Economic modeling for human moral and human decision making

An analysis on the Crowding-out effect of pro-environmental behavior induced by providing incentives

Abstract

This paper proposes an ecnomic modeling for human moral and human decision making in the context of electricity saving by the pro-environmental motivation. Former studies on the moral modeling have alreay proposed a variety of ways to express the moral motivation starting from the discussion of “warm glow”. Recently, another way of modeling “kantian model” is widely accepted. And now it is well known that providing incentives sometimes negatively impact on the human decision making, that is, providing incentives to the environmental friendly behavior could result in the reducion of the pro-environmental behavior. We call such effect “crowding-out”. In the manuscript, we firstly explain the household electricity consumption decision model. And next, we introduce the two major energy policies, critical-peak pricing and negawatt trading. After that, we formulate the human moral by applying the kantian way of modeling to the energy consumption decision making. When considering the human moral, we show that the crowding-out surely reduce the amount of electricity saving. And furthermore, we show that the magnitude of crowding-out differes under the different energy policies. We therefore conclude that the policy choice is closely related to the human moral and the magnitude of the crowding-out could change the order of effectiveness of different policies.