Bags of nudges

(featured image credit: Mitchell Haindfield CC BY)

The British government is planning to double the charge for single-use plastic shopping bags, to reduce their usage further. Will this work?

I am pretty sure that you, like so many environmentally conscious consumers, take your own reusable bags to the shops all the time. Maybe you simply have no choice – in a growing number of countries, disposable bags have simply been banned. Or if they are still available at a price, you just decide not to pay for the bags that used to be given away for free.

There are many ways to reduce the consumption of certain goods. Bans can be pretty effective, though they are still not an entirely watertight approach. People can stockpile goods (as appears to be the case in New Zealand, ahead of an announced ban on plastic bags). And while the sale of, say, hard drugs or radar detectors is illegal, anyone sufficiently motivated and willing to pay the black-market price can still obtain them. But it is hard to imagine sellers hovering around the tills in supermarkets, surreptitiously offering single-use bags at inflated prices. So if a government really wants to cut the use of such bags (and their environmental impact), a ban is probably going to be the most effective.

A bit more libertarian

But maybe bans are a bit dictatorial. Making consumers pay extra for the environmental cost they cause is a much more libertarian approach: pollute if you want, but foot the bill for the damage you cause. Sometimes this can be done in quite a direct manner. In Belgium, for example, the collection and processing of waste electrical and electronic equipment is managed by Recupel, a non-profit organization. Importers and manufacturers have a legal obligation to recover and handle discarded appliances. They can either do this themselves, or outsource it to Recupel in return for a contribution, which is explicitly added to the price the consumer pays. The “polluter” hence pays for the “clean-up” that will be needed several years in the future.

For single-use plastic bags the contribution serves a different role. It does not really directly cover the handling of the waste, but it provides a negative economic incentive. All else being equal, and with the exception of so-called Veblen goods (whose high price makes them more, rather than less attractive), people tend to consume less of something as it becomes more expensive. Hey presto!

At first sight it looks as if reducing the use of disposable bags, whether through a ban or through a charge has nothing to do with nudging. The former clearly eliminates a key choice, and the latter provides a material disincentive. But is that tiny cost really the reason why the measure has been so successful (in the UK, usage dropped by 86% since the charge was introduced)?

Let’s do the sums. In the olden days, I found that I typically needed eight bags for a weekly shop of around £100, so that would cost me 40p (€0.45, $0.50), or about 0.4% of the total amount. That is not remotely a significant economic disincentive, and in any case well worth the convenience not needing to bring your own bags.

nobags

Look ma, no bags! (image: Kat Northern Lights Man CC BY)

So there must be something more at play than just the economic cost. If the cost of the bags were absorbed in the price of the 30 most expensive items I bought every week – a penny each – I most likely would not notice. Yet, I certainly would notice it if the till operator explicitly rang up the extra charge. That would increase the pain of paying – no matter how trivial the amount (even accumulating it over time, it’d run to barely more than £1 a month, or £15 per year).

The salience of the cost of the bags functions as a covert nudge, amplifying the profoundly modest contribution so it punches well above its economic weight in terms of the effect. It’s the fact itself that we need to pay an amount – any amount – for the bag that has the power to change our behaviour.

And there are further, almost inadvertent, nudges supporting it. Reusable bags were available at the tills even before the charge was introduced, but only a small minority actually bought and used them – it was simply easier to stick to the default of taking the single-use bags that were handed out freely. Now, almost overnight, that default had changed and a sizeable, and very visible, proportion of customers, growing in numbers by the week, appeared to have embraced them. We are a social animal, and social proof is a strong influencer of our behaviour, so the snowball rolled and rolled.

More of the same?

But – here is a bit of framing for you – if bag use has dropped by 86%, four years on it is still as high as 14% of the level of what it was in 2014. On average, each British household still uses more than 30 single-use bags per year. To reduce consumption further without introducing an outright ban, additional measures will be needed.

This is why the UK government is toying with the idea of increasing the charge per bag to 10p. Standard economics would indeed predict a substantial drop in the use of any product the price of which is doubled. One might even plausible expect it to fall by the same factor again as the initial charge achieved: a reduction by a further 86% based on current usage would leave us with just 2% of the 2014 levels, or about 150 million bags.

There are reasons to be sceptical, though. A charge of 10p would indeed be a doubling, and framing it that way might reinforce the effect. But anyone who currently happily pays 5p for a bag is more likely to see this doubling as a negligible extra cost of 5p from the current reference point. It’s “pennies a day” (a concept described in depth in 1998 by John Gourville, a professor marketing at Harvard), and then we are more likely to view the increase as absolute than as relative.

To ensure the economic cost really makes current purchasers of single-use bag reconsider, the price would probably need to go up a lot more. It would probably be wiser to turn to behavioural economics for counsel. Nobel laureate Richard Thaler, who wrote Nudge together with Cass Sunstein, often states that his top mantra from the book is “Make it easy” – that is, remove the obstacles toward the desired behaviour.

But that can also be turned on its head: make it more inconvenient or more annoying to do the undesired thing. What if the cost of a bag was set not at 10p but at 6p, payable in cash only? The annoyance of having to carry change, and fishing out the coins is likely to have much more effect than the insignificant cost of adding 5p.

plasticbag

Too cheap and too easy (image: Edinburgh Greens CC BY)

Or imagine that the single-use bags were no longer available at the tills, and you’d need to buy them separately. Having to queue at the customer service desk before you start your shop would be bad enough, but it’d a lot worse if you forgot, and you had to return there to get some bags before you can pack your goods. The irritation of anyone behind you at the till would of course add to the general effect.

An alternative, perhaps even more potent intervention might be to offer the single-use bags at just one till (the furthest one from the exit, naturally). This would be normally unmanned, and you’d need to press a button to summon a cashier, triggering a recorded message, something like “Colleague announcement. Customer wishing to buy single-use shopping bags at till 45!”. Way to change behaviour.

And if that were still not enough to crank up the social proof of doing the right thing together with, by now, the vast majority of shoppers, how about imprinting the bags with a slogan like “I don’t give a damn about the environment”?

Economic interventions have their use, and it is true to say that people respond to incentives. But it’s not just incentives we respond to. Sometimes a bagful of nudges is just what is needed.

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About koenfucius

Wisdom or koenfusion? Maybe the difference is not that big.
This entry was posted in Behavioural economics, Economics, Psychology and tagged , . Bookmark the permalink.

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