Beyond Homo economicus: evidence from experimental economics

Environmental policies are generally based on a model of the human actor taken from neoclassical economic theory. This paper reports on laboratory experiments suggesting weaknesses in this model and describes alternative models correcting these weaknesses. One finding is that economic actors tend to be hyperbolic as opposed to exponential discounters who discount the immediate future at a higher rate than the more distant future. Another finding is that economic actors are not self-regarding, but rather in many circumstances are strong reciprocators who come to strategic interactions with a propensity to cooperate, respond to cooperative behavior by maintaining or increasing cooperation, and respond to free-riders by retaliating against the ‘offenders’, even at a personal cost, and even when there is no reasonable expectation that future personal gains will flow from such retaliation. We discuss some implications for policy analysis.