Pro-environmental behavior and rational consumer choice: Evidence from surveys of life satisfaction

This paper theoretically and empirically investigates the hypothesis of decision error in environmental-friendly consumption. Existing evidence suggests that people make systematic mistakes in affective forecasting that lead to suboptimal decisions. The paper hypothesizes that such errors are important in the context of the private provision of environmental goods and shows in a simple theoretical model that decision errors imply a non-zero net marginal utility at the chosen level of environmental-friendly consumption. Using life satisfaction as a proxy for experienced utility, the empirical analysis finds a positive and significant association between life satisfaction and pro-environmental behavior, which is consistent with environmental-friendly consumption being less than individually optimal. The results are robust to controlling not only for socio-demographic characteristics but also for differences in environment-related personal attitudes.