II. Environmental protection in economic thinking
9. Behavioural Environmental Economics and Green Nudges
Olivér Hortay
9. Behavioural Environmental Economics and
increasing environmental performance. Most of the time, such bias is ex-plained by loss aversion. Companies attach more weight to the potential risks of new technologies than to their future benefits, which hampers the expan-sion of solutions and, thus, the improvement of environmental perfor-mance221.
9.3. Bandwagon Effect
In repeat experiments, it is often observed that there is an interplay between the participants’ strategies; for example, the kindness of a participant is af-fected by the kindness of the others. Man is a social being; therefore, people are often willing to ‘divert’ their behaviour from what is rational in order to achieve more efficient inclusion in a given community. This distortion is called group effect or bandwagon effect. It is a new type of coordination mechanism in environmental policy since the drivers that move people to act are different: in public interventions, the driver is an external incentive, in market mechanisms, it is self-interest. In contrast, in the setting of a group effect, the main drivers are the norms of a given community. Separate waste collection is a good example of this phenomenon: in many countries, there are no consumer-level public incentives (there is no tax on traditionally col-lected waste, and no benefits are granted to those collecting their waste sep-arately) or market incentives (separate waste collection requires an extra ef-fort and does not generate any extra benefits), but the number of people par-ticipating in this system is increasing because they feel that such behaviour makes them more responsible members of the community.
9.4. Green Nudge
In addition to clarifying models that capture the impacts of ‘hard’ public in-terventions (regulations, taxes, subsidies), systematic behavioural distortions have also opened the way to a new ‘soft’ intervention, known as ‘nudge’.
The representatives of this trend suggest an incentive that does not limit the choice of actors but—taking advantage of the behavioural distortions de-scribed above—creates a decision-making context in which participants are more likely to select the option chosen by the regulator (or ‘choice architect’) over others. This kind of ‘soft’ policy approach is called ‘libertarian pater-nalism’, with reference to free choice and the patronizing leadership of the
221 L. Venkatachalam (2005): Damage Assessment and Compensation to Farmers: Lessons from Verdict of Loss of Ecology Authority in Tamil Nadu, Economic and Political Weekly, vol. 40, 2005, pp. 1556–1560.
choice architect. The choice architecture includes the description of the op-tions, the establishment of their structure and the creation of the context (or framing)222. Green nudge is different from the traditional nudge type of in-centive. Both of them are interventions that are different from the preference of the person making a choice, but while the latter aims to increase the wel-fare of the choosing person, the first one promotes the welwel-fare of the com-munity. Of all the distortions described above, the majority of green nudge tools used in practice build on the bandwagon effect and the status quo bias.
In the following sections, some practical examples will demonstrate how they are used.
9.4.1. Green Nudge Techniques Based on Group Effect
Over the last few decades, plenty of examples have shown that people can be greatly influenced by reminding them of certain social standards. In the 1980s, in Texas, a campaign called ‘Don’t Mess with Texas’ was launched to reduce the quantity of waste thrown out of cars. The campaign’s slogan was written on billboards alongside motorways. The witty reference became a great success: in a few years, the quantity of roadside waste was reduced to less than a third. The key to the success of the measure was strengthening group identity223.
Another frequently cited example of the use of group norms is the Opower program launched in the US, which achieved an average reduction of house-hold energy use of over two percent simply by indicating on consumers’
household energy reports not only their own consumption but their neigh-bors’ energy consumption as well224. Solutions based on group effect can often result in a status competition, which can be exploited by decision-mak-ers. The driving force behind the early proliferation of electric vehicles and solar cells was that, by using them, owners could show their acquaintances that they were more responsible members of the community than others. This effect has enormous additional potential since any indication or symbol can
222 R. Münscher, M. Vetter and T. Scheuerle (2016): A Review and Taxonomy of Choice Archi-tecture Techniques, Behavioural Decision Making, vol. 29, no. 5, 2016, pp. 511–524.
223 M. Nagatsu (2015): Social Nudges: Their Mechanisms and Justification, Review of Philosophy and Psychology, vol. 6, no. 3, 2015, pp. 481–494.
224 H. Allcott (2011): Social Norms and Energy Conservation, Journal of Public Economics, vol. 95, no. 9, 2011, pp. 1082–1095.
be a good incentive through which users can show to their community that they are environmentally conscious225.
9.4.2. Green Nudge Techniques Based on Status Quo
In addition to constituting a constraint when it comes to technological tran-sition, status quo bias can also be used as a nudge-type incentive in cases where consumers have to make minor decisions. In such cases, people tend to choose the ‘default’ option. This may be an important tool for queries about social preferences, on the one hand, and may be used for incentivizing specific choices, on the other. For example, on the registration platform of an increasing number of scientific conferences, the cost of travel-related ‘car-bon offsetting’ is included in the registration fee by default. Since this cost item is low compared to the total cost of participation, which is usually not borne by the applicants themselves, the relevance of choice is also low; there-fore, few people choose another option.
9.4.3. Ethical Issues Associated with the Green Nudge
There may be several ethical concerns about nudge-type incentives. Firstly, while the objective of classic public interventions and the tools used to attain them can be easily monitored, in the case of a nudge, this is way more prob-lematic. Secondly, these tools can reduce people’s autonomy because if eve-ryone knows that a choice design is optimized, individuals will be less moti-vated to seek information. Thirdly, as nudge is often easier than providing information, this can easily result in a negative trend whereby regulators in-creasingly turn to nudge tools even when informing the society would be the better option. Finally, the diffusion of nudge tools and the fact that such so-lutions build on instinctive behaviour patterns can reduce people’s auton-omy. Due to the ethical concerns related to the green nudge, in these cases the need for transparency is even more pronounced than in the case of tradi-tional incentives: it is important to call people’s attention to the fact that their choice has been designed with nudge tools, because, in this way, a large part of the ethical concerns can be resolved, since people identify with the objec-tives of their community and the program’s efficiency will not decrease ei-ther.
225 R. H. Thaler and C. R. Sunstein (2008): Nudge: Improving Decisions About Health, Wealth, and Happiness, New Haven & London, Yale University Press, 2008.
Bibliography
• Allcott, H., ‘Social Norms and Energy Conservation’, Journal of Public Eco-nomics, vol. 95, no. 9, 2011, pp. 1082–1095.
• Kahneman, D., J. L. Knetsch and R. H. Thaler, ‘Anomalies: The Endowment Effect, Loss Aversion and Status-quo Bias’, Journal of Economic Perspec-tives, vol. 5, no. 1, 1991, pp. 193–206.
• Venkatachalam, L., ‘Damage Assessment and Compensation to Farmers: Les-sons from Verdict of Loss of Ecology Authority in Tamil Nadu’, Economic and Political Weekly, vol. 40, 2005, pp. 1556–1560.
• Münscher, R, M. Vetter and T. Scheuerle, ‘A Review and Taxonomy of Choice Architecture Techniques’, Behavioural Decision Making, vol. 29, no. 5, 2016, pp. 511–524.
• Nagatsu, M., ‘Social Nudges: Their Mechanisms and Justification’, Review of Philosophy and Psychology, vol. 6, no. 3, 2015, pp. 481–494.
• Thaler, R. H. and C. R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness, New Haven & London, Yale University Press, 2008.
Noémi Csigéné Nagypál