Common Tragedies

Thoughts on Environmental Economics

Here’s 5 bucks–why don’t you just do it?

Posted by Evan Herrnstadt on October 4, 2007

Tim Haab cites a study that displays some interesting patterns in public opinion on various potential carbon-saving policies. Basically, subsidies for solar panels and energy efficiency and a 20 percent RPS (amounting to a tax/rate hike of $5-8/month) get around 70% support, while a gas tax of similar magnitude gets a paltry 36%.

Perhaps people perceive the first three as higher taxes that encourage society to go out and get something new (renewable energy or cheaper home improvements) while the gas tax simply means one is paying more for the same thing, with intent that we’ll actually consume less than we did before. I guess we do love buying shiny new toys (weeeee!) more than changing old habits (boring).

So we would notice $5/month at the pump, but not on our tax forms. Is this the result of some sort of collective loss aversion? Or is it temporal separation?  Would we really notice that extra 10 cents/gallon (incidentally, this is basically the relevant effect of a $10/tCo2 price)? If one could give gasoline a big hug, would Americans do so?

Most importantly: Can we really not boil behavior down to the intersection of two lines on a graph?

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One Response to “Here’s 5 bucks–why don’t you just do it?”

  1. Nick said

    I’m voting for the temporal separation, and over-estimation affect. And no, I don’t have any evidence:

    Paying an extra 5 bucks once a month feels less painful than paying an extra buck each week.

    And, I think peolpe may over-estimate the gas price impact (even when you tell them it’s the same $5). There’s so much media nonsense each time gas goes up $0.10, that people may over-estimate the impact that this actually has on their annual disposable income.

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