Climate Change and Human Behavior: A Behavioral Economics Perspective

In the context of the pressing need to address climate change, this chapter highlights the transforming power of behavioral economics through education. There is a large literature on an economic approach to climate change using traditional economic policy instruments such as taxes, subsidies, and regulation in a world of risk and unbounded rationality. By contrast, our aim in this chapter is to consider the promise and challenges that arise by using behavioral economics in a ‘non-standard setting.’ Our non-standard elements are bounded rationality, behavioral risk preferences, behavioral time preferences, true uncertainty, and complex adaptive dynamics. We distinguish between a ‘micro approach’ to the problem that leverages insights from behavioral economics to influence pro-environmental actions, and a ‘macro approach’ that considers the system-wide properties of the dynamic system. We discuss the role that can potentially be played by education/persuasion of the lay public, politicians, and policymakers in inducing more environmentally friendly outcomes. We address an interdisciplinary audience, make no attempts at comprehensiveness or generality, and our approach is necessarily selective.