2. Assumptions underlying maximizing behaviour
