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.