Could having better labels help out the environment?
By David Rand and Martin Nowak
Have you ever noticed a friend or neighbor driving a new hybrid car and felt pressure to trade in your gas guzzler? Or worried about what people might think when you drive up to the office in an SUV? If so, then you have experienced the power of reputation for encouraging good public behavior. In fact, reputation is such an effective motivator that it could help us solve the most pressing issue we face—protecting our planet.
Environmental problems are difficult to solve because Earth is a “public good.” Even though we would all be better off if everyone reduced their environmental impact, it is not in anyone’s individual interest to do so. This leads to the famous “tragedy of the commons,” in which public resources are overexploited and everyone suffers.
Public goods situations crop up all over the place, including decisions on maintaining roads, funding the police, and whether or not to shirk at work. This leads us to an important question: Is it possible to make people care enough about such problems to do their bit? To help answer this, researchers have developed a representation of such situations called the public goods game. The results give cause to believe that the tragedy of the commons can be overcome.
In the public goods game, each player is given a sum of money, say $10. They then choose how much to keep and how much to anonymously contribute to a common pool. Contributions are multiplied by some factor (less than the number of players) and then split equally among all players. If everyone contributes, the payout is higher. But making a contribution is costly, and causes you to end up worse off than if you did not contribute.