Raising Environmental Consciousness versus Creating Economic Incentives as Alternative Policies for Environmental Protection
Santopietro, George D., Journal of Economic Issues
Protecting the environment means changing people's behavior to reduce human impact on the environment. Neoclassical economists, with their analytical focus on utility maximizing individuals, recommend the creation of monetary incentives that force users of environmental services to take account of the opportunity cost of their behavior. These policies are often rejected by noneconomist environmentalists who object to allowing people to pay to pollute and to having to pay them to stop. Such environmentalists tend to advocate raising environmental consciousness through education as a means of inducing changes in behavior. In this paper, an institutionalist analysis of monetary incentives and education is used to identify the conditions under which each type of policy might be more effective.
This debate is likely to become more important in the design of future environmental policy. Environmental policy in the United States since 1970 has focused on technological fixes for abating pollution from point sources of emissions. Thus far, policymakers have generally avoided alternatives aimed at changing the behavior of households. However, as the potential for technological fixes is exhausted, environmental protection and sustainable development will require changes in the behavior of millions of individuals and households.
Alternatives for Influencing Household Behavior
J. K Galbraith's analysis of the types of power provides a useful framework for classifying the methods that might be used to change household behavior in order to reduce the environmental impact of current life-styles [Galbraith 1983].
1. Condign power wins compliance by making alternative behaviors sufficiently unpleasant or painful that these alternatives are not chosen. Monetary disincentives may be used to discourage undesired behavior. Fines for violating emission regulations and emission charges are examples of environmental protection policies based on condign power.
2. Compensatory power wins compliance by offering sufficient rewards for appropriate behavior so that individuals are induced to comply. Monetary incentives are offered when the appropriate behavior is followed. Payment for recycling materials and subsidization of control of agricultural run-off are examples of compensatory environmental policy. To a neoclassical economist, both monetary incentives and disincentives represent the same policy-changing opportunity costs. Charges increase the monetary cost of emissions, and payments for recycling create an opportunity cost of disposing. However, from the point of view of the household, charges would be seen as a punishment for continuing a customary behavior, while payments would seen as a reward that can be earned for adopting change.
3. Conditioning power persuades a person to perform the desired behavior because it is perceived as natural and proper. The motivation becomes intrinsic. The person will choose this type of behavior without extrinsic influences such as the threat of punishment or the expectation of reward. The person's own value system is changed in the effort to change behavior. Environmental consciousness-raising constitutes the use of conditioning power to change behaviors that harm the natural environment.
Economists advocating the use of monetary incentives are in effect relying on the use of condign and compensatory power, but environmentalists supporting the use of education prefer to use conditioning power. This is because their fundamental goals differ. Economists are concerned only with compliance: whether or not the individuals change their behavior in the desired manner. Environmentalists are seeking conversion: changing the underlying value system that guides behavior.
Social psychologists have studied the means by which behavior can be changed through conversion. Much of the literature in social psychology acknowledges that monetary incentives are the most powerful tool for obtaining desired behavioral changes [De Young 1986, 1993; Dwyer et al. …