Automatically Green: Behavioral Economics and Environmental Protection

Cass R Sunstein,Lucia Reisch

doi:10.2139/ssrn.2245657

Cass R Sunstein, Lucia Reisch

Open Access

https://doi.org/10.2139/ssrn.2245657

Copy DOI

Abstract

Careful attention to choice architecture promises to open up new possibilities for environmental protection – possibilities that go well beyond, and that may be more effective than, the standard tools of economic incentives, mandates, and bans. How, for example, do consumers choose between environmentally-friendly products or services and alternatives that are potentially damaging to the environment but less expensive? The answer may well depend on the default rule. Indeed, green default rules may well be a more effective tool for altering outcomes than large economic incentives. The underlying reasons include the power of suggestion; inertia and procrastination; and loss aversion. If well-chosen, green defaults are likely to have large effects in reducing the economic and environmental harms associated with various products and activities. Such defaults may or may not be more expensive to consumers. In deciding whether to establish green defaults, choice architects should consider both consumer welfare and a wide range of other costs and benefits. Sometimes that assessment will argue strongly in favor of green defaults, particularly when both economic and environmental considerations point in their direction. But when choice architects lack relevant information, when interest-group maneuvering is a potential problem, and when externalities are not likely to be significant, active choosing, perhaps accompanied by various influences (including provision of relevant information), will usually be preferable to a green default.

Highlights

Suppose that in a relevant community, there are two sources of energy, denominated “green” and “gray.” Suppose that consistent with its name, “green” is better than gray on environmental grounds
4 If, by contrast, environmentalists lament the fact that few people are choosing green energy, the result might well be to aggravate the very problem that environmentalists are seeking to solve, by drawing attention to, and reinforcing, a social norm that they hope to change.[5]
Economic incentives are exceedingly important, but with respect to the environment, consumer choices are greatly affected by a wide range of influences, including social norms and the applicable default rule

Summary

Introduction

Suppose that in a relevant community, there are two sources of energy, denominated “green” and “gray.” Suppose that consistent with its name, “green” is better than gray on environmental grounds. Those who use green energy emit lower levels of greenhouse gases and of conventional pollutants. Consumers will be more likely to choose green energy than if it is only slightly better on environmental grounds and if it costs far more. If there is a widespread belief that reasonable and good people select environmentally preferable products, that norm will exert pressure in favor of green

Objectives

Methods

Findings

Conclusion