Don’t get me wrong- I am in no way anti-environment (that would be nonsensical, like being anti-puppies or anti-chocolate cake), but I get concerned sometimes about how actually environmentally useful some of the “green” (picture air quotes here) products out there truly are. Are we having a printer/ink cartridge type problem here?
The printer/ink cartridge setup is the example usually given by David Laibson in his lectures to undergraduates. The basic idea is that people are biased in their choices of printers (i.e. are lured into purchasing the low price printer with the expensive ink) because they don’t properly account for the ongoing costs of use of the product. The term that Laibson uses is “shrouded attributes”, and the same argument could be made for what is going on here:
We all love a good China joke every now and then, right? In this example, the light bulb is the printer and the factory is the ink cartridge. Do people fully internalize the environmental impact of producing the environmentally friendly products that they consume? My guess is probably not. That said, it is important to make the right comparisons when thinking about overall environmental impact. Clearly the plant in the cartoon above is polluting, but that in itself is not what is relevant. The relevant question is “Is the plant polluting more in producing one energy efficient lightbulb than it would be to produce the equivalent number of regular lightbulbs?” Thinking about that question probably makes the factory above not seem so bad. Not so bad in this case perhaps, but still important to not ignore.
Laibson points out that market forces may or may not provide the proper incentives for consumer education. On one hand, educating a consumer about shrouded attributes makes him more likely to purchase a particular product over another. In these situations, competitive forces provide a motivation to educate consumers. On the other hand, however, if informed consumers are not profitable, the market is not going to do the work to educate them. I suppose that is what things like Consumer Reports and The Consumerist are for.
You can see Laibson’s thoughts on “The Curse of Education” here. (PowerPoint presentation given to the FTC) Here’s an interesting thought exercise for you: what “green” products are likely not so environmentally friendly when the overall production/consumption process is taken into account?