Automatically Green: Behavioral Economics and Environmental Protection

Cass R. Sunstein, Lucia Reisch

    Research output: Working paperResearch

    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.
    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.
    LanguageEnglish
    Place of PublicationFrederiksberg
    PublisherInstitut for Interkulturel Kommunikation og Ledelse, IKL. Copenhagen Business School
    Number of pages23
    DOIs
    StatePublished - 5 Apr 2013
    SeriesWorking paper

    Keywords

    • Behavioral Economics
    • Deafult Rules
    • Social Norms
    • Active Choosing
    • Green Energy

    Cite this

    Sunstein, C. R., & Reisch, L. (2013). Automatically Green: Behavioral Economics and Environmental Protection. Frederiksberg: Institut for Interkulturel Kommunikation og Ledelse, IKL. Copenhagen Business School. Working paper, DOI: 10.2139/ssrn.2245657
    Sunstein, Cass R. ; Reisch, Lucia. / Automatically Green : Behavioral Economics and Environmental Protection. Frederiksberg : Institut for Interkulturel Kommunikation og Ledelse, IKL. Copenhagen Business School, 2013. (Working paper).
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    Sunstein, CR & Reisch, L 2013 'Automatically Green: Behavioral Economics and Environmental Protection' Institut for Interkulturel Kommunikation og Ledelse, IKL. Copenhagen Business School, Frederiksberg. DOI: 10.2139/ssrn.2245657

    Automatically Green : Behavioral Economics and Environmental Protection. / Sunstein, Cass R.; Reisch, Lucia.

    Frederiksberg : Institut for Interkulturel Kommunikation og Ledelse, IKL. Copenhagen Business School, 2013.

    Research output: Working paperResearch

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    Sunstein CR, Reisch L. Automatically Green: Behavioral Economics and Environmental Protection. Frederiksberg: Institut for Interkulturel Kommunikation og Ledelse, IKL. Copenhagen Business School. 2013 Apr 5. Available from, DOI: 10.2139/ssrn.2245657