Is it Time to Rethink the Idea of the Amoral Economic Man?

There is a widely held belief that when designing public policy or legal systems, it makes the most sense to assume that all citizens are entirely self-interested and amoral. It’s a theory known as “homo economicus” or “economic man.” But, economist Samuel Bowles argues against that belief in his book The Moral Economy: Why Good Incentives are no Substitute for Good Citizens. Bowles laid out the case for his argument during a recent talk at UC Berkeley.

Bowles says there are two key reasons to move away from the economic man idea. First, he says polices that follow the paradigm can be self-fulling – making the assumption of universal amorality truer than it might otherwise be under different policies. Second, he argues that fines and rewards often do not work as intended.

The problem Bowles argues, is that incentives can “crowd out” otherwise altruistic motives people might have for any given action. He cites the classic example of a daycare that imposed a small fee for parents who showed up late. The result? Many more late parents. The thinking goes that the fee turned being late into a commodity rather than an inconsiderate action. Thus, the incentive backfired, and ended up having the opposite of its intended effect.

However, Bowles says incentives themselves are not to blame. He argues they can be designed in a such a way to encourage good civic behavior, while avoiding possible pitfalls. For example, when Ireland wanted to get rid of plastic bags, lawmakers imposed a small tax. But, they paired the tax with a huge media campaign about not trashing the Emerald Isle. Appealing to citizens better nature made the difference, and most shoppers stopped using plastic bags within weeks.

Watch — The Moral Economy: Why Good Incentives are No Substitute for Good Citizens

Pathbreaking Environmental Initiatives

Over the past 30 years, arguably the most significant innovation in environmental policy has been the introduction of policy instruments that rely upon market forces to control pollution. You may know it as “cap-and-trade.” This policy debuted in the Clean Air Act Amendments of 1990 and has since spread from a focus on acid rain in the US to the development of carbon markets around the world. China is the most recent large emitter to announce a national carbon market.

This talk by Dan Dudek at the Bren School of Environmental Science and Management at UC Santa Barbara reviews the major innovations of this policy tool, its migration around the world, and prospects for the future.

Dudek joined the Environmental Defense Fund in 1986. He has participated the development of several environmental initiatives including the Montreal Protocol, the US acid rain program, the Kyoto Protocol, and California’s AB-32. He has been an adviser and consultant to numerous governments and organizations. He has served on the Secretary of Energy’s Advisory Board; US EPA advisory committees; and on two councils that personally advise China’s Premier on environmental issues. He launched EDF’s China Program in 1995 to develop programs for the control of both conventional and greenhouse gas emissions. His work now focuses on India’s air quality problems.

Watch From the Adirondacks to Beijing: One Economist’s Journey.