Students and professors interested in the environment and economics participated in a small lunchtime discussion with Professor Matthew Kotchen of Williams College yesterday.
Kotchen presented his recent paper, entitled "Conservation Behavior: From Voluntary Restraint to a Voluntary Price Premium," then engaged in a short question and answer discussion with his audience.
Within his paper, Kotchen expressed concern about the implications of utilizing one's concern for the environment as a factor in buying goods and services.
According to Kotchen, there isn't much literature within the economics field on conservation decision-making, but "there is a social psychology model for conservation behavior."
Kotchen mentioned the Schwartz model for altruistic behavior - a theory that argues the existence of a personal norm to prevent harm, even if it entails personal cost.
He specifically looked at the case of Traverse City, Mich., where a certain population of the state bought "green electricity" - energy created using a wind turbine.
"Some of the people were willing to pay a 100 percent markup for their energy to come from green electricity companies," Kotchen said.
The wind turbine "was as big as you could go in 1996," Kotchen said. Energy supplied by the turbine was more expensive, so those buying such energy paid what Kotchen called "a voluntary price premium."
Kotchen surveyed residents who decided to pay the voluntary price premium, and separated them as either conservationists or non-conservationists, depending on whether they held a membership in an environmental organization.
The study identified an assortment of reasons explaining why conservationist consumers would participate in a more expensive green program. This list of reasons included social approval, prestige, and benefit of doing a good deed.
Tufts Economics Professor Jeffrey Zabel said he saw the idea of social approval as policy potential, and referred to "the moral suasion" of using clean energy instituted by the Swedish government.
"Your norms are affected by your peer group," Zabel said. "Think of it as a big peer group."
When asked why non-conservationists would pay a voluntary price premium for green electricity, Kotchen said, "They get a lump-sum benefit - a bag of 'money' of feel-good."
The study then gathered data on the amount of energy used by participants of the voluntary price premium.
"Participating conservationists did not significantly change their electricity consumption," Kotchen said. The participating non-conservationists did reduce their consumption between four and 10 percent, he said.
Kotchen offered two explanations for the unusual results. First, by paying for greener energy, conservationists lost their feeling of guilt and didn't have as high a motivation to make conservation efforts. Second, non-conservationists had an incentive to limit their energy consumption because the cleaner energy cost more.
With regard to conventional energy, conservationists show "evidence of voluntary restraint," according to Kotchen. In using more environmentally friendly energy, many conservationists would lose such voluntary restraint.
In the conclusion of his presentation, Kotchen compared the findings of the study to governmental policies dealing with environmental concerns. "Are our policies complements or substitutes for these voluntary restrictions?" he asked.
"By giving compensation, you're taking away why people are [making voluntary energy restrictions,]" Kotchen said, arguing that people often make economic decisions for feel-good reasons. "It's outside the realm of compensation."
