Behavioral Economics And Sustainability How Consumer Choices Affect Environmental Policies

Abstract

This paper discusses how behavioral economics has been used to address environmental sustainability and in particular how the decision making of consumers impacts and is affected by environmental policy. Common policy instruments are often based on rational actor models, but behavior in practice is regularly moving away because of the issues of cognitive biases, habits and social norms. Based on a qualitative analysis of literature review and through case studies examining several examples in a relative extent, the study has uncovered some of the major behavioral impediments towards sustainability, which includes present bias, status quo inertia and diminished perception of individual contribution. It also considers the effectiveness of behaviorally informed interventions, such as nudging, default setting, framing and social norm messaging. There is evidence that such tools have enormous potential to enhance the attainment of sustainable practices once created and applied in the right way using the UK, US, India, and EU programs. In conclusion, the presentations undermine the idea that inclusion of behavioral economics in sustainability policy is effective and fair, and provide a feasible system of integrating individual decision-makings with the overall environmental interests.