Five Percent: Conserve Energy

Climate Change Is Important: Energy Conservation is the First Step

October 27, 2007

Why People Don’t Conserve: Game Theory in Action

Category: Economics,Editorial,Observations,Policy – Tom Harrison – 5:20 pm

My wife and I spend a lot of time asking the question, “Why don’t people conserve energy?” Sometimes we get snarky and haughty. But it may not be that people are selfish, or uninformed, or idiots. Indeed, people may be making the most rational decision. But why? The answer reveals one reason why it is so critical that our government force action through legislation.

This week, we watched “A Beautiful Mind”, about John Nash who won the Nobel Prize in Economics. He was one of the mathematicians who promoted the ideas of Game Theory. I learned about game theory in college economics. The classic example is called the “prisoner’s dilemma“, which demonstrates how people can rationally make a choice that leads to the least good outcome, not only for others, but for themselves. If you’re not familiar with this, read the link — it’s not too technical, and it’s kind of fun to think about. What is especially significant about the outcome of the prisoner’s dilemma is that the participants know they are making the worst choice, but make it anyway.

Presently, there’s very little incentive to take action to help solve our global warming, climate change and energy crises. Here’s a simple example. Changing a light bulb to CFL costs a few dollars, and will pay for itself in reduced energy expense in five months, and then keep paying for 4 more years. It’s a good bargain, but even if you do most of the lights in your house as we have done, the payoff is distant, and relatively small. Even with the good bargain, this isn’t a compelling action for any one person, even though if everyone changed one bulb, it would make a surprisingly large difference (if 110 million households in the US replaced one incandescent bulb with a CFL, this would reduce annual US carbon emissions by about 2.6%. Wow! (Next post: the math behind this, what are the assumptions, and… could this be correct???).

Anyway, my point for this post is that there’s not enough financial incentive for an individual to make this change. I suppose that if everyone believed, as I do, that failure to reduce emissions will lead to all sorts of really, really bad things. Then maybe they would make the change. But I am still not sure: the really, really bad things probably won’t seriously affect most Americans for 10 years or so, maybe 20 if we’re lucky. Let’s say that by “seriously affect” I mean than one in every four family members died as a result. Good god, how morbid (and I am just making up these numbers and outcomes). Still, the risk to any individual is far lower and much more distant than many other real, immediate risks of death. And even if the risks were more tangible and immediate, we seem to be pretty good at fouling up assessments of risk (witness: Air Travel Insurance).

Consider something a little bigger, like that shiny new SUV that promises convenience, or the fast car you have wanted since a kid. Nope — financial or risk incentives are not there.

Now let’s say you’re a country faced with signing the Kyoto Protocol. You have to convince a lot of people and supporters to make sacrifices? The economic or risk incentive is not there. And if you’re China, wouldn’t you wait for America to blink?

Now let’s say you’re a country with a President who realizes that his or her responsibility is not to donors and constituents, but to the long-term well-being of your citizens. Now we’re talking, because the economics and human nature parts are always going to lead to a lousy outcome. Unfortunately, we all play by the rules of game theory.

But game theory has a good outcome when the players are convinced that the other players are going to act in the “right” way. What we need is someone to lead, and some laws that will requires us all to share the burden of change, and help us all feel shared responsibility, duty, and efficacy. We’ll all be happier, safer, and it’s going to be very doable. Laws are always tricky, but leadership makes all the difference. It’s the only real solution.

So vote well next year!


  1. […] Leadership will make the difference. Can we expect a new kind of leadership from our new president? Obama has been compared to John F Kennedy many times. I am hopeful that he will be elected President, and that we will have a new congress that will help us stop dithering and start acting. I am also hopeful that Gore will have a position of power in his new administration. […]

    Pingback by Gore’s Challenge: All Electricity from Clean Sources in 10 Years | Five Percent: Conserve a Little Energy — December 13, 2008 @ 3:15 pm

  2. Great blog…defo things to think about!

    Comment by Annika — February 1, 2010 @ 11:31 am

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