Frontiers of Environmental Economics
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Frontiers of Environmental Economics

Edited by Henk Folmer, H. Landis Gabel, Shelby Gerking and Adam Rose

Top European and American scholars contribute to this cutting-edge volume on little-researched areas of environmental and resource economics. Topics include spatial economics, poverty and development, experimental economics, large-scale risk and its management, organizational economics, technological innovation and diffusion and many more.
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Chapter 5: To whisper in the ears of princes: laboratory economic experiments and environmental policy

Ronald G. Cummings, Michael McKee and Laura Taylor

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5. To whisper in the ears of princes: laboratory economic experiments and environmental policy Ronald G. Cummings, Michael McKee and Laura O. Taylor 1 INTRODUCTION Over the last decade or so there have been relatively modest efforts by environmental economists to apply the tools of experimental economics to analyses of contemporary environmental policy issues. Motivation for these efforts derives from at least two considerations. First, it is often the case that data required for assessments of policy initiatives are unavailable and field trials of an initiative are not feasible.1 In such instances one may appeal to experimental economics. When properly designed and implemented, laboratory experiments provide a powerful, low-cost mechanism for the generation of data that can be useful for policy evaluation. A second compelling motivation for the use of laboratory experiments is the potential ‘educational’ benefit that can result from the use of experiments to illustrate the effects of policy initiatives – data from experiments can be used to demonstrate the consequences of policy alternatives to decision makers in ways that theory cannot. Many policy makers are not trained in economic theory and empirical arguments often carry more weight than the theoretical predictions alone. Absent field data, the only alternative for empirical demonstrations is laboratory experiments. Experiments may be viewed as a means of improving the decision-making process of policy makers by providing information that would be otherwise unavailable or by furthering the evaluation of decision criteria such as benefit measurement. As noted above, a relatively modest number...

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