Sunday, 18 May 2014

Climate change is not just about cutting back

Recently I read the book Climate Change Begins at Home by David Reay. It makes for an entertaining read and persuasively argues that every family can substantially cut its greenhouse gas emissions. I particularly liked how the book puts the focus of tackling climate change on individual behaviour. Way too much climate change debate is about governments making agreements, even though such agreements are basically worthless. Governments can do little: it's individuals that pollute, and it's individuals that need to pollute less!
        The arguments Reay put forward in his book did, however, seem a bit na├»ve when it came to economics. He made the case, which one often sees, that cutting back on emissions is a win-win scenario. If a family uses the car less, uses the air conditioning less, goes for a local holiday rather than flying half way around the world, buys less plastic gadgets, and so on, then they benefit the environment and save money. At the level of the family this argument is sound. The problem comes when we apply it at the level of society.
         To see the point, suppose that a family reduces its production of greenhouse gas by 50%. In doing so it spends 50% less. For example, it buys less petrol, less electricity, less plastic gadgets, less airplane tickets, etc. In isolation the family should be happy. But, if every family in the country cuts spending by 50% then something has to give. GDP would halve overnight! Or, in more practical terms, many are going to find that they are out of job - we do not need so many people refining oil, selling petrol, producing electricity, flying aeroplanes, etc.
         Tackling climate change requires more, therefore, than families cutting back on greenhouse emissions. It will require far bigger fundamental changes in the economy. This will primarily mean a shift away from the materialistic world we appear to have converged on. In particular, basic logic suggests we are going to need a 50% cut in income to go with the 50% cut in spending! This need not come at the cost of happiness, because all we need to do is cut out unnecessary things that were not needed anyway. And we know that more income does not buy more happiness. But, whatever the framing, a cut in income of 50% is not going to be very popular.
         So, tackling climate change will require a fundamental change in the economy. Does that change the individual incentives to cut back on greenhouse gas emissions? No. Popular discussion of climate change essentially seems to suggest the 50% cut in income has to proceed the 50% cut in spending. And, therefore, individuals (and governments) are reluctant to sign up to tackling climate change. But, this gets things the wrong way around! The 50% cut in spending will proceed the 50% cut in income. It is better, therefore, to be ahead of the game and reduce spending now. This way you save money in the short term and are prepared for any shift in the economy that may subsequently follow. 
   

Monday, 5 May 2014

Obesity and nudging over the long term

A recent issue of Nature had a special report on obesity. One of the articles looked at the merits of  behavioural interventions in tackling obesity and came to a somewhat pessimistic conclusion. In particular, the article pointed to evidence that behavioural interventions produce only short term gains - weight loss over the first 6 to 12 months but creeping weight gain thereafter. This is bad news for anyone wanting to tackle obesity. It also raises questions about the general benefits of behavioural interventions.
        And this second point is especially interesting given that behaviour change is very much a buzz idea at the moment. Richard Thaler and Cass Sunstein have done most to publicize the idea with their book Nudge, but they are by no means the only advocates. The popularity of behaviour change stems largely from its seeming simplicity and cost effectiveness: people's decisions are effected by the way choices are framed and so framing choices in a particular way change change behaviour in predictable and desirable ways. 
         The nudges that have received most attention are those explicitly related to financial decisions like saving for retirement, paying tax returns etc. But, eating also seems an area apt for a bit of nudge. For example, smaller plates might mean you eat less, the positioning of food in the canteen buffet might mean you make healthier choices, keeping a food diary may mean you eat less and make healthier choices, a pedometer app might mean you walk more, and publicizing your exercise or weight loss plans to friends and family might make you more likely to stick to plan.
        The continuing interest in behaviour change is evidence that it has delivered results. Nudges have proved successful in increasing saving, reducing tax evasion and so on. But, what if the gains are only short term, as the experience in tackling obesity suggests? Clearly this sounds like bad news for advocates of behaviour change. To me, it suggests two important caveats that need to be kept in mind when thinking through the consequences of behaviour change:
        1. Some decisions we make very infrequently, such as how much to save for retirement. Some decisions we make very frequently, such as what to have for dinner. 'Short term' can, thus, mean widely different things depending on the context. Nudges can have 'long lasting' success if decisions are made infrequently; if, for example, you change your retirement saving plan then you may be set for life. But, nudges may wear off quickly if decisions are made frequently; if, for example, you buy some smaller plates you may eat less for a month or two but soon be back to normal.
       So, why do the effects of nudges wear off? Nudges work by changing framing and that works because of the heuristics we use. If, for example, you use a heuristic 'fill my plate one cm high with food' then buying some smaller plates means less food. This, though, need not change your underlying preferences. So, after a few months of feeling hungry you likely adapt your heuristic to, say, 'fill my plate two cm high with food'. (Note that this means you then end up eating more when you go to the self service canteen!) Such adaption suggests that, in a context where decisions are made frequently, nudges may not be enough. A more fundamental 'change in preferences' is required.
        2. But how do we 'change preferences'? Preferences are largely determined by culture, norms and the like. So, changing the behaviour of one person is a drop in ocean. Instead, it may be that society as a whole needs a nudge in the right direction. And that likely requires some big policy intervention.
        The article on obesity, with which I began, concludes: 'Ultimately, the only effective, sustainable solution - on a large scale over the long term - may be to change the culture. "The issue to me is not whether or not behavioral interventions work," Katz [director of the Yale-Griffin Prevention Research Center] says. "There's absolutely no question to me that they are the thing we have to depend on." But even the most comprehensive programme, he says, is no match for a culture built around calorie-dense foods and sedentary lifestyles. "Behavioural interventions are a very slow march forward on a walkway that's going in reverse".