Experiments and externalities : understanding cause and effect in environmental decision making

• Main Author: Gosnell, Greer
• Published: London School of Economics and Political Science (University of London) 2016
• Subjects: 333.72; GE Environmental Sciences
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.713428

The field of behavioral economics enhances the ability of social science research to effectively inform socially efficient climate policy at the microeconomic level, in part due to the dependence of climate outcomes upon present and future human consumption patterns. Since the behavioral field is relatively new, environmental and resource economists still have scarce evidence as to why people make particular decisions. For this thesis, I have conducted both field and laboratory experiments to address market failures highly relevant to environmental outcomes, namely international public goods problems and externalities from fuel and resource consumption. My methodology capitalizes upon the benefits of each experimental methodology—laboratory, artefactual, framed, and natural—to capture the effects of particular informational and contextual elements on subsequent behavior. While each methodology has its potential advantages and shortcomings, I contend that the complete toolkit is necessary to study a broad range of relevant environmental contexts. For instance, while natural field experiments are generally considered the “gold standard” in terms of exogeneity and generalizability, many settings in which field experimentation may provide tremendous insight preclude randomization across unknowing subjects. Similarly, researchers may not have access to populations of interest, though lab experimentation may still provide insights into the behavior of these populations or reveal motivations not yet captured in neoclassical utility functions. In this thesis, I will detail results from one of each experimental type, each suited to the context of interest. The natural field experiment in Chapter 2 aims to discern whether there is a role for environmental preferences and cognitive dissonance to play in encouraging individuals to engage in resource-conserving behaviors, and suggests that the latter may be effective in changing the behavior of green consumers. Chapter 3 presents the results of a large-scale framed field experiment comprising all eligible captains in Virgin Atlantic Airways, which tested the impacts of personalized information, tailored targets, and prosocial incentives on captains’ performance of fuel-efficient behaviors. In addition to documenting a substantial Hawthorne effect, we provide intent-to-treat estimates of the three types of feedback to show that tailored targets are the most (cost) effective strategy of those implemented. I introduce a complementary artefactual field experiment in Chapter 4, which allows for detailed scrutiny of captains’ fuel efficiency based on their social preferences as well as preferences and attitudes toward risk and uncertainty. I find that more risk-averse captains are more prone to over-fuel, that prosocial incentives increase captains’ well-being, and that revealed altruism increases responsiveness to prosocial incentives. Finally, Chapter 5 aims to provide insight into the effects of “side deals” in facilitating cooperation on international climate agreements. Using a lab experiment, we find that side deals alter the composition of group contribution to climate change mitigation, eliciting increased effort on the part of players with higher wealth.