18 4 e-01-understanding-predictably_irrational_influences_on_saving_energy_and_the_planet

Understanding “Predictably Irrational”Influences on Saving Energy and the Planet

Behavior, Energy & Climate Change Conference

Sacramento, CA: November 16-19,2008

Linda DethmanDethman & Associates

In Memoriam, 19XX-2008?

“Buildings would work perfectly if it weren’t for the people occupying them.”-- Anonymous, ACEEE presenter, circa 1993

Dethman & Associates

Mea Culpa

“I made a mistake in presuming that the self-interests of organizations. . .were such as that they were best capable of protecting their own shareholders and their equity in the firms.”– Alan Greenspan, mid-October,2008


A Behavioral Revolution?

“So perhaps this will be the moment when we alter our view of decision-making. . . this financial crisis is going to amount to a coming-out party for behavioral economists and others who are bringing sophisticated psychology to the realm of public policy.”-- David Brooks, New York Times Op-Ed,

October 28, 2008


Default Rational Decision-Making Assumptions

Perceive the situationConsider possible courses of actionCalculate which course is in your best interestTake action


“What a piece of work is man? how noble in reason! how infinite in faculty!”-- Act 2, Scene 2, Hamlet, W.Shakespeare

According to Behavioral Economists


Today

What this talk is based onKey ideas from behavioral economicsPossible energy program applicationsPossible energy policy implicationsConclusions


What this talk is based on

Frustration and elationSpecial thanks to four recent books

Predictably Irrational – Dan ArielyNudge, Richard H. Thaler, Cass R. SunsteinHabit, Neale MartinSway, Ori Branfman and Rom BranfmanAnd various articles and crises


Key IdeasTwo states of mindAnchoringFear of lossThe power of FREEInertia and status quoThe power of normsRelativity and comparisonsAnd more. . .


Two States of Mind

Automatic/HabitualLizard/puppy brainUnconsciousUncontrolledAssociativeRapid fireSkilledMulti-tasking

Reflective/ExecutiveNew/adult brainSelf-awareControlledDeductiveSlowRule-followingSingle minded


Who’s in Charge? Who do we like?

Mostly the habitual mind rules/has to rule

The underlying “operating” system we try to avoid

But we’re most aware of/ comfortable with the executive mind


Who do we design for/market to?


How to Read The Energy Guide LabelManufacturer, model number and appliance type• Information about features, capacity, and sizeso you can compare brands• Estimate of appliance’s annual energy use.The lower the number, the more energyefficient the appliance, and the less it costs torun it.• If the appliance is an ENERGY STARappliance the ENERGY STAR symbol willappear on the ENERGYGUIDE label• The range of energy use for similar models.Use this scale to see how a particular modelmeasures up to the competition.• Estimate of how much it can cost to run thismodel for a year. Note that the estimatedyearly operating cost is based on the nationalaverage cost of electricity ($0.0824 per kWh).

AnchoringWe are tied to “starting points”

Prices – how much for a cuppa joe?• In Taipei

Sizes – how big is Las Vegas?• How big is your town?

Charitable contributions • “You’re crazy, I can’t afford $500”

The power of random numbers• Wheel of Fortune and Social Security numbers


Fear of Loss“Losing something makes you twice as miserable as gaining the same thing makes you happy” (T&S)

Do people still equate conservation with loss?

• Thank you Jimmy Carter• CFLs etc.

Should we talk about losing $ versus saving or gaining?


The power of “free”

My dadHershey's kisses and Lindt trufflesAmazonBe careful what you ask for


Time OneKiss 1¢

27%Lindt 15¢

73%

Time TwoLindt 14¢

31%Kiss FREE

69%


Amazon Insights and Confessions

If you buy a second book, shipping is freeDramatic sales increase except in France

Buy Amazon “Prime” and get all your shipping free and fasterAdd to your order to meet a minimum and get FREE Super Saver Shipping


Be Careful What You Ask For

Consumer response to PPL Electric Utilities’ compact fluorescent light bulb program was overwhelmingly positive. “After running out of power strips. . .”


Status Quo & Inertia

Same seats?Same investments?Opting in versus opting out?

How we create our own benefits and trapsCurves, Weight Watchers, Pro ActiveGreen Energy


Program ImplicationsHow do we simplify?

What about those labels?Pricing

How do we capitalize on FREE?Are we giving the right/any comparisons?

What anchors do we need to set? How do we reset anchors?


Program ImplicationsCan we use fear of loss constructively?How do we give better feedback?Pre-mortem thinking – write the history of a disaster


Policy Implications

If you remember one thing from this session. . .let it be this one: There is no way of avoiding meddling. People sometimes have the confused idea that we are pro meddling. That is a ridiculous notion. It's impossible not to meddle. Given that we can't avoid meddling, let's meddle in a good way. —Richard Thaler


Policy Ideas

Support behavioral economics research in energy efficiency, climate change

We really don’t know enoughWe need to educate and convince ourselves (it’s hard to abandon our anchors)

Support technology & feedback mechanisms that SimplifyAnchorHonor human reality


Policy IdeasEnable programs where the default is “opting in” to efficiencyHelp build stronger communities (norms)Support more youth education (early anchoring, values, transformative?)



A conclusion is simply the place where you got tired of thinking.

Out of intense complexities, intense simplicities emerge.- Winston Churchill


THANKS!Contact: Linda Dethman

[email protected]

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Documents

energy starappliance

range of energy use

energy guide labelmanufacturer

energy star symbol

appliances annual energy

dethman associateshow

dethman associatesmea

appliance type information