new publication: The endogenous formation of an environmental culture

cultureThere is a new article of mine that I would like to announce, entitled “The endogenous formation of an environmental culture“, and I am happy to tell you that it is forthcoming in the journal the European Economic Review.

The article is summarized as follows:

This article presents a mechanism explaining the surge in environmental culture across the globe. Based upon empirical evidence, we develop an overlapping generations model with environmental quality and endogenous environmental culture. Environmental culture may be costlessly transmitted intergenerationally, or via costly education.

The model predicts that for low wealth levels, society is unable to free resources for environmental culture. In this case, society will only invest in environmental maintenance if environmental quality is sufficiently low. Once society has reached a certain level of economic development, then it may optimally invest a part of its wealth in developing an environmental culture. Environmental culture has not only a positive impact on environmental quality through lower levels of consumption, but it improves the environment through maintenance expenditure for wealth-environment combinations at which, in a restricted model without environmental culture, no maintenance would be undertaken. Environmental culture leads to a society with a higher indirect utility at steady state in comparison to the restricted model.

Our model leads us to the conclusion that, for societies trapped in a situation with low environmental quality, investments in culture may induce positive feedback loops, where more culture raises environmental quality which in turn raises environmental culture. We also discuss how environmental culture may lead to an Environmental Kuznets Curve.

So what is this all about?

For a change, this is a more theoretical article, with the main idea being to provide a more integrated approach to economics, society and the environment. In our (theoretical) studies, we economist have always placed the most emphasis on studying the interaction between economic growth Sustainable_developmentand the environment. However, in these approaches, the important dimension that is so very relevant for how we actually feel about the relationship between the environment and our economic growth, namely social aspects or culture, has been widely neglected. This, in my opinion, has several reasons. One, enough work needed to be done to provide a thorough study of how economic and environmental aspects interact. Specifically, economists focused on the limits to growth defined through technological advances, limited resources, pollution-production feedbacks, directed technical change, optimal extraction rates, and obviously internalizing the pollution externalities, taxes, quotas, how to converge to what kind of equilibria, etc. From these topics, the jury is still out on quantifying the optimal taxes, as can be seen by the spread of results of the various integrated assessment models that are out there. Two, integrating cultural aspects into economic models has started only recently. There are various approaches, but they mostly start with the works of Bisin and Verdier. Little work has been done on integrating culture into the environment-economic models, though it is picking up slowly. Thirdly, culture tends to be a rather fuzzy concept, which integrates a whole array of different aspects. For example, Linton in his famous book Acculturation in Seven American Indian Tribes (1963, p.466) defines culture as being “the sum total of the knowledge, attitudes and habitual behavior patterns shared and transmitted by the members of a particular society.” This obviously places economists in a delicate position when trying to (mathematically) model how culture impacts the environment-economy trade-offs.

However, it should be clear that our cultural attitudes play an important, if not crucial role for how we treat the environment. Specifically, it shapes the way in which our preferences are directed towards the environment. Relying on Linton’s definition, in this article we treat culture not as a static concept but as something that develops endogenously through society. In contrast, most articles that analyze some sort of cultural feedbacks in environmental economics treat those cultural aspects in a pre-determined way. This means that society cannot willingfully choose its own direction or how its culture evolves, and thus in its decisions is left at the mercy of how the previous generations decided. Instead, we here focus on the type of culture that affects society’s attitude towards the consumption-environment trade-off and dub this particular type of culture the `environmental culture’.

In particular, we assume that society can choose its own culture, and then we investigate what this would mean for the trade-off between environmental culture, economic growth and the environment. More specifically, we allow culture to evolve in two ways. One, it is simply transferred between generations in a costless way. This, for example, is something I have studied in a slightly different framework HERE. In addition to the costless intergenerational transmission of educational culture, there exists ample evidence suggesting that an environmental culture develops in response to educational measures, pressure groups, or simply through spending more time in nature itself. Thus, we suggest that society can invest in educational expenditure in order to shape its attitude towards the environment-consumption trade-off. cultureVSeducation1This, in effect, is nothing new: When I was young, in school my teachers taught me small things like not to let the water run while washing the teeth, to think more carefully about driving and consumption. Now, my son’s teachers do the same, they take the kids into the forests to play, etc. All these are educational, costly measures that shape the kids’ preferences away from consumption towards environmental values. In effect, the need for environmental education has already been emphasised by the UNESCO/UNEP in 1977, which resulted in the Tbilisi Declaration. In this document, it was suggested that (p. 13-14) “…adopting a holistic approach, rooted in a broad interdisciplinary base, [environmental education] recreates an overall perspective which acknowledges the fact that natural environment and man-made environment are profoundly interdependent.” Furthermore, emphasis was placed on the point that environmental education should (p. 14) “… encourage those ethical, economic and esthetic values which, constituting the basis of self-discipline, will further the development of conduct and improvement of the environment.” As my graph to the right shows, those countries with better education, as proxied by the percent of secondary school enrollment, also tend to have better environmental culture, or place more value on the environment, as proxied by a mix of attitude questions taken from the World Values Survey. My contribution here is to take what is done anway already in real life, and study the impact in a stylized mathematical model.

So what are the main results of this study?

Our main findings are that for low wealth levels, society is unable to free resources for environmental culture. In this case, society will only invest in environmental maintenance if environmental quality is sufficiently low. Once society has reached a certain level of economic development, then it may optimally invest a part of its wealth in developing an environmental culture. When environmental quality and wealth are both sufficiently high, then society may find it optimal to temporarily over-invest (vis-\`{a}-vis its steady state level) in environmental culture. This is optimal until environmental quality is decreased to a level from which onwards it is worthwhile for society to also invest in environmental quality. In other words, if there is no urgent need for society to improve environmental quality, then society will either invest in an environmental culture if it can afford to do so, or not invest in case it is too poor.   Technological improvements in emission or abatement efficiency both raise steady state wealth and environmental quality, and make an interior solution in environmental culture more likely.

Since investments in environmental culture raise the importance of environmental quality for utility, it becomes also more worthwhile for society to invest in maintenance due to the positive feedback between culture and the environment. As a result, environmental culture has not only a positive impact on environmental quality through lower levels of consumption, but in addition it improves the environment through maintenance expenditure for wealth-environment combinations at which, without environmental culture, no maintenance would be undertaken.

This analysis suggests that wealth drives utility through higher consumption levels and the possibility to improve environmental quality through maintenance, but after a certain level of economic development there are other aspects that are raised into focus. In our case, the particular aspect we looked at is environmental culture. A society that is rich enough will invest in both culture and the environment, and thereby end up with a higher level of utility than one that is unable to invest in environmental culture. This result suggests that, after a certain level of economic development, society may wish to undergo a social change that places cultural aspects, here environmental cultural aspects, at the forefront of decision-taking. In the article, we also discuss how investments in environmental culture can give rise to the Environmental Kuznets Curve (which is basically a u-shaped relationship between environmental quality and a country’s GDP), and the role that technological advances play. Furthermore, we describe how investments in culture can lead to positive feedbacks between the environment and economic growth, a result that generally is not found when looking at trade-offs between economic growth and the environment.

This research field that combines the missing third pillar of sustainable development, namely culture, when studing the interaction between the environment and economic growth, is definitely still an open book, with many potentially interesting contributions possible.

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