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38 Harv. Envtl. L. Rev. 127 (2014)
Automatically Green: Behavioral Economics and Environmental Protection

handle is hein.journals/helr38 and id is 131 raw text is: AUTOMATICALLY GREEN: BEHAVIORAL ECONOMICS AND ENVIRONMENTAL PROTECTION Cass R. Sunstein* and Lucia A. Reisch** Careful attention to choice architecture promises to open up new possibilities for envi- ronmental protection - possibilities that may be more effective than the standard tools of economic incentives, mandates, and bans. How, for example, do consumers choose between environmentally friendly products or services and alternatives that are poten- tially damaging to the environment but less expensive? The answer may well depend on the default rule. Indeed, green default rules may be a more effective tool for altering outcomes than large economic incentives. The underlying reasons include the powers of suggestion, inertia, and loss aversion. If well-chosen, green defaults are likely to have large effects in reducing the economic and environmental harms associated with various products and activities. Such defaults may or may not be more expensive to consumers. In deciding whether to establish green defaults, choice architects should consider con- sumer welfare and a wide range of other costs and benefits. Sometimes that assessment will argue strongly in favor of green defaults, particularly when both economic and environmental considerations point in their direction. But when choice architects lack relevant information, when interest group maneuvering is a potential problem, and when externalities are not likely to be significant, active choosing, perhaps accompa- nied by various influences (including provision of relevant information), will usually be preferable to a green default. I. Beyond Incentives ............................................. 128 II. Green Defaults: An Illustrative Survey ......................... 133 A . P aper .................................................... 133 B. G reen Energy ............................................ 134 1. Actual Behavior ...................................... 135 2. Experim ents .......................................... 136 C. Energy Efficiency ......................................... 137 D . Sm art G rids .............................................. 138 Il. Why Default Rules Matter ..................................... 140 A. Suggestion and Endorsement .............................. 140 B . Inertia ................................................... 14 1 C. Reference Point and Loss Aversion ......................... 143 IV. When Default Rules Do Not Stick .............................. 144 V. G reen or G ray? .............................................. 146 A. Consumers (Without Externalities) ......................... 146 B. Consumers and Third Parties .............................. 148 VI. Active Choosing, Influenced Choice, and Personalized Defaults .. 150 A. Neutrality and Active Choosing ............................ 150 1. Green or Gray by Choice? ............................ 151 2. Active Choice Is Not a Panacea ....................... 152 3. A Very Simple Conclusion: Decision Costs and Error C osts ................................................ 153 * Robert Walmsley University Professor, Harvard University and Harvard Law School. ** Professor, Copenhagen Business School, Department of Intercultural Communication and Management. We are grateful to Cassie Chambers and Daniel Kanter for excellent research assistance.

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