If human beings were the perfectly rational creatures imagined by classical economists, we would have done something about climate change by now. But the central insight of behavioral economics — the once heretical but now ascendant paradigm in economics, particularly following the 2002 Nobel Prize awarded to one of its founders, Daniel Kahneman — is that humans aren’t fully rational. All sorts of cognitive limitations prevent us from being so, and behavioral economists have spent much of the past decades discovering, describing, and naming our many mental shortcuts and biases, and ascribing our various irrational tendencies to their effects. Ben Ho’s particular interest is in how people’s feelings of guilt and altruism can be leveraged to reduce their carbon footprint, and he presented his findings at the November conference in a talk he titled “Using Behavioral Economics to Save the World.”
Early in Ho’s presentation, he mentioned a book called Nudge, written by the behavioral economist Richard Thaler...the Obama administration nominee to head the Office of Information and Regulatory Affairs. In their book, Thaler and Sunstein coin a term: choice architecture.
They argue that because the way in which we are presented with information changes our response to it, the best choice architecture gently steers us into the salubrious behavior that more thoroughly rational beings would choose.
Nudge describes a simple but astonishing experiment along such lines: Residents of a community were shown how their energy use measured up against the communal average. If they consumed more than the average, most reduced energy in the months ahead. If households saw that they consumed less energy than their peers, however, their energy use actually rose, except when the frugal households were given the merest of rewards: a smiley face on their bill.