Cognitive biases in Environmentalism

Behavioural Science teaches us that people suffer from greater aversion to risk than attraction to gains, (Endowment effect) and that differently framed questions on the same issue yield differing responses (Framing bias). Messers Samuel Kahneman and Amos Tversky, won the Nobel Prize in Economics for studying similar behavioural phenomenon, collectively called of cognitive biases, which led to the emergence of behavioural economics. Apart from explaining market aberrations, this field of economic analysis is useful in studying many real world problems.

There is an interesting article in the Guardian, There are no penguins in my garden, which tries to draw lessons from the Endowment effect and framing biases for the environmental movement. Arguing that the multiple messages of the environmentalists tend to get lost if the subject is distant, Steve Martin writes, "Perhaps a more effective alternative might be for the environmentalists to not only point out what stands to be lost thousands of miles away but to also point out what stands to be lost a little closer to home. Ideally it would be something that we already possess."

He writes about the need for more specific formulation of the dangers, "Studies demonstrate people's tendency to try to take action to reduce threats and fears but mostly with one very important exception. When recipients of a fear-producing message are not told of a clear and specific action they can take to reduce the danger, they often block out the message and deny that it applies to them. As a consequence, they may indeed be paralysed into taking no action at all."

Driving home the importance of the endowment effect, he writes, "For messages to have the best chance of being effective it would seem that not only should they be framed in terms of what we stand to lose. That loss should be something we currently possess and should also be accompanied with a clear and specific action we can personally take to avoid such as loss."

It would exert a much greater effect on the audience if the damages caused by climate change were presented in terms of what they would individually and collectively stand to directly gain or lose by way of climate change. Therefore instead of far away issues like disappearing penguins and submerging Maldives, the environmental movement should project losses like the increased electricity bills, forced changes in our food habits and personal lifestyle etc.

A few other real world situations where cognitive biases make some policies, especially on taxation, more effective than certain others:
1. Packaging a tax as a specific user charge is easier to sell - Framing effect
2. Easier to improve revenues by efficiency improvements rather than raising taxes. But such revenue increases do not get acknowledged as much as that raised by higher taxes, even though the effect of both is the same.
3. Fines are easier to levy and collect than even user charges. Fines have a moral repugnance dimension that makes people more willing to pay.
4. Backload a taxation proposal with higher payments deferred for later years - hyperbolic discounting
5. Fines may be more effective in incentivizing contractors than monetary incentives (loss aversion effect)
6. Front loaded revenue contracts are easier to sell than back loaded ones with the same Net Present Value of cash flows
7. If the tax collection is non-invasive, it is likely to pass through un-noticed. eg the E-ZPass toll collection in the US.
8. Small cess on a reasonably large tax stream is easier to push through, especially if it is directed towards a specific cause.
9. How about announcing an increase in a user charge or tax (say water connection charge) by 20%, while simultaneously declaring a 25% concession for those who pay within one month? The negative effect of the increase is often offset by the positive from the concession.
10. Offering a bouquet of public services, with varying rates/user charges, can also help take the sting out of proposals for increases in taxation. A basic minimum of services (stripped down, no frills) can be offered at the lowest rate, and the prices of every additional service can increase progressively.

Update
The NYT carries an article on Apple's spectacular success in promoting its retail stores. The "retail experience" Apple stores provide is unique, in that it gives personal attention to thet smallest detail of consumer requirements. It relies on the assumption that if you can get consumers on to the shop and make them like the experience and get them to linger on, they are more likely to make purchases.