Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 34: Environmental Policy when People's Preferences are Inconsistent, Non-Welfaristic, or simply Not Developed

Olof Johansson-Stenman
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Olof Johansson-Stenman: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: , Box 640, SE 405 30 GÖTEBORG

Abstract: This paper discusses how a benevolent policy maker should act based on some, possibly non-welfaristic,ethical principle in cases where people's preferences are not perfectly informed,consistent and fully developed with regard to all goods, including all kinds of environmental goods, as is normally assumed in mainstream economic theory. When stated or revealed preferences do not reflect the maximization of individual welfare, it is argued that welfare,rather than preferences, has intrinsic value. However, it is also argued that properly designed stated preference methods may provide useful information about people’s views about alternative ethical ends, besides human well-being, and that policy makers should take such views seriously.

Keywords: ethics; environmental policy; environmental valuation; cost-benefit analysis; endogenous preferences; preference construction; irrationality; bounded rationality; cognitive dissonance; anthropocentrism

JEL-codes: A13; D61; Q28

20 pages, February 28, 2001

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