Institutions, Motivations and Public Goods

Institutions, Motivations and Public Goods: Theory, Evidence and Implications for Environmental Policy
Date:
2008-01
By:
Andrew Reeson (CSIRO Sustainable Ecosystems, Australia)
URL:
http://d.repec.org/n?u=RePEc:cse:wpaper:2008-01&r=cbe
In economic terms, the environment is largely a public good. Contributing to a public good is costly to an individual, while the benefits are enjoyed by all. Despite this, many people voluntarily contribute to public goods, both in laboratory economic experiments and through day-to-day environmental decisions. These voluntary contributions are largely motivated intrinsically, that is satisfaction comes from the act itself rather than external rewards. Policy interventions are often required to increase the provision of public goods to the socially optimal level, which usually take the form of extrinsic incentives such as payments or regulations. Theoretical and empirical evidence from psychology and economics suggests that such extrinsic incentives can crowd out the intrinsic motivations which underlie voluntary contributions. As a result, a policy may have less than the anticipated impact. It is even possible for a costly
Keywords:
public goods; environmental policy; intrinsic motivation; crowding out
JEL:
H4 Q0