The Impacts of Other-Regarding Preferences and Ethical Choice on Environmental Outcomes

First, the moral invisible hand that encourages the observance of duties; second, the invisible hand of the price system, which guides the 1Similarly, the 2015 Nobel laureates in physics won their prize for working outside the Standard Model of Particle Physics. 1 allocation of resources.2 Unfortunately, writers of standard economic textbooks do not seem to be aware of Adam Smith s rst invisibl [...] Veblen (1899) emphasizes the pervasiveness of emulation, which he de nes as the stimulus of an invidious comparison which prompts us to outdo those with whom we are in the habit of classing ourselves. He claims that with the exception of the instinct for self-preservation, the propensity for emulation is probably the strongest and most alert and persistent of economic motives proper. Emulation c [...] Alternatively, the resource stock may be interpreted as the quality of the global environment, and the model is then applicable to the climate change problem. [...] The analysis of Long and McWhinnie (2012) relies on two key assumptions: rst, each agent takes as given the time paths of resource exploitation of other agents (i.e., the authors restrict attention to open-loop strategies); and second, the agents take the market price of the extracted resource as given (i.e., the goods markets are perfectly competitive). [...] The greater the degree of responsiveness of extraction to changes in the stock level, the larger this incentive to overproduce.