Effective Public Policy Design When Preferences and Beliefs are Endogenous: Illustrated by Sustainable Climate Policies

In a host of societal challenges – dramatized by climate change and epidemics – technology and knowledge of the relevant sciences have advanced dramatically in recent decades; but policy responses have lagged behind these advances. Public policies to improve some aspect of society are deliberate interventions in an evolving adaptive system whose autonomous workings the intervention seeks to alter. A common approach borrowed from mechanism design in economics represents individuals making up the target population as having exogenously given beliefs and self-interested preferences. 

The proposed working group will extend this approach and explore the ways in which public policies may affect beliefs and preferences, sometimes undermining the effectiveness and long-term sustainability of the policies. Using illustrations from the challenge of climate change, we will explore how well-designed policies could instead cultivate and enhance the values and beliefs essential to their intended effects by positively affecting peoples’ identities and belief systems, network structures, preferences and social norms. We will also consider dynamics characterized by multiple stationary states and social tipping points. The aim of the working group (and the particular example of climate change) is to suggest advances in economics and across the scholarly disciplines required to support effective public policies.