Green by Default

Sunstein, C. R. and Reisch, L. A. (2013), Green by Default. Kyklos, 66: 398–402. doi: 10.1111/kykl.12028

Excerpt: 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 also of conventional pollutants. Suppose that those who use gray energy save money. Which will consumers choose?

On standard assumptions, people's decisions will depend on the relationship between economic incentives and underlying preferences. Suppose that green energy is far better than gray on environmental grounds and that gray energy costs only very slightly less. If so, 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.

The standard assumptions are not exactly wrong, but as behavioral economists have shown, they disregard important variables that do not involve strictly economic incentives (Thaler and Sunstein, 2008). Some kind of choice architecture lies behind people's decisions, and that architecture may have large effects on what people choose.

Our focus here is on the potential effects of green default rules. Default rules establish what happens when individuals do not do anything at all. In the example with which we began, people are asked to make an active choice between green and gray energy. But it is easy to imagine a different approach, in which choice architects set a default rule in one direction or another, while allowing people to depart from it. In short, social outcomes might be automatically green.

Green defaults can have major consequences for the environment, potentially larger than even significant economic incentives (cf. Chetty et al., 2012). Especially in a period in which the standard tools – mandates, bans, and economic incentives – sometimes face both economic and political obstacles, default rules deserve careful attention.

Read the article.

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(Something interesting I found)Posted:Aug 01 2013, 12:00 AM by brendah
  • brendah said:

    test comment

    October 14, 2013 8:39 AM
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