Diffusion of environmental policies; Bayesian learning or heuristics?

Will public policies to solve environmental problems spread from innovating nations to other countries? Do people involved process information about foreign experiences properly? The empirical diffusion literature finds that the experience of others is important for policy innovation. To approach this question with a different methodology, a questionnaire to students is used. The data generated are also used to test the prevailing economic theory of diffusion, namely that people maximize expected utility and update information according to Bayes theorem. The study supports the idea that policies spread between countries, and most strongly between neighbours. However, the prevailing economic theory of diffusion is rejected. Rather, support is found for an alternative theory which holds that people update information using a combination of the "anchoring and adjustment" and the "representativeness" heuristics originating in cognitive psychology. As a consequence, diffusion is not as strong as it ought to be for policies with (apriori) uncertain outcomes. The fact that diffusion takes place, has important implications for policy making. For instance, a successful policy to curtail CO2-emissions in one country will lead to cost effective abatements also in neighbouring nations. Hence, national "testing" of innovative public policies could be seen as a global public good, which should be supported just as nations support research and development. To speed up diffusion, information is needed: about the resulting experiences with policies, about the representativeness of countries as testing grounds for other nations, and about proper information processing. The project has been funded by the SAMRAM program under the Research Council of Norway.