Moral behaviour, altruism and environmental policy

David Tregear Ulph, Marc Philip Klaus Daube

    Research output: Working paperDiscussion paper

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    Abstract

    Free-riding is often associated with self-interested behaviour. However if there is a global mixed pollutant, free-riding will arise if individuals calculate that their emissions are negligible relative to the total, so total emissions and hence any damage that they and others suffer will be unaffected by whatever consumption choice they make. In this context consumer behaviour and the optimal environmental tax are independent of the degree of altruism. For behaviour to change, individuals need to make their decisions in a different way. We propose a new theory of moral behaviour whereby individuals recognise that they will be worse off by not acting in their own self-interest, and balance this cost off against the hypothetical moral value of adopting a Kantian form of behaviour, that is by calculating the consequences of their action by asking what would happen if everyone else acted in the same way as they did. We show that: (a) if individuals behave this way, then altruism matters and the greater the degree of altruism the more individuals cut back their consumption of a ’dirty’ good; (b) nevertheless the optimal environmental tax is exactly the same as that emerging from classical analysis where individuals act in self-interested fashion.
    Original languageEnglish
    PublisherUniversity of St Andrews
    Pages1-24
    Number of pages24
    Publication statusPublished - 3 Feb 2014

    Publication series

    NameSchool of Economics & Finance Discussion Paper
    PublisherUniversity of St Andrews
    No.1409
    ISSN (Print)0962-4031
    ISSN (Electronic)2055-303X

    Keywords

    • Altruism
    • Climate change
    • Environmental economics
    • Environmental tax
    • Externalities
    • Moral behaviour
    • Pro-social behaviour
    • Public goods

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