Why do we have to pay people to do what is in their own interest?

Conventional economic theory tells us that we are rational beings making rational decisions.  But experience and examples are surely teaching us something different.

The endless queues to buy  luxury global brands at prices way above their cost belie the ‘fundamental’ notion that high prices place a value on scarcity. And psychologist Daniel Kahneman, who won the Nobel prize for Economics, has demonstrated beyond a doubt that many of our decisions are made on the basis of unconscious biases and flawed understanding.

Could this be why the government is now asking whether it should provide incentives to households and businesses to save energy? The Electricity Demand Reduction consultation published at the end of November 2012 by the Department of Energy and Climate Change is seeking views on a proposal to create a Feed-In Tariff similar to that for renewable energy generation payable to those who can demonstrate that they are using less electricity.

Hmmmm… Which? says that rising energy prices is the hot topic amongst its members.  So if people are worried about high bills, why are they not taking the much-publicised opportunities to save energy available to all of us? Simple things like wearing a jumper.  Or switching off unused lights.  Save energy and save money.  There’s a direct correlation.

Perhaps we simply don’t know just how much that Skybox is putting on electricity bills, or how little we could be paying to heat our homes if we managed them properly. Or perhaps we simply take energy for granted as a basic human right, and see it as someone else’s responsibility to get our bills down.

Whatever the reason, the chances are that we will all be paying more on our electricity bills to pay ourselves an incentive to reduce our electricity bills.  Most definitely, this is not rational!

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