A program designed to reduce energy consumption persuaded some Republicans to consume more.

The search for better economic policy.
April 23 2010 10:01 AM

Nudges Gone Wrong

A program designed to reduce energy consumption persuaded some Republicans to consume more.

It's a sad statistical reality: Half of us are below average. But that doesn't stop most of us from clinging to delusions of superiority: We like to believe we're better-looking, smarter, funnier, and more honest than those around us. Now and then, when presented with evidence of our shortcomings, we set to work catching up with—and getting ahead of—the Joneses. A decade ago, I caved in and bought a cell phone when I read that the median American owned one.

Psychologists and behavioral economists hope that our tendency to benchmark our own achievements using the performance of others might provide a way to encourage Americans to become better citizens. Can the fear of being below average persuade us to reduce our electricity consumption, increase our charitable contributions, and otherwise compete to be better citizens?

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One problem with this approach is that we all define "better" differently, as a new study emphasizes. UCLA economists Dora Costa and Matthew Kahn analyzed the impact of an energy-conservation program in California that informed households about how their energy use compared with that of their neighbors. While the program succeeded in encouraging Democrats and environmentalists to lower their consumption, Republicans had the opposite reaction. When told of their relative thrift, they started cranking up the thermostat and leaving the lights on more often.

The notion of illusory superiority—the misguided belief that we're better than others—is a basic tenet of social psychology. In one early study, 93 percent of Americans rated themselves as better than average drivers (as compared with 69 percent among the more modestly deluded Swedes in the sample). It's also one of the quirks of human behavior that best-selling author Robert Cialdini is exploiting to get us to behave better. In one academic study, Cialdini and his co-authors found that simply telling hotel guests that a majority of other guests reused their towels boosted reuse rates by 34 percent more than telling them to do it for the sake of the environment. Cialdini is now retired from his academic position at Arizona State University and is working as chief scientist at Opower, a company that aims to make money by helping utility companies design social nudges to get their customers to conserve. *

In early 2008, Opower collaborated with a California utility to send a Home Energy Report to 35,000 randomly selected customers. (It came bundled with the household's regular energy bill.) Each report contained a bar depicting the household's energy use alongside bars showing consumption for average neighbors and also "efficient" ones. The principle behind highlighting the household's own use relative to its neighbors is the same as in Cialdini's towel study—no one wants to be worse than average. In addition, Opower reinforced the household's performance by awarding one or two smiley faces for good households and adding the words "ROOM TO IMPROVE" to the charts of energy gluttons. * (The reports also included a few energy-saving tips and suggested what customers might save if they followed them.)

In a study evaluating the program's effectiveness, Opower researchers compared power use before and after the HERs began arriving, and further compared this change with a group of control households that never received the reports. On average, the HER households reduced their consumption in the months that followed by a little less than 2 percent. Not bad, but probably not enough to save the planet.

Working with the same utility as Opower, Costa and Kahn matched up information on the households in the pilot study to data on political affiliations and a database of past charitable giving to environmental organizations. The economists found that the 2 percent average decline in energy use obscured significant differences in the responsiveness of different types of households to the conservation message. Registered Democrats who give to environmental organizations and live near other liberals reduced their consumption by 3 percent. For liberals who started out as heavier-than-average consumers, the reduction was almost 6 percent.Republicans who live in conservative neighborhoods (and hence had no neighborly pressure to conserve) and had no record of giving to environmental organizations actually increased their consumption by 1 percent.

Why would some energy-conscious Republicans all of a sudden become power hogs? One explanation is that many conservatives don't believe that burning energy harms the planet, so when they learn that they're better than average, they become less vigilant about turning the lights off. That is, they're simply moving closer to what they now know is the norm (what psychologists call the boomerang effect). Costa and Kahn also look for guidance from the patron saint of right-wing fundamentalists, Rush Limbaugh, who encouraged his listeners to turn on all their lights during Earth Hour. Costa and Kahn suggest that ardently right-wing electricity customers might respond to paternalistic nudges by burning more energy, just to thumb their noses at Big Brother.

That some groups respond in unexpected ways to well-meaning nudges is a lesson that the architects of "behaviorally informed" policy and regulation should keep in mind in drafting their messages. Costa and Kahn's findings suggest that you shouldn't try to prod Republicans into conserving energy through this type of social pressure. But perhaps there is a nudge that would resonate with Opower's conservative customers. * Future messages could be tailored to the market—what works in San Francisco might backfire in San Diego—or even to individual households based on their political leanings, ties to environmental organizations, or enrollment in renewable-energy programs.

But this starts to sound an awful lot like fine-tuned social engineering, which gets us away from the original vision of simple nudges making a better world. And it starts to sound exactly like the type of heavy-handed governing that Republicans may be quietly rebelling against by turning up their thermostats.

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Corrections, April 23, 2010: The article originally stated that Cialdini retired from his academic position at the University of Arizona in order to take a job at Opower. In fact, he is retired from Arizona State University but did not retire from that post for the purpose of taking the Opower job. (Return to the corrected sentence.) It also said that households with high energy-consumption rates were told "YOU NEED TO IMPROVE." They were actually told there was "ROOM TO IMPROVE." (Return to the corrected sentence.) Finally, the article stated that a nudge that might resonate with conservative energy costomers might stress "savings over environmentalism." In fact, the Opower program does stress that customers who reduce their energy use could lower their bills as well as help the environment. (Return to the corrected sentence.)

Ray Fisman is a professor of economics at the Columbia Business School and co-author of The Org: The Underlying Logic of the Office. Follow him on Twitter.

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