Nudging our way to sustainability

It is often thought that economics and sustainability are uneasy bedfellows. Indeed many an environmentalist blames economics for the rapacious consumption of natural resources, increased inequality and a climate crisis the like of which the world has never known.

However this year’s winner of the Nobel Prize for Economics, Richard Thaler, perhaps offers salvation. Thaler is chief architect of behavioural economics, a discipline that seeks to move beyond the rational economic man of classical economic theory and instead considers how people really make decisions. For behavioural economists such as Thaler, decision making is not the result of rational choice but rather is heavily influenced by irrational biases. Loss aversion, status quo bias, choice architecture and framing all have major impacts upon decision making.

Applying this insight Thaler (2008) developed a series of ‘nudges’ to help influence people’s choices in ways that will benefit themselves and society. The most cited (though possibly most unpleasant!) example is that of the men’s urinals in Amsterdam airport where, in an effort to reduce spillage, planners painted a fly in each urinal for men to aim at. The result? An 80% reduction in spillage.

But what does this mean for sustainable consumption? For me, it offers the opportunity to move beyond climate communication and towards affecting behaviour change. It has long been a frustration of mine that no matter how stark the warnings, how urgent the crisis or how concerned people claim to be, changing their behaviour towards more sustainable consumption has remained stubbornly hard to achieve. The application of behavioural economics offers hope that people can be influenced to make more sustainable choices.

It should be noted that the approach is not without its critics. Leaving aside libertarian concerns about overbearing state influence, even some environmentalists have concerns. For Adam Corner (2017), a key drawback of nudge theory is that it prevents people from meaningfully engaging with the issue. People are nudged into making more sustainable choices without even realising it or due to other motivating factors such as saving money (eg emphasising the money saving benefits of turning off lights). This transactional nature negates long term sustainable behaviour change. For Corner, what we really need is cognitive engagement to achieve a long term shift.

However, it seems to me that nudging still has a valuable contribution to make, not least because such is the urgency of the climate crisis any method to encourage the adoption of sustainable lifestyles should be encouraged. Furthermore, the potential impact could be huge. Take energy for example. Research shows that in Western countries 50-90% of people favour renewable energy. Yet these preferences rarely translate into action. In the UK less than 1% of people choose renewable energy tariffs (Heeter and Nicholas, 2013). When choosing an energy contract the choice architecture results in the vast majority of households simply signing up to the default (non renewable) option. Insights from behavioural economics suggest that if energy providers changed their default option to the renewable energy tariff, there would be a big increase in people signing up to renewable energy (Sunstein 2016). Indeed research in Germany showed that when the default was changed households using renewable energy exceeded 90% (Pichert and Katsikopoulos, 2008). Nudge thus harnesses the inertia that typifies the energy market and turns it into a positive, resulting in a large uptake in renewable energy.

What begins as a small nudge is thus transformed into a mighty shove towards greater sustainability.

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4 thoughts on “Nudging our way to sustainability”

  1. I really enjoyed your post and my burst of laughter about a painted fly had the rest of my family enquiring what I was reading so a chance to share your message further rather than just reading it……nudging in an active form ! I really do think nudging has to be continual as we can be so busy that the default option is the easiest which is where aiming for leaders who are brave enough to take the change will make it easier for others to follow.
    Just a piece of advice your painted fly example won’t work in Australia as we head into summer – the fly’s in our urinals will be real, lots of them and they’ll move if you hit them therefore increasing the spillage problem 😂

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  2. This is my favourite post on the topic yet. What a statistic: 80% reduction in spillage in men’s urinals by painting an aim.

    Here is another surprising one, following up to your mention about 90% support for renewable energy but less than 1% signing up to renewable energy tariffs. There are more people that claim to use carbon offset generated power or renewable distributed electricity than actually signed up. (That’s like 100 people saying they have donated $10 each to charity , only to find there’s only $20 in the charity tin in total). I think people recognise how important it is and want to be perceived as caring about the environment, but might need more ‘nudging’ to get more action going.

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  3. Simon, thank you for the Economics lesson, but more importantly thank you for sharing Amsterdam airport’s spillage reduction efforts. I just finished placing a work order to have aim points placed in all our urinals.

    I agree that in order to change undesirable behaviors well thought out measures have to be adopted that overcome biases to maintain a failing status quo. Sustainable consumption initiatives require behavior change. Though many environmentalists contend economics, specifically capitalism is responsible for natural resource depletion, widening inequality gaps and global warming there is an element of economist that would argue that free markets have the ability to drive future sustainability endeavors. Organic farming techniques have lowered farming cost substantially (Haanaes, Michael, Jurgens, & Rangan, 2013). Sustainable business models can benefit not only the environment but yield positive financial outcomes as well. It has been demonstrated regardless of motivation that sustainable corporations can generate above-average growth, as well as profit margins (Haanaes, Michael, Jurgens, & Rangan, 2013).

    In attempt to drive behavioral change toward a more sustainable consumption conscious mindset, environmentalists and economists must work together. It is important to recognize that non-profits and governmental organizations cannot solve sustainable consumption issues without the assistance of the private sector. Corporations and people in general will tend to do what is more valuable – value is by no means determined by revenue alone. As the triple bottom line encompasses profit, people and the planet (The Economist, 2009) organizations have come to realize that generating less revenue in a sustainable fashion can exhibit increase profits when there is a well thought out plan that places emphasis on an organization’s workforce and the survivability of our planet. As society is influenced or nudged to overcome irrational biases and default options are put in place that are more beneficial to society to further facilitate goals in regards to sustainable consumption more choices will be made that positively impact the longevity of our world.

    References

    Haanaes, K., Michael, D., Jurgens, J., & Rangan, a. S. (2013, March). Making Sustainability Profitable. Retrieved November 20, 2017, from Harvard Business Review: https://hbr.org/2013/03/making-sustainability-profitable

    The Economist. (2009, November 17). Triple bottom line: It consists of three Ps: profit, people and planet. Retrieved November 20, 2017, from The Economist: http://www.economist.com/node/14301663

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