Changing Behaviors To Save Energy Energy Star labels and miles-per-gallon vehicle ratings aren't enticing enough consumers toward energy-saving options, according to economist Hunt Allcott. Allcott explains how new research in behavioral economics might help lead consumers to more energy-efficient choices.
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Changing Behaviors To Save Energy

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Changing Behaviors To Save Energy

Changing Behaviors To Save Energy

Changing Behaviors To Save Energy

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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Energy Star labels and miles-per-gallon vehicle ratings aren't enticing enough consumers toward energy-saving options, according to economist Hunt Allcott. Allcott explains how new research in behavioral economics might help lead consumers to more energy-efficient choices.


You're listening to TALK OF THE NATION: SCIENCE FRIDAY from NPR. I'm Ira Flatow.

When it comes to money, why is it that we don't always act in rational ways? You know, you should be saving for retirement, but somehow your 401K stays flat, or you know that if you spend five minutes picking a new cell phone plan, you'd save more than enough to make it worth your time.

But somehow knowing what we should do is just not enough. Well, to understand why we don't always do what we should be doing, economists are borrowing research techniques from the social sciences and applying them in a new field of study called behavioral economics.

Can human behaviors explain economic decisions? And taking it a step further, can we use that information to nudge people to make more energy-efficient choices?

Well, that's the question posed in a paper in the journal Science this week, and that's what we're going to be talking about. Our number is 1-800-989-8255, 1-800-989-TALK. You can also tweet us @scifri, @-S-C-F-R-I. Why don't you make a rational why don't you become more energy efficient, even though you know it's good for you? What's your thoughts on the matter? 1-800-989-8255.

Hunt Allcott is assistant professor of economics at New York University. He is on leave from NYU, and he serves as the energy and society fellow in the department of economics at MIT. Thanks for being with us today, Dr. Allcott.

Dr. HUNT ALLCOTT (Massachusetts Institute of Technology): Thanks to you. Happy to be here.

FLATOW: You're welcome. What's wrong with just telling people it's good for them, that they'll save money, that they have Energy Star labeling, that they can find the information easily that they want? What's wrong with all of that?

Dr. ALLCOTT: So I think one of the answers is that this is a really complex decision. So when you go to buy a car have you bought a car recently, Ira?

FLATOW: A couple of years ago.

Dr. ALLCOTT: So, you know, I think when most people go to buy cars, this is a big decision. This is 10, 20, $30,000, for you maybe $100,000.

FLATOW: Wrong guy, wrong guy.

(Soundbite of laughter)

Dr. ALLCOTT: Fair enough. But, you know, you've got to think about horsepower. What does 180 horsepower mean? Do I want the red car? Does my girlfriend want the pink car? And things like energy efficiency are just part of a very complex set of decisions, and the issue with energy efficiency that is potentially of concern is that energy costs accrue in the future, and they accrue slowly over time. And so when I test drive that car, who knows if I'm thinking about how much it's going to cost me to fill up the tank of gas? So that's, I think, the reason for initial concern.

FLATOW: But if you have to choose between, you know, a fluorescent light bulb and a and a, you know, a regular, old-fashioned light bulb, that's not such a big decision, is it?

Dr. ALLCOTT: That's true, and there are - I think there are many much simpler decisions. That's a great example. The fluorescent light bulb, I think, is a great example of this sort of issue.

So when you go to the store, again, you have normal light bulbs, you have fluorescent light bulbs, and the fluorescent light bulb can typically save you $20 over the life of the bulb.

Now, the light's a little bit different. They used to be a lot worse than they are now, but this in many cases seems to be a no-brainer. In reality, what we see is that a lot of people still aren't buying fluorescent light bulbs.

FLATOW: Could their political views be involved here? Could they say, you know, I you know, in the old days we used to make decisions based on good science. Now we may be making decisions based on politics. I don't believe in global warming. The whole thing's a sham. I'm not buying any CFL.

Dr. ALLCOTT: Yes, definitely, and I think there are a lot of reasons why we might or might not buy the energy-efficient good. I mean, maybe I just don't like hybrids. Maybe I don't want my neighbors to think of me as green.

There's another side of the population that really loves hybrids, not because they save energy and money but because they can signal that they're green. So there are a lot of factors that go into decisions.

I think that the thing that I would highlight - let me give you a very stylized example, but it kind of gets at the core of the issue. Let's say I could give you two products that were exactly the same, except one would cost think of them as air conditioners. One costs $20 more to buy now, but it saves you $30 over the life, you know, over the time that you're going to own it at discounted present value. If those things are the same, but you can save then $10 from energy efficiency, that's a decision that you should want to make.

FLATOW: Do other countries find this easier to do than we are? I mean, it is easier to be greener and make those decisions easier in Germany or France or other places?

Dr. ALLCOTT: So I mean, I think that there are really fascinating cultural differences across countries and even within countries too. So certainly we know that many parts of energy prices, in particular gasoline prices, are much higher in Europe, and that's affected the size of cars that we see there and how much people drive, and even within the U.S.

I mean, there are parts of the U.S. that are extremely, extremely energy conscious, and it's very easy to get people to conserve, and other parts where we just don't care. And so I think there's a lot of heterogeneity, and that's, you know, that's true in this domain and that's true in lots of other domains. Culture exists.

But it's really, I think in this case, poorly understood. If you move me to Alabama or some other state where people cared less about energy than my little enclave in Cambridge, how much would that change my behavior? I don't know.

FLATOW: Do you have any techniques that you could suggest to get people to change their behavior?

Dr. ALLCOTT: So - yes, and I'll give you one example that we highlight in the science article that I think is especially interesting, and it's an example of the company called OPOWER, and this is actually especially timely today. President Obama visited there in their offices in Arlington, Virginia to give a talk on jobs, on green jobs.

But what's fun and interesting about OPOWER is that this is a company that sends home energy use reports to electricity and gas consumers, so to just, to normal households. And these home energy reports have comparisons to your neighbor, and if that neighbor comparison motivates you, then on the back they have energy conservation tips.

And for the average household in the places where they've rolled this out, and this is about 500,000 households across the country, they have a treatment effect of 2.4 percent. In other words, they're causing the average household to reduce their energy use by two to three percent.

FLATOW: By comparing what your neighbor does compared to you.

Dr. ALLCOTT: That plus the information plus the energy conservation tips plus the fact that they, you know, they're reinforcing the message every month or every quarter. Some combinations some combination of those things appears to be really powerful.

And remember that half the people aren't even opening their mail. And so for some people this is in some sense much more effective than the 2.4 percent suggests.

FLATOW: I've got to ask this question. I don't like the way it sounds, but I've got to ask this question.

(Soundbite of laughter)

FLATOW: Are we just stupid? Do you know what I'm saying? You know, we know what's good for us. We know how to save energy. We know how to save money. What is the problem? Are we just stupid?

Dr. ALLCOTT: I think I personally would be very, very cautious, you know, with saying that. I think there are a lot of again, a lot of complex decisions in the world: buying a car, buying a house, deciding when to get married, whom to get married to. All of these things are complex decisions.

And yeah, so I agree that we have, in some sense, a non-infinite ability to do all the calculations that we'd like to do, but that's perfectly natural. That's part of being human.

So we may not be able to infinitely compute things, but I think there are also a lot of other mitigating factors that would cause us to want to conserve energy in some settings but not conserve energy in other settings.

FLATOW: But you show when you put a competitive angle to this, like in sports, when you see what your neighbors are doing, that does stimulate us to go to become greener. We like competition maybe. We need to compete against somebody, at least on our own block.

Dr. ALLCOTT: Yeah, I think that's remarkable. There's something about the neighbor comparisons here and in other settings that's very powerful, and the person I think who's done the most work in illustrating this is a psychologist named Bob Chaldini(ph) with a group of co-authors, and they show that social comparisons not just in terms of energy use but other environmental behaviors, you know, do you recycle your do you want the towels washed at the hotel, or do you steal firewood from a forest - in many of these settings we are influenced substantially by what we're told about what other people are doing in terms of the social norm.

FLATOW: Yeah, we've talked about that on this program, studies that show if there are other, larger groups that are doing things, you'll want to join in on a positive side with those groups. So I guess one of your challenges is to find what kind of motivational techniques would work.

Dr. ALLCOTT: Exactly, exactly, and I think, you know, in the case of energy, we've seen that, you know, that this motivational technique works very well.

I think what (unintelligible) and I are arguing in the Science article is, it's really not about OPOWER. OPOWER is used as an example of how behavioral science, psychology, behavioral economics, sociology, can be used to generate other insights like this one, and I think that's what you were getting at.

So the question then is: Are there other directions that we can go that would generate other, similarly powerful programs?

FLATOW: Well, one direction that we have seen that works, have we not, is when the price of gasoline goes to $4 a gallon, people are motivated.

Dr. ALLCOTT: For sure, yes, and you know, and that's perfectly, you know, that's perfectly natural. That's what we would expect.

One thing that's interesting, and there's some research going on to kind of substantiate this, but one thing that's interesting is that, remember, gas prices varied a lot before they got to $4 a gallon, and in principle, you know, we should you might think that we would react even before gas reaches some very high threshold. And so you would expect that as gas prices change from 2003 to 2006, early 2007, that as gas prices went up, we should be, you know, more and more willing to buy hybrids.

And what's interesting is that it appears that, yes, we became somewhat more willing to buy fuel-efficient cars but not as much as the financial differences would predict. And then in 2008, when gas prices really hit the roof, you couldn't give away an SUV, and you couldn't rent an SUV on the the rental car companies couldn't give away SUVs.

And so it's interesting how we may have overreacted and then eventually excuse me, underreacted, and then eventually overreacted.

FLATOW: And that magic 99 cents, $3.99 versus $4, which we've heard about.

Dr. ALLCOTT: Right, right, exactly.

FLATOW: Really, that little penny makes a difference. I want to thank you very much for being with us today, and good luck in your search to find those motivational factors to become greener.

Dr. ALLCOTT: Thanks very much.

FLATOW: You're welcome. Hunt Allcott is assistant professor of economics at New York University. He's on leave from NYU while he serves as the energy and society fellow in the department of economics at MIT

We're going to take a break and switch gears. We're going to talk about nuclear power. We've been talking about motivating people to switch to greener energy. Well, let's we're going to do a series of different kinds of energies, the possibilities, and one we're going to talk about is the new technologies in nuclear power, and one of those ideas is to shrink up the size of the nuclear reactors.

So we'll talk with one entrepreneur who's trying to get his tiny micro-nuclear power plant on line, talk about the pros and cons with it. So stay with us. We'll be right back after this short break.

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