Joint Design of Economic and Environmental Policies: A Simonian Satisficing Approach

Abstract

Multiobjective programming and compromise programming are underpinned by the traditional economic view of optimizing agents. In this chapter we explore an alternative view to human behaviour introduced by Simon, based on the idea that people do not aim to maximize any objective, but to satisfice some acceptable achievement levels. This view is consistent with another multicriteria approach known as goal programming (GP). We start from the idea that policy makers do not usually pursue the maximization of policy objectives, but they try to achieve some reasonable aspiration levels or targets. We enlarge the scope of the previous chapters by including emissions of CO₂, SO_X and NO_X, as well as four traditional macroeconomic objectives. After setting tentative target values for all the goals, we look for satisficing policies using different versions of GP. First, weighted GP minimizes a weighted sum of the unwanted deviation variables under the assumption that the policy makers have finite trade-offs between any two given objectives. Second, by using minimax GP, we look for balanced policies that aim to prevent any goal from being too displaced from its target value. Finally, by means of lexicographic GP, we address a situation in which the policy maker is assumed to have pre-emptive priorities over the targets.