Fables of the Reconstruction: Human Emotion and Behavioral Heuristics in Environmental Economics

Abstract

Environmental economics provides an especially rich source of insights into the impact of emotion, cognitive bias, and behavioral heuristics on risk assessment and management. In contrast with the ambivalent reception of behavioral psychology within mathematical finance, the impact of emotion and innate heuristics on environmental decision making has never been doubted. From the affect heuristic to the endowment effect and disaster psychology, environmental choices harbor the richest trove of economic departures from strict rationality.

Keywords: environmental economics, behavioral finance, Roll's critique, natural disasters, biodiversity

JEL Classification: Q54, Q57, G02