1Why it Matters How and What Policymakers Learn Empirical Evidence from Austrian Environmental Policymaking

According to public choice theory, policies may fail because of intentional rent-seeking. However, by building on the standard neo-classical behavioural model in which agents choose from a complete choice set, this theory rules out the more mundane case that policies fail because of mistakes made due to incomplete knowledge. This paper therefore relaxes the strong assumptions pertaining to knowledge in the textbook model and explores what knowledge is required for policy design and how it can be acquired. Different types of policy failures are identified that may result from lack of particular types of knowledge. Furthermore, it is explored from which sources and through which learning processes this knowledge can be obtained. Finally, implications for the organisational design of policymaking are discussed. The relevance of the arguments is illustrated by means of empirical data on the design of three Austrian environmental regulations. ' … before we can explain why people commit mistakes, we must first explain why they should ever be right' (Hayek 1937, p. 34) Economic theory tells us that in an ideal world, a competitive equilibrium leads to an allocation of re-sources that maximises social welfare. To approximate this ideal in reality, public policies are needed