16480_2.14_000007210772XSmall

Green Signals

Jul 8, 2011 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Environment, Households, Thinking Economically • 140 Views    No Comments

When “green” is valued, hybrid car sales will be high.

But here is the interesting part. When green is valued, looking “green” sometimes can be more important than being “green.” As a result, people buy more Priuses than Honda Civic hybrids because the Prius has a unique design while the hybrid Civic looks like a gas guzzling Civic.

To confirm their theories about “conspicuous conservation,” 2 economists looked at auto sales in Washington and Colorado. In addition, they noted California consumers who placed solar panels on the shady side of their property in order to have them face the road for all to see.

This takes us to Portland, Oregon or Berkeley, California. Certain communities encourage environmental displays while others do not. By comparing Prius and Honda Civic hybrid sales, we can see where.

In this Freakonomics podcast, you can hear more about the green signals conveyed by conspicuous conservation.

The Economic Lesson

In The Theory of the Leisure Class (1889), economist Thorstein Veblen (1857-1929) introduced us to “conspicuous consumption.” Referring to society’s more affluent, he said that buying behavior relates more to displaying power and prestige than need.

With “conspicuous conservation,” rather than the costly jewelry or using the corporate jet, environmental concern elevates a person’s status.

An Economic Question: How does this quote from Adam Smith (1723-1790) relate to conspicuous conservation? “The wish to become proper objects of this respect, to deserve and obtain this credit and rank among our equals, may be the strongest of all our desires.”

Related Posts

« »