GREEN NUDGES Fredrik Carlsson Department of Economics, University of Gothenburg

GREEN NUDGES

                Fredrik Carlsson
Department of Economics, University of Gothenburg
             fredrik.carlsson@gu.se

TRADITIONAL PURE NUDGE

Affect decision situation but not the monetary incentives
But do not ban
Easy to avoid
The objective is better decisions for the individuals being nudged
Pensions, healthy food, excercise, stop smoking

CLASSIFICATION OF INTERVENTIONS

                                            Type of Intervention

     Rationale                   Traditional                       Behavioral

Traditional Economic
                       A. Externality-correcting taxes   C. Green Nudge: Pure and Moral
   (externalities)

Behavioral Economic    B. Internality-correcting taxes    D. Traditional Nudge: Pure and

   (internalities)              information                           Moral

PURE VS MORAL NUDGES

Pure: focus on the choice architecture

Moral: focus on providing descriptive and/or injunctive norms, or moral pleas

QUICK TOUR OF DIFFERENT
        NUDGES

DEFAULT

Organ donation (opt-in vs opt-out), climate compensation (default yes or
default no), printing (simplex or duplex default), green energy contract.

SALIENCE OF INFORMATION

Order on the menu (top vs bottom on the list), energy labels (A-D,), food
labels (traffic light)

Often hard to disentangle reasons for an effect:
- Information
- Salience of information
- Norms

PHYSICAL ENVIRONMENT

Waste bins, footsteps to waste, plate size, hand sanitizer

REMINDERS

Reminding about what action to take, or what people have set out to do.

SOCIAL NORMS

Information on what others do (descriptive norm) and what one should do (injunctive
norm)

MORAL PLEA

Asking people to do the right thing: save energy, water, use duplex etc

COMMITMENT AND GOALS

Setting goals and committing to goals: saving energy, taking public transport

If possible: make commitment public and known by others.

A REVIEW OF THE EFFECTS OF
       GREEN NUDGES

A REVIEW OF GREEN NUDGE STUDIES:
                           SNAPSHOT

                                                                                      Statistic
   Study          Description            Environmental good          Effect size      ally sign.
                                                                                       effect?
                                             Default
Arana &       Default opt-out vs opt-   Climate compensation air
                                                                        +27%             Yes
Leon                   out                        travel
Brown et                                 Default temperature on
                   Temperature                                          -1,8%            Yes
al.                                            thermostat
Ebeling &      Opt-out compared
                                         Green energy contract          +860%            Yes
Lotz               with opt-in
Egbark &       Default on printer
                                               Paper use                 -14%            Yes
Ekström        simplex or duplex
Löfgren et    Opt-in/opt-out/active     Climate compensation air     -16% (opt in)
                                                                                         No
al.                  choice                      travel             -7.7% (opt-out)
                                        Purchase of steering unit    -10% (opt-in)
Toft et al.   Opt-in versus opt-out                                                      Yes
                                            with heat pump          -23% (opt-out)

SUMMARY MOST COMMON GREEN
                                     NUDGES
                                   Average        Median           Min    Max
              Default               107%           14%             1,8%   860%
              Moral: comparison      8%            4,9%            0,2%   62%

              Moral: plea            32%           14,6%           0%     197%

              Commitment             11%            8%             3,2%   28%

Many studies on moral nudges on things that are easy to measure
Also a sizeable share of default studies
Most find statistically significant effect, and sizeable effects
Very few that compare nudge with other instruments: Mixed results on the few that does

WHY WOULD A NUDGE WORK?

SELF-CONTROL

People want to do the right thing but cant resist short-run gain

 Commitment, reminders, observability

THE WAY WE MAKE DECISIONS

System 1: Intuitive, fast, gut-feeling, habit
 Default, physical environment, salience of information

System 2: Slow, rational, calculating

SOCIAL NORMS

We want to do the right thing: what others do and approve of
 Moral nudges, moral pleas

SIGNALING AND IDENTITY

We want to do the right thing because: (i) tell others who we are, and/or (ii) that is the
right thing to do.
 Moral please, commitment, reminders

FUNDAMENTAL THINGS TO
      CONSIDER

REASON FOR INTERVENTION

Paternalism: people are making bad choice for themselves.

Interventionism: people are making choices that are bad for others.

KNOWLEDGE GAPS

Knowledge gaps:
- Comparison of effectiveness of different instruments.
- Longer run effects of nudges.
- Heterogeneity of effects

NUDGE VS OTHER INSTRUMENTS

Feasibility? What instruments are feasible

Implementation costs? Fixed and variable costs of taxes, nudges etc.
Enforcement costs? Often low for nudge, but not necessarily of politically mandated
nudges.
Welfare costs? “Hidden costs of nudging”?

Targeting? Can different instruments better target some groups + politically ok to target
with some instruments.
Scalability?