Green Unintended Consequences

It’s Not Easy Being Green

Oct 30, 2013 • Behavioral Economics, Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic Thinkers, Environment, Government, Households, Innovation, Macroeconomic Measurement, Regulation, Tech, Thinking Economically • 411 Views    No Comments

In our school parking lot, we have prime spaces that are reserved for employees who drive a hybrid or electric car. After reading Ed Glaeser’s new paper, “The Supply of Environmentalism,” I realized that bestowing these tangible benefits on green auto owners is a bit more complex than we typically realize.

As Dr. Glaeser explains, sometimes marketers and politicians are not “as green as they seem.”  On the environmental supply side, our motives vary. They could be altruistic or pecuniary. We might want social status or political power. Genuinely concerned about the planet’s future, the people who buy hybrids and electric cars may also have been encouraged by a profit seeking auto dealership or they could have been displaying “conspicuous conservation.” Meanwhile politicians could be genuine environmentalists or support an agenda that appeals to a specific constituency.

Dr. Glaeser’s purpose is to display how disparate human motives can create unintended environmental consequences. He reminds us that William Jevons warned us in 1865 that, “It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is truth.”  So too for electric cars.  Knowing your cost per mile has plummeted, a typical demand incentive kicks in. You drive more and could actually increase your carbon footprint.

Or, told to recycle paper to save a tree, your behavior might lead commercial foresters to plant fewer tress. Similarly, the unintended consequence of more “green space” in San Francisco could make families occupy homes in other areas that consume more fossil fuel for AC and heat. As a result, “think globally; act locally” may be environmentally counterproductive in terms of aggregate emissions.

Our bottom line? Varied personal, pecuniary, social, and political environmental motives create unintended consequences that we need to recognize more often.

Sources and resources: H/T to an excellent Freakonomics podcast for alerting me to the Glaeser NBER paper (gated). Further evidence of the “fickleness” of consumer buying behavior of environmentally friendly products is in this NY Times article while at econlife we observed “conspicuous conservation.”

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