posted by Susanna Olai on 23 November 2011
tags: transport ,
I have long been interested in the image of environmentalists. It seems like some of us can easily get away with walking barefoot, wearing windproof jackets and backpacks to business meetings and avoiding using the services of qualified hairdressers when few other professionals can. Perhaps not the coolest look.
I recently read the excellent paper ‘Conspicuous Conservation: The Prius Effect and WTP for Environmental Bona Fides’ (Sexton and Sexton, 2010). The theory is based on the well-known concept within Economics of conspicuous consumption. The term was first used to describe the behaviour of the nouveau riche, i.e. acquiring goods and services to display wealth. Basically, it’s buying ‘bling’ to show off your high status in society.
Are all environmentalists do-gooders who don’t care about social status and work to save the planet in the quiet? Well, no… in the paper, the authors argue that the same concept of conspicuous consumption can be applied to certain environmental goods, for example solar panels and low carbon vehicles. The phenomenon was coined conspicuous conservation.
The Toyota Prius is the most popular low carbon vehicle with 48% of the US market in 2001. While there are other electric or hybrid cars such as Honda Civic that looks exactly like their petrol driven counterpart, Toyota made their hybrid version stand out. The Honda Civic is sold for approximately the same price and has the same fuel efficiency as the Prius.
Part of the success of the Prius can certainly be attributed to Toyota’s marketing efforts and the Toyota brand. However, marketing efforts cannot explain why ownership increases in green communities disproportionately relative to other similar hybrid cars such as Honda Civic (i.e. conditional to green attributes).
The authors calculations show that the “Green Halo” of the Prius, i.e. that the design is distinct and instantly recognisable as low carbon car, is something consumers are willing to pay up to several thousand dollars for.
This is good news: we do not need to rely only on altruism to sell certain environmental goods – their appeal as green, recognisable to all, has a market value.
And before anyone thinks Prius owners are superficial trend-setters, it should probably be said that most consumers buy cars to fit with their image, so this is certainly not unique for those who choose a Prius. As the authors of the paper point out, whereas conspicuous consumption represents wastefulness, conspicuous conservation has the potential to be welfare improving.
Unfortunately, this concept of conspicuous conservation does not seem to have any influence on ‘invisible’ (read less sexy) environmental goods. It could therefore be argued that government support is of even greater importance for the inconspicuous green measures such as home insulation and improved heating systems.
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