Local environmental control and institutional crowding-out

Regulations that are designed to improve social welfare typically begin with the premise that individuals are purely self-interested. Experimental evidence shows, however, that individuals do not typically behave this way; instead, they tend to strike a balance between self and group interests. From experiments performed in rural Colombia, the authors found that a regulatory solution for an environmental dilemma that standard theory predicts would improve social welfare clearly did not. (DSE/DÜI)