At Anthesis we are keen to collaborate with organisations that can support our clients to address their sustainability criteria and strategic plans. We’ve been exploring with European Economics, specialising in economic regulation and the application of economics to public and business policy issue. In this blog Stephen Topping explores the application of Behavioural Economics and how it can add value to our networks in the recycling sector.
A continuing challenge facing the recycling sector is increasing the recycling rate among households. The latest government figures show that 44.9 per cent of waste from households was recycled in 2014. While this represented an increase on previous years, further progress is needed if the UK is to meet its EU target of recycling at least 50 per cent of waste from households by 2020.
Behavioural economics and policy-making
Behavioural economics is a potentially valuable tool that could be employed to increase household recycling rates. Whereas traditional economics assumes that people act rationally, behavioural economics takes on board findings from psychology and assumes that people’s behaviour may sometimes be influenced by biases.
Behavioural economics has grown in popularity in recent years. Behavioural economists have published best-selling books and been awarded the Nobel Prize for economics.
Increasingly, public policy-makers have started to incorporate insights from behavioural economics into policy-making. In 2010 the UK government set up a dedicated unit (the Behavioural Insights Team) within the Cabinet Office to apply behavioural science to public services. This team was subsequently turned into a social purpose company. Various regulatory bodies (e.g. the Financial Conduct Authority) have also applied behavioural economics in their policy-making.
Using behavioural economic biases to design household recycling policies
Behavioural economists have studied a wide range of biases in the way that human beings behave. In this guest blog, I will pick a few of them for the purpose of illustration, and show their potential relevance to the design of policy measures to increase household recycling.
One bias identified by behavioural economists is the status quo bias – the idea that human beings tend to stick with the status quo in a way that goes beyond the objective benefits of doing so. This suggests that part of the explanation as to why some households do little recycling is that they are simply sticking with the status quo – they have never done much recycling in the past, and so they continue not to do much recycling. This implies that a policy measure – such as a financial incentive for recycling – may only need to be temporary in order to effect a long-term change in behaviour. Provided that the policy measure is effective in changing people’s behaviour and lasts long enough to establish a new status quo, it could potentially lead to a permanent increase in recycling.
Behavioural economists have also studied biases relating to information framing effects – by which we mean that the way in which people respond to information will depend on how it is presented. To give an example, an economic policy that achieves an employment rate of 92 per cent sounds much more attractive than an economic policy that leads to unemployment of 8 per cent – even though these two statistics are logically equivalent! This kind of insight suggests that subtle changes to the drafting of leaflets on recycling could potentially have a significant effect on the way in which people respond.
Another behavioural bias is information overload – the idea that if too much information is provided it can actually paralyse decision-making. This suggests that an overly-long list of materials that can be placed in a recycling container might actually lead to less recycling than a shorter list which is easier for households to absorb.
Another behavioural bias is the tendency to do what most other people are perceived to be doing. This suggests that leaflets aimed at promoting recycling could potentially achieve greater results if they include facts about the recycling that other similar households are doing.
Many other behavioural biases could be mentioned, but hopefully the above examples are sufficient to illustrate the kind of insights that behavioural economics can bring. A comprehensive review would be needed to identify the full range of lessons that can be drawn from the behavioural economics literature.
An important part of the work of behavioural economists is carrying out tests to look at actual impacts on people’s behaviour. Hence, theoretical analysis of the implications of behavioural economics for the design of recycling policies could be followed by tests of the actual impact of specific policy measures on recycling behaviour.
In some cases, behavioural economists may test impacts in a behavioural economics laboratory – for example, by carrying out controlled experiments to look at how people’s behaviour is affected by (say) the way in which information is presented to them. In other cases, testing may involve a field trial of a policy measure, with people randomly assigned to different groups exposed to different variants of the policy measure or to a control group that does not have the policy measure applied to it at all. Tests of this nature can sometimes throw up surprising results, and allow the design of policy measures to be optimised before they are rolled out across the wider population.
This guest blog was written by Stephen Topping, a Managing Consultant at Europe Economics. Europe Economics is a specialist economic consultancy which advises on economic issues associated with public policy, economic regulation and competition.