Chapter 8 Throwaway society? Waste and recycling Flashcards
Externality
The effect on society or the environment of economic activities that are not adequately reflected in the prices of goods and services.
Behavioural economics
Behavioural economics, as an approach, blends psychology and economics to shape individual decisions.
Bounded rationality
Bounded rationality: there are bounds or limits in the capacity of people to make rational calculations. One effect of this is that people rely on rules of thumb when making some decisions.
Overconfidence
Overconfidence: individuals tend to overestimate their capacity to filter and understand a mass of information. Also, people think that bad things are less likely to happen to them than to others.
Loss aversion
Loss aversion: people do not value potential losses and gains in the same way. They prefer to avoid losses rather than make gains and will take steps to avoid the prospect of losses.
Status quo bias
Status quo bias: this points towards a tendency that individuals have to fall back on existing patterns of behaviour and adopt the status quo.
Mental accounting
Mental accounting: this refers to a habit that people have of separating related areas of money matters. Instead of looking at the overall picture, they will prefer to place different parts of personal finance in different mental boxes.
Choice architecture
The ‘choice’ part of this term refers to the idea of an individual choosing something or making a decision. However, Thaler and Sunstein (2008) suggest that choices are not made in a vacuum, but are shaped instead by outside factors such as institutions. They use ‘architecture’ to refer to the context in which choices are made and, as such, architecture refers to the idea of interlocking institutions.
Nudge principles
Thaler and Sunstein (2008) develop a set of principles to shape choice architecture. They call these ‘nudge principles’, as the different principles are said to spell the term ‘nudges’. It is important to note that each of these principles is linked to an underlying claim about human behaviour – this is how Thaler and Sunstein use their initial claims to build their argument:
I(n)centives (Nudge Principles)
Incentives: although Thaler and Sunstein (2008) criticise standard economic approaches, they do not reject all of the claims. They accept that self-interest is important when designing institutions. This can be seen in the attention they pay to incentives. Self interested agents compare the costs and benefits of an action, and may be interested in something as long as the benefits outweigh the costs. An emphasis on incentives appeals to this cost–benefit calculation.
People might be provided with a financial reward for behaving in a particular way and this could be a stimulus to action. For example, supermarkets might give store card points if a person reuses plastic bags when shopping. Alternatively, people might face a penalty (financial or otherwise) that would prompt them away from particular types of behaviour. For instance, people could be fined for littering on the street.
(U)nderstanding mappings (Nudgle Principles)
Understanding mappings: people have limits in their capacity to make rational decisions and so architecture should make it easier for people to pick options by understanding mappings. This could refer to the labelling on different products.
For example, councils often use different coloured boxes for different types of recycling, with black boxes used for, say, newspapers and cardboard, and blue boxes for metal or plastic. Sandwich chains sometimes provide different bins also for different types of recycling (such as for packaging or liquids).
(D)efaults (Nudge Principles)
Defaults: status quo bias suggests that people resist changes and prefer the status quo. This means that defaults are important when designing policy, as this defines the status quo. Defaults refer to what choices would be set or ‘defaulted’ to in the absence of any other choice made by people. For instance, a coffee chain might sell, in increasing order of price (and profitability), coffees in small, medium or large size. However, staff may be told to ask, by default, whether the customer wants a medium or large size to steer them away from the small size, and towards the more expensive options.
(G)ive feedback (Nudge Principles)
Give feedback: people’s choices are influenced by social norms and they might also develop rules of thumb when making choices. Feedback can help cultivate a norm or assist in fashioning a rule of thumb. For example, utility companies (such as gas, electricity or water) might give feedback to people when sending out bills on their energy use and whether they are using energy efficiently.
(E)xpect error (Nudge Principles)
Expect error: people are thought to have limits on their capacity to make choices. This means that designers of choice architecture should build in an expectation that people will make errors when making choices.
Structure complex choices (Nudge Principles)
Structure complex choices: mental accounting means that people often put things into different mental boxes rather than taking a comprehensive overview of a choice. To respond to this choice, designers should break down complicated choices into simpler choices. Recycling could cover a range of different materials, and choice designers could break this down into looking at how people recycle or dispose of particular materials. This may mean different nudges to get people to compost some of their perishable foods separate from how they dispose or recycle the food packaging.
