Economic Incentive and Disincentives

Economic Incentive and Disincentives “The Secret to Turning Consumers Green” It isn’t financial incentives. It isn’t more information. It’s guilt. WNE - Introduction to Economics

Incentives WNE - Introduction to Economics A factor which enables of motivates a given course of action (financial or non-financial) Categories Financial – material reward Moral – “right thing to do” Coercive – failure to do so would result in punishment Social – social norms

“Going Green” incentives WNE - Introduction to Economics Financial - Washington D.C. imposed 5% tax on plastic bags from stores Social – Customers must ask for bags in front of other customers Results – Reduced bags from 68m to 11m

Changes to demand curve WNE - Introduction to Economics

“Telltale Towels” WNE - Introduction to Economics • A study conducted on effectiveness of reusing towels in hotels • Place cards in room urging customer to reuse towels • Two Types of incentives used • Moral “Help save the environment” or “Show your respect for nature” • Social “Join your fellow guests in helping to Save the Environment” • Results: Social proved 25% more likely to reuse

“Influence without boarders” WNE - Introduction to Economics • Further studies have shown that social incentives prove effective outside of US • Examples • Chinese adopting environmentally practices upon hear about neighbors • Publishing list of worst polluting paper companies was followed by dramatic improvements

Social incentives WNE - Introduction to Economics • Are most effective on things which are easily identified • Shopping bags • Inefficient vehicles • Difficult to create social norms on “going green” because it is invisible • Conserving water, electricity • Efficient houses etc

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Economic Incentive and Disincentives