19 July 2010

More behavior

means more licensing

This is a very familiar theme in behavioral economics. Make a car safer, people will it drive more recklessly. Offer a diet soda and calorie charts, people will overeat. Buy a fuel efficient car and people will drive more (and thus clog up the road).

The main problem with something like "going green" is that it is a conspicuous form of consumption. It becomes a signaling game. "I am superior to you because I drive a Prius and not your silly Hummer. Ha! Take that!" Ideally, the reason to go green is for the conservation of resources, to make a sensible economic decision personally to not over-consume and waste energy or fuel or water on senseless and wasteful things. The reason it doesn't happen is that instead of these being essentially simple and private decisions, they're public and thus create feelings of entitlement. You have to take the recycling containers out to the curb or drive around town with a sticker that says "hybrid" on your car. I'm guessing those bring you up a notch. Then that notch is dispelled through a series of minor adjustments back downward. The sticker is on an SUV. People order a diet soda with their fast food. Money is spent on useless consumer goods (which require energy and resources to manufacture of course). And so on.

To be sure there are many people who do environmentally sound things because they assume, perhaps rightly, that they are doing something morally sound for themselves and for the benefit of others. We preserve a natural space of a park because it brings enjoyment to many people to see natural wonders and beauties, and in general human happiness and welfare is considered a reliable moral good. So environmental thinking is hardly useless as a framework for an individual's moral considerations. But if we buy a fuel efficient car, one sensible and practical reason to do it is to reduce fuel costs of our actual driving habits. Not to act as an excuse to drive around town more (and thus increase fuel costs by raising traffic congestion). Confusing economic and budgetary decisions with moral ones is bound to mix up these incentives. The moral decision is simple "I care about X", x being the planet or my children or animals, etc. But much environmentalism is really boiled down to sensible economic decisions. Energy efficiency in products from light bulbs to washing machines to cars is designed to lower resource use and personal bills for consumption. It has a significant side benefit of being environmentally helpful, but it is not the primary selling point to any random individual. That is, that expending less money on energy or resources frees up finances for other things.

One problem with this, and one reason that a carbon tax has so much appeal, is that pricing the cost of resources being used is vitally important to insuring that damaging and harmful resources are reduced in their effects. To be sure there are many billions of dollars in subsidies and corporate welfare which go out the window to feed oil and coal wealth that should be eliminated. But these are hardly the full measure and cost of the consumption of such goods. Pollutants, regardless of the long-term damage on climate, have significant immediate impacts on quality of life and health. These are not always priced into the current regime (some regulatory costs increase the cost of coal/oil based energy to the end consumer, but not all costs can be passed along in this way). We then hear arguments against such an idea that "taxing these things will make them cost more". I think that's the point in the first place, but it's not that hard to make an adjustment in personal and corporate income taxes to accommodate the increase in energy taxes (and the decrease in subsidies, to all forms of energy generation, including ethanol or nuclear power) at the same time as one seeks to raise, ideally in stages, the cost of non-clean fuels and energy consumption.
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