Economic Research and Perspectives

Economic Research and Perspectives

Cognitive Biases in Climate Change Policy using Behavioral Economics Theories

Authors
Mojtaba Panahi 1
rouhollah shahnazi 2
karim Eslamloueyan 3
Ali Asgary 4
1 PhD Candidate, Department of Economics, Faculty of Economics, Management and Social Sciences, Shiraz University, Shiraz, Iran
2 Associate Professor, Department of Economics, Faculty of Economics, Management and Social Sciences, Shiraz University, Shiraz, Iran
3 Professor, Department of Economics, Faculty of Economics, Management and Social Sciences, Shiraz University, Shiraz, Iran
4 Associate Professor, Crisis and Disaster Management Department, York University, Toronto, Canada
10.22034/24.2.265
Abstract
Introduction:

In recent years, policy makers have increasingly recognized the significance of vulnerability to climate change. This urgent situation necessitates the implementation of immediate, extensive, and comprehensive measures. Extensive scientific consensus has demonstrated that human activities have contributed to significant climate warming trends. However, despite this evidence, there are individuals who remain skeptical and deny the existence of climate change. Consequently, addressing this skepticism and effectively tackling the climate crisis require fundamental changes in behavior and attitudes across various levels and domains of human life. Therefore, the primary objective of this article is to examine the behavioral factors involved in climate policy making, with a particular emphasis on the role of cognitive biases.

Methodology:

This research employed a semi-experimental method, drawing on the principles of behavioral economics. The study utilized a design that included both an experimental group and a control group, with pre-test and post-test assessments. The experimental group was exposed to different information frames, which were developed based on the principles of behavioral economics, while the control group did not receive any framing intervention.

Data for this study was collected through fieldwork and a questionnaire. The statistical population consisted of individuals who had access to WhatsApp, Telegram, and Instagram platforms during the experiment, which took place in the spring of 2023. The target sample size for this research was determined to be 600 participants, divided into six groups of 100 individuals each. The sample size was determined using Cochran's formula for limited populations. Additionally, a random sampling method was employed in this research.

Results and Discussion:

This article aims to establish a connection between climate policy and behavioral sciences by introducing the practical and cost-effective approach of nudge theory. Drawing on insights from behavioral economics, specifically through behavioral interventions that leverage biases such as loss aversion, hyperbolic discounting, and the framing effect, this study investigates how these interventions can encourage individuals to make choices that align with addressing climate change and environmental concerns. Moreover, existing research has demonstrated that integrating the framing effect with other cognitive biases can be an effective and low-cost policy tool for studying environmental behavior.

Using a semi-experimental methodology, this article examines the impact of information formatting, including profit and loss framing, hyperbolic discounting bias, as well as extensive and continuous information presentation, on individuals' general attitudes and understanding of climate change. The hypotheses of this research were derived from the literature of behavioral economics, cognitive science, and previous studies in the field of environmental issues. The findings of this research indicate that individuals exhibit a greater sensitivity to loss framing, supporting hypothesis H1. In other words, people are more responsive to potential losses than gains when making decisions. Additionally, the results demonstrate that individuals display a significantly higher willingness to participate when presented with present-loss and present-profit framing compared to future-loss and future-profit framing, aligning with hypothesis H2. This preference for the present over the future, known as present bias and hyperbolic discounting bias, has been extensively examined and validated in behavioral economics literature. Furthermore, the findings show that framing losses and emphasizing the present context contribute to a heightened perception of risk, consequently increasing individuals' willingness to take preventive measures under a loss framework.

Additionally, the provision of information in a broad and continuous manner also yielded a significant effect in influencing individuals' behavior, corroborating hypothesis H3.

Conclusion:

This study offers novel insights for policymaking and governance regarding public participation in mitigating the impacts of climate change. The findings indicate that the utilization of loss-present framing and continuous framing proves more effective in increasing the willingness of the general public to engage in climate change reduction efforts. Based on the research conducted in this article, climate change mitigation policies can be effectively promoted in public settings through the implementation of nudges that employ loss-present framing when delivering information.

Furthermore, the current reliance on economic incentives in most policies to encourage public participation is a noteworthy issue. However, this study proposes the use of non-economic incentives and demonstrates the positive impact of nudges on individuals' willingness to engage in projects aimed at reducing the effects of climate change
Keywords
Climate Change
behavioral economics
Cognitive Bias
nudge
Hyperbolic Discounting Bias
Loss Aversion Bias
Framing Effect

Subjects

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Economic Research and Perspectives
Volume 24, Issue 2
Summer 2024
Pages 265-298