maandag 23 juli 2012

Economists need the softer social sciences

A follow-up to my remark on how few valuation studies include proper qualitative research: this remark was provoked by two travel cost studies presented at EAERE 2012. One looked at the effect that forest fires have on visit rates in Portuguese forests, whereas the other studied how people trade off entrance fees and mortality risk while visiting a nature reserve in Japan.

The Portuguese study reminded me of a paper by Erwin Bulte and others on what they called the 'outrage effect'. They found that people are willing to pay a lot more for conservation of Wadden Sea seals if you tell them the population suffers from pollution than if you tell them the seals suffer from a viral disease. I would expect something similar to happen with regard to forest fires. People might even appreciate a scorched patch of forest if you tell them it is part of a natural or at least indispensible process, but they would be apalled if the fires were caused by human carelessness. I would also expect it matters whether multiple hectares are gone, or whether there are only occasional blackened patches. The researchers did not ask their respondents what they thought was the cause of forest fires, but almost all forest fires in their region were man-made, and they assumed their respondents were aware of that fact.

The Japanese study reminded me of the Darwin Awards, or rather, the fact that most of its recipients are intoxicated, overconfident males. Suppose a respondent prefers a $20 dangerous hike over a $30 safe one, does that mean that he considers $10 too much to lower his risk of getting killed? Or does he (I'm afraid it's mostly a 'he') assume that bad stuff only happens to other people? In this case the researchers stated that it was widely known which hiking trails are dangerous, and that casualties have been all over the news. But that argument ignores how good some people are at downplaying risks - at their peril, indeed.

The bottom line for me is that too much economic research, especially the valuation stuff, seems to blindly jump into the issue, imposing wildly unrealistic assumptions on human behaviour, without doing proper explorative research first. Why not interview a few hikers first, to get an idea what considerations may be at play? Why not talk to a psychologist, or a sociologist, who has done research on how people view their own mortality risks?

I think economists should observe more, and take more heed of what other social scientists have found so far about human behaviour. Economics is a world apart from most other social sciences, notably sociology and anthropology. (Supposedly, an unnamed Hindu economist once claimed that bad economists reincarnate as sociologists.) But I think this is finally changing, as Economics Nobel prizes1 are being awarded to behavioural economists and political scientists, and economic experiments have become fashionable enough to be published in top journals like American Economic Review.

So how does this relate to my own work? Besides other activities, my work involves modelling of how people exploit natural resources, and estimating how valuable those resources are to them. I think the time is ripe to do such work together with anthropologists and sociologists. I am about to start a research project on international cooperation in management of Pacific tuna, together with Simon Bush from Wageningen University's Environmental Policy Group. But I'll keep my eyes open for opportunities to do more such interdisciplinary work.

1 Actually, I don't like calling the Economics Nobel an Economics Nobel. It's just that Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, as it is officially called, is a bit too long. But there is no such thing as a Nobel Prize for Economics. The only reason why there is an Economics prize that has "Nobel" in its name, and not, say, a similar biology prize, is that economists work at banks such as the Swedish central bank, and thereby have access to enough money to create the fund for such a prize. Unlike biology faculties.

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