« Freakonomics Radio

36. Hey Baby, Is That a Prius You're Driving?

2011-07-06 | 🔗
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me twenty one. Nilsen report limitations applying the bridge prime Mr David Cameron, when he was leader of the opposition, is trying to get elected. He wanted to convince people that he was a carrying guy and he installed a little windmill on his house TIM her. is an economist and writer who lives in London. His first book was called. The undercover economist is latest is adapt its about how success often starts with now it turns out. Wind power can be pretty effective But you need a really really big windmill at a really windy location to be efficient. These laws. windmills, especially in an urban environment where you don't get a consistent flow of wind. They generate new credibly small amounts of energy really really ineffective? Indeed, as a fantastic example from the bridge, Physicists David Mc High, who points to be
top windmills. In Japan that action have little electric motors in them to keep them spinning around Otherwise they will really stupid on top of the building and not actually moving these men. actual actually cost energy, I'm fine from a pm. American public media, W and Y see. This is for economic radio today Haven is that it yes, you're driving, here's, your house, Stevens Abner! You will know that David Cameron did get elected prime Minister of the UK, and where there is little windmill had anything to do with it, tough to say, but while it may not always be easy being green these days it certainly attractive, rooftop, windmills, those I am not a plastic bag, reusable shopping bags and
certain make of automobile their richer jail. Guy yeah, it's a hybrid. I just just sit back and be a part of destroying the earth anymore. You thanks that's from the tv show South Park poking fun at how some people get a little sanctimonious when they start driving a hybrid car. In this episode, the car is called a pious little bit like previous. Maybe the message is clear: helping the planet is nice, but being seen helping the planet is really nice
So here is a question for you: how much value do people who lean green place on being seen, leaning, read? My name is Steve Sexton, I am a Phd student at you, see Berkeley studying our cultural and resource economics, I'm Allison Sexton, I'm a phd at the University of Minnesota, studying health information economics, so I'm a little suspicious, some share last name you ve related to each other. Perhaps we are. We also share the womb, that's right, Alison and Steve Sexton or twins and they're. Both budding economists, because what their parents do yeah economists o is very
citing, as you might imagine, all of our friends couldn't wait to come over for dinner with us. We like to show that we have a family planned, become a one family, consulting firm kind of like the Partridge family for economics. Alison Sexton worked briefly for the Federal Reserve Bank in Minneapolis. Steve Sexton has somewhat less sedentary hobby. Yes, in addition, due on trying to finish up my p dear at Berkeley, also training for the London Olympics as a traffic. How good are you like when you say, training for the Olympic? That means there is reasonable expectation that you might actually be there. Yes, I was. I ended twenty ten as the third American and the olympic points rankings when we get to take three people, so that's by no means by no means- and I made it yet- but I must have a shot at it as economists in training the site, since know all about the economic behaviour known as conspicuous consumption, Thorstein Babylon coined the phrase more than a hundred years,
more and more Americans were growing rich and it became important to show off that wealth. Today there is still plenty of conspicuous consumption, but the sextants noted a trend that updates the old model that is not showing off your flesh. A car or flashy jewellery, but showing off your environmental, bona fides by say driving a car. That's plainly: a hybrid psychologists have defined competitive, altruism, a sort of keeping up with the Joneses type concept, but applied to pro social behaviour or efforts to make society better. So I will be competing with neighbours to donate, to a charity, for instance, or to reduce energy conservation or environmental impacts or, as the Saxons call it conspicuous conservation right because conspicuous consumption. There invest
in products they provide. The same functionality is cheaper alternatives, but their flash year just because it costs more or what and so that can be wasteful and leave nobody better off, but in this case, with conspicuous conservation, because the costly effort that individual undertaking is providing benefits to society, this rat race could actually be a good thing and talk to me for just a minute about how the idea came about. There are two of you, even though your twins, I gather you, know exactly share every single thought or mate. Mono, maybe do was it as you pulled in whole foods parking lot and saw that you know half the cars represses pre I. How did it happen? While I think that part of it did come from Steve who lives in Berkeley and he did notice a lot of prices on the road and didn't notice a whole lot of other hybrid cars, such as honey civics, and wondered why
There has been surveys of previous owners asking them why they by the press and far more common. They answer that it says something about them, then mention the fuel efficiency of it. So I see was actually bag visiting me last year for Easter, and we were talking about this idea of signalling your ear environmental concerns by driving a press and how we could see how we could create an economic model to test for it and see if that signal exists. This, might not sound like something that economists study how people signal, their environmental concerns, but in fact they ve written Reims on what's called signalling theory. Here's Robin Hansen from George some university signalling theory is another way of talking about showing off her trying to present your best face. It's all about what we do to look good, or at least not to look bad, no offense to you or your fellow economists. But why are you guys?
Looking at this issue seems they don't you have other more economics, themed problems too solving, why have you guys gotten involved in this, and maybe even good, at figuring out signalling? So managing our appearance is actually a lot of what we humans do trying to understand business, trying to understand jobs, school even medicine. If you don't realize that people are trying to manage their image, you miss out on a lot of what's going on so the Sexton twins were looking to measure the signal sent out by people who drive hybrid cars by their count. There were twenty four different hybrids on the market, but the previous was a market hog, the runaway winner, with a whopping forty, eight percent of the hybrid market
why the Hunter civic hybrid looks like a regular Honda centred on the Ford escape hybrid, looks like afford escape, except that these cars have a small badge on them. That indicates their type is a hybrid but the stifling of the car as identical, whether its hybrid version of the model or the conventional, DR version of the model, but Toyota Prius doesn't look like any other toiled or any other car period, and so our hypothesis is that if the previous looked like,
a toy Camry or Toys Corolla that it wouldn't be as popular as it is, and so what we set out to do in this paper is to test that empirically ok. So how do you do that? The paper the Saxons would end up. Writing is called conspicuous conservation, the previous effect and willingness to pay for environmental bona fides. The first step pick a different hybrid car to act as a control against the previous that comparably price to the Junta, civic, hybrid and so throughout. For thinking about this project, we kind of use on the civic hybrid, as our control for the previous. It doesnt have that unique signal, but its otherwise very similar, not a perfect control, but its very similar to the previous, except that it doesn't have a unique design. Ok, similar price, similar fuel efficiency, but different design So what's the press is unique design worth as a signal
the outside world, that you are burning, less fuel and everyone else. So if your neighbors about the environment and so on that signal can be very valuable but assent. But if your neighbors don't care about the environment, then why do you care to send a signal to them that you care about the invite and so you can think about whether you'd rather drive a priest in Berkeley or in Crawford Texas, for example, keep in mind that before the sextants came up with this idea, South Park was all over it with a new kind of changing you. Yes, it certainly is we think about. Let people encounter starting to take offence at your actions. We feel like you're starting to become alienated from some of your friends. Well, I totally agree Kyle, you do yes, a lot of people in town just aren't ready to drive hybrid cars, ok, and that's why I talk it over with your mother and we ve decided to me.
we need to be where everyone is motivated and progressive. Like us start getting your things pact boys, the Brok Lofty badly, is moving to San Francisco. Now in other words, if you green leaning person, the signal of appeal, might be more valuable if you live in a green, leaning neighbourhood than if you live in a place. Where environmentalism. Isn't such a big deal? The Saxons wanted to know if a this is true and be, if so, just how valuable is the The signal coming up measuring the previous effect and Much did Toyota know about conspicuous conservation when it designed the pious previous. When somebody thinks about hybrid they think of previous now, it is the standard for what I
bi. Lo in my Prius, all leather tinted windows, you can see everybody's trying to park. You can feel the tension. I'm in electric mode can't even hear the engine. Thanks to Pennsylvania, lottery, scratch, ass, pennsylvanians or scratching their way to fund, and we new games every month, big top rises and said enchants drawings, excitements, always in order so try, Pennsylvania, lottery scratch offer your ticket to fund and get yours today keep on scratching, must be eighteen or older. Please play responsibly benefits older pennsylvanians, everyday, reconfirmed,
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to your bank account on. You reschedule see all the ways Square can health at square dot com slash, go slash! Freak though nonsense. We have been able now people guiding, I may be able to bring w and Y see an ATM american public media. This is for economics, radio, here's your house, Stephen doublet. Come on everybody mediaeval now so the young twin economists, Alison and Steve Sexton, set out to gather some data and hybrid car sales in different places. They chose Colorado in Washington to states with a lot of political diversity and they got hold of vehicle registration data and voting records. The vehicle data told them what kind of cars are being bought where and the voting record stood as a proxy for how green each part of the state was the idea being that greener,
communities vote more democratic than republican. When the sextants looked at the numbers they found it hybrids indeed sold it did proportionately well in the green or zip codes, and bolder in Seattle, for instance, but was that true for all hybrids? What about the Hunter Civic, hybrid, sextants control car? We didn't have to see if the market share for honey civics also incur steam in greener, zip codes, and we found no statistical effect and, in fact, in a few of the Russians, we found a negative effect. But the previous those green zip codes were crawling with races and, through our common metric model, were able to determine what share of the press is. Market share is due to its unique styling, the previous signal or the conspicuous conservation.
fact, and then using other studies that have determined how responsive vehicle demand is to prices were able to basically trace out a demand curve and estimate the willingness to pay for that single attribute of the process. That is how much people are willing to pay just to signal that they are green right. So how big is the effect? How big is conspicuous conservation effect than in these places? So for Colorado we measure that it accounts for about between twenty one and thirty three percent of the market share, and in Washington. We measure that it accounts for about ten to seventeen percent of the market share. So this translates into a willingness to pay in Colorado for of between about affair, ten dollars and four thousand dollars and in Washington a willingness to pay between five hundred and thirteen hundred dollars are. This needs a bit of
verification. The market share numbers the sextants or talking about that's not how much of the market. The previous has its. How much edition a market share. The previous has because of its unique hybrid look. That willingness to pay figure there talking about that doesn't mean people actually pay that much more for the priests they don't willingness to pay is just economists speak for how much the priest effect is worth the people in terms of feeling good about themselves being seen, by others in a positive light, things like that? What do you know about how intentional the priest design was in terms of setting itself apart as an obvious hybrid and, in other words, did Toyota understand conspicuous conservation well before you
guys even ever thought to look into it. I think there is evidence that Toyota understood conspicuous conservation before before we did they. They instructed their car designers to make the previous unique and said that they didn't care what it looked like so long as it looked different. It suggested they did expected. They could count on this conspicuous conservation effect, DR sales? Oh that's right! I mean the design it everything about previous re. Everybody understands that the car is both efficient and it has a unique designed to stand out. Nothing else looks like it on the road. That's done Coleman, the previous product manager at Toyota, USA, You see a pre ass. He noted, as you know, it stands for hybrid and there's really know their car that stands for hybrid, so having something. That's unique is really important to our buyers
The sextants convinced that the toilet, a priest represents the height of conspicuous conservation, went looking for other examples at one and the more common ones that we see here in California. Is people putting solar panels up on their house. In fact, there is a number of cited cases where people will put solar panels on a shady side of their house, because it's the street side, so people will be able to see it now. Do you think, consultant or installer says to them. This is not going to really do as much as if you put it on the sunny side, your house, you think those conversations happen. We know that they do. You know I haven't been at at those conversations, but do understand those conversations go on the experts advise Here's how to maximize the benefit from your solar panels and homeowner say well. No, I actually want did on that side of the house, in other words,
side, where my neighbours will see that I have so well on the street side of the house. Right, and again and again we don't judge. We don't judge that that's fine. We don't take a position on that, but if, if that kind of an effect is occurring than it has implications for both firms that might want to market these types of products as well as for governments that might want to maximize the benefit from investment and in those types of products, could it be that people are engaging in conspicuous conservation Instead of doing less visible but more pragmatic things like you know that, I'm instead of putting solar panels on the shady side of my house, I could better insulate my walls and doors which would actually be very effective, but nobody's going to see it. So is that kind of the problem that you're trying
yes, sure that the conventional wisdom among energy economy is at the low hanging fruit. The easiest way to achieve energy conservation is through those in conspicuous investments that she talked about and boosting the insulation in the home window, ceiling, treatment, energy, efficient appliances and so forth that those are the most cost effective ways to reduce energy consumption. But, of course, none of those can be seen by one's neighbours unless are brought into the house, but that's really not visible from the street side. But if you consider that there's a high concentration of greens in the Bay area, where its foggy most of this The sun doesn't even really come out much higher in Berkeley. In fact, that's why trying it out of Berkeley every summer that I can son does shine on the on the rooftops of all the Republicans or the or the for lack of a better term browns that live in the central Allie, they get a lot of sun during the summer. But there can be less inclined to install the rooftops solar panels on their homes. So we might like to imagine a creative programme whereby your Berkeley, Green, who doesn't get very much sun in the summer, could
you dont stall, rooftop solar on the home of a Bakersfield Brown and therefore again maximize the effectiveness of those conservation dollars or get more energy conservation, Argus Energy production in this case out of the solar panels. The problem with this, of course, is that then, that Berkeley Green is unable to demonstrate to their neighbour that they're making this investment in conservation will. Then you just have to be able to buy a big billboard in your yard. That says my solar panels are on a Republicans House and Bakersfield, and then Nobody would be happy. I'm a woman, so the answer is no. What are the implications of your research than for palsied? You want to encourage or incentivize more inconspicuously conservation, since you know that the conspicuous stuff will take care of itself
so right. Now the government has subsidies for a number of different types of conservation acts, some conspicuous in some in conspicuous, but our results would suggest that perhaps government policy should focus on the inconspicuous, such as window ceilings and air fans, and that perhaps we can provide privately the conspicuous conservation efforts. the words the conspicuous stuff, like the previous, we'll take care of itself, because in a way it offers its own reward. You're, trying to enhance your reputation or attained some kind of status by undertaking these personally costly actions that benefit others, and what s interesting about these conceptions of altruism, both competitive, altruism and reputational motivation for altruism as at their fundamentally selfish, and so they they are consistent with traditional neoclassical economics. They aren't fundamental,
altruism in the purest sense. What are you guys drive I have for most of my graduate school career and before I was without vehicle. I just this Christmas gotTA and me down Toyota Camry from my mom, not hybrid. It was before hybrids I drive and eighty four the when it went way when I I got myself in trouble. There you're a Phd student did. Were you selling crack? A few years between is triumph very profitable, in fact, Oh, I was fortunate to get a number our ships, in my undergraduate studies and my parents essentially turned over what was left of my college fund to me- and I blew it on a car and my first year- grad school awesome, it's not a hybrid correct. No, it isn't
I drive a Miata Amitabha yeah sports car. That's Robin Hansen! Again, our signalling economist. I think it's it's easy to pick on, say the conspicuous consumption of of a conservationists image and say well, these people driving a previous because they're trying to seem one way, but of course all the other. cars are trying to seem some other way to re. What are you trying to signal to the world when you drive your miata? Well, I'm fun, I'm spontaneous. I dont mind whizzing around, maybe I'm a little aggressive, sometimes I'd like to get places fast. I like the wind and my hair. Is that all true think it's year roughly true, I'm I'm happy to admit a lot of what I do.
is to manage my image. You mentioned your Miata Robin. I wonder what are some other if we, if we could climb deep inside the Control Summit Centre for Robin Hansen's, brain and his signalling activity? What else do we see what some other singly activity that EU engaging economists like to point out, there's almost no chance that your vote is gonna determinant election salt LE things economists like to do to show off that there are clever economists to not vote and a site, everybody hey, I'm smarter than all the rest. You see. I understand that by voting it's not gonna make any difference anyway, and we do a little of that too often say you might not Tipp at a restaurant, because you say you know, I'm never coming back to this restaurant again, and so economists often do things. that sort of thing through strategy and they go out of their way to may be a little rude or a little thoughtless and in the usual language and artist, show hey. I understand the strategy of us and I gotta admit I do that. Sometimes I tippit restaurants. I tell you that, but still devote some time
Are you more likely to vote in local elections than a national election, or vice versa? Probably more like It's about international action, but that's also a common via an essential innocence, local elections matter more for your lives. A local will also. Your vote is much more likely to influence and outcome, and so why do you got the opposite, then, because, like most other people voting in an actual election She talked about it, so you want to sit around and talk with your friends and colleagues. You tend to talk about national politics, and so the voting is a way to help. You talk about it in the brag about your inside. Do me a favor, don't go hating on Robin Hansen, just because he boats, for his sake and not out of civic duty. and don't go hating the sextants just because they have pointed out that you might drive a previous for reasons that are in one hundred percent altruistic or
neither they nor Hansen, DR hybrids themselves and therefore consume gallons and gallons of gas. They don't have to we shouldn't. he's be grateful, though not sitting around consuming, gallons and gallons of milk. back to our british friend TIM Hartford. Here's the problem. It's really easy for us to fool ourselves about what is actually good for the planet, its surprisingly difficult to, pin down exactly what is going to help from what is not. Let me give you an example. You you think yourself. I'm worried about climate change. For a moment about carbon dioxide emissions has come to excite is a major greenhouse gas. Therefore, I'm worried about energy consumption, so to reduce my energy consumption cause I'm worried about climate change. look around your kitchen and you just about to make a couple of peace of toast He said you have another to make that toast the toaster
The consumer, electricity, that's bad for the planet, I'm gonna have an alternative breakfast, so you open the fridge. You grab some milk, He points out the Milken cornflakes. You eat the complex and you you think yourself. Well, I didn't have to make you think it hot. I didn't have to use any energy, so that's good for the planet. When you do the math, I have done them ass, you realize well them gene to produce milk is called a cow account also produce a lot of methane, methane is a really powerful greenhouse gas and, in fact, at the glass of milk is much worse for the planet, then the toast So there you go. If you want to save the planet, go ahead and drive the priests if you have to, but we really gotta do it's a toast,
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Transcript generated on 2021-03-17.