Preserving or escaping? On the welfare effects of environmental self-protective choices

Abstract

In modern societies individuals often try to alleviate their personal damages from environmental degradation by increasing their consumption of private goods. Although this “self-protective” behavior is very frequent in industrial economies, insufficient attention has been paid to its economic and environmental consequences. In this paper we show that such a behavior can give rise to a self-reinforcing growth process in which environmental degradation increases economic growth and vice-versa, leading the economy on a welfare-reducing path. For this purpose, we first provide several examples of environmental self-protective choices to give a heuristic view of this phenomenon and then examine their effects through a two-islands evolutionary model that leads the reader beyond a purely intuitive understanding of the argument. Although the proposed model is deliberately very simple, it may provide some interesting insights on an aspect that has been mainly ignored in the literature so far.Self-protective choices; defensive expenditures; environmental degradation; negative externalities; economic growth.