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Monday, October 31, 2005

Environmentalism—People Want it, Honestly They Do.

An article in the current Economist edition—How to persuade people to go green (subscription required) described British Airways new program to help the environment: beg. But the program hasn’t been the success the environmentalists hoped. According to the article:

“LAST month British Airways (BA) announced it would give passengers the chance to do their bit for the planet by letting them pay a few pounds extra on every ticket and use the money to offset the carbon emissions from their trip. Last week the airline admitted that, so far, hardly anybody seems interested, with fewer than 1 in 200 passengers willing to cough up. That sits oddly with people's professed anxiety in polls about climate change.”

Considering the significant damage caused by each flight, why is it that passengers wouldn’t want to pay for their part of the damage they cause? That seems to be the question posed by the environmentalists, and if that question seems to be flawed you might be an economist.

It may be a simple axiom, but nevertheless, people will not pay more for something than they have to. British Airways basically asked their passengers if they would voluntarily pay a tax. So it should come as no surprise that passengers decided to forgo voluntary taxes. So what do the environmentalist claim was the reason for the failure of the article? According to the article, “Greens accuse it [BA] of failing to do enough advertising.”

Yet there is more that this story has to tell. Particularly that pesky difference between what people say they want, and what they are willing to pay for. To put it another way, the article describes this difference thus, “Economists spy an example of what they call revealed preferences—the idea that talk is cheap and actions provide the best guide to somebody's beliefs.” This example should lead any policymaker to be wary of what people actually want when they receive the latest polls.

Yes, I like your analysis. Could we also wonder if the "good" in question is excludable, and whether the self-interested free rider might also be relevant?
The free rider dilemma is most definitely relevant, however, excludability is questionable. Like national defense, air quality is something that affects everyone—especially considering at thirty-five thousand feet or so any appreciable affect the aircraft pollution would have would most likely be global. Thus I’m not sure how to exclude people from cleaner air the world over.
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