Alternative models of individual behaviour and implications for environmental policy

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 environmental policy theory are outlined.