Visiting with my wife's relatives for Christmas, I noticed the label on their "natural" laundry detergent. It informs the customer that he is making a difference—if every household in America replaced one large (50 load) bottle of petroleum based laundry detergent with their vegetable based product, it would save enough oil to heat 19,500 homes.
I have no idea whether it is true; what struck me was how tiny the effect boasted of was. On a wildly unrealistic assumption of how many people switch to their product, it will save enough petroleum to heat about one home in five thousand. Restating the claim in individual terms and assuming that the average family does two loads of laundry a week, using the vegetable based product instead of a petroleum based one, saves an amount of oil equal to less than a tenth of a percent of that family's home heating consumption. Roughly speaking, and depending on where they live, that's equivalent to the savings from turning the thermostat down by a few hundredths of a degree.
There are three possible interpretations of the effectiveness of such a claim, assuming that it does encourage people to buy the product:
1. People really do care about such small effects.
2. Many customers don't intuit mathematics very well. 19,500 is a large number, it doesn't occur to them to compare it to the entire housing stock or to scale down the effect from every household in America using the product to their using the product, so they believe they are actually saving a substantial amount of oil.
3. Customers are making their decision on the basis of symbolism, not consequences. The question is not "how much oil does it save" but "does it save oil." Saving oil is good, so one should do it.
One of the nice things about a price system is that it presents calculations of that sort in a form both more easily understood and more immediately relevant to the consumer. Not using a certain amount of oil reduces the cost of producing the detergent by, say, six cents. Using alternative inputs raises the cost by, say, five cents. So, in a competitive market, the vegetable based product will be a cent cheaper—or more expensive, if the numbers go the other way. The consumer can then decide whether other differences between the two products do or do not outweigh the price difference.
The price system isn't perfect; external costs and benefits get left out of the mechanism that determines price, so the signal isn't entirely accurate. But alternatives to measuring costs and benefits via price require getting people—consumers voluntarily, as in this case, or voters and politicians making decisions for consumers—to substitute some alternative mechanism. As this particular example suggests, that alternative is likely to be enormously less accurate, off not by ten or twenty percent but by orders of magnitude.
A second point that occurs to me is that my third alternative, deciding on a symbolic rather than consequentialist basis, may not be quite as crazy as it at first seems. It is, after all, the way many people, myself among them, often think about moral issues. A small lie is still a lie, a small theft still a theft, and both are to be condemned not only on the basis of their consequences but also because they are, somehow, wrong in themselves.
So perhaps I shouldn't be quite so quick to condemn as irrational people who are interested in whether they are saving oil, not in how much oil they are saving, still less in any estimate of what the value is of saving that amount.
I have no idea whether it is true; what struck me was how tiny the effect boasted of was. On a wildly unrealistic assumption of how many people switch to their product, it will save enough petroleum to heat about one home in five thousand. Restating the claim in individual terms and assuming that the average family does two loads of laundry a week, using the vegetable based product instead of a petroleum based one, saves an amount of oil equal to less than a tenth of a percent of that family's home heating consumption. Roughly speaking, and depending on where they live, that's equivalent to the savings from turning the thermostat down by a few hundredths of a degree.
There are three possible interpretations of the effectiveness of such a claim, assuming that it does encourage people to buy the product:
1. People really do care about such small effects.
2. Many customers don't intuit mathematics very well. 19,500 is a large number, it doesn't occur to them to compare it to the entire housing stock or to scale down the effect from every household in America using the product to their using the product, so they believe they are actually saving a substantial amount of oil.
3. Customers are making their decision on the basis of symbolism, not consequences. The question is not "how much oil does it save" but "does it save oil." Saving oil is good, so one should do it.
One of the nice things about a price system is that it presents calculations of that sort in a form both more easily understood and more immediately relevant to the consumer. Not using a certain amount of oil reduces the cost of producing the detergent by, say, six cents. Using alternative inputs raises the cost by, say, five cents. So, in a competitive market, the vegetable based product will be a cent cheaper—or more expensive, if the numbers go the other way. The consumer can then decide whether other differences between the two products do or do not outweigh the price difference.
The price system isn't perfect; external costs and benefits get left out of the mechanism that determines price, so the signal isn't entirely accurate. But alternatives to measuring costs and benefits via price require getting people—consumers voluntarily, as in this case, or voters and politicians making decisions for consumers—to substitute some alternative mechanism. As this particular example suggests, that alternative is likely to be enormously less accurate, off not by ten or twenty percent but by orders of magnitude.
A second point that occurs to me is that my third alternative, deciding on a symbolic rather than consequentialist basis, may not be quite as crazy as it at first seems. It is, after all, the way many people, myself among them, often think about moral issues. A small lie is still a lie, a small theft still a theft, and both are to be condemned not only on the basis of their consequences but also because they are, somehow, wrong in themselves.
So perhaps I shouldn't be quite so quick to condemn as irrational people who are interested in whether they are saving oil, not in how much oil they are saving, still less in any estimate of what the value is of saving that amount.
16 comments:
Here's a fourth possibility: people *know* they don't intuit the mathematics very well, and don't trust themselves to try. Instead they simply opt for a strategy of taking the "green" choice whenever it's not too much more costly than the default, on the assumption that some will be snake oil and some will do some good.
Is there some corner of economics that deals with how people balance the desire to make optimal choices, against the time to work through the math? Seems like it would come up all the time; for example when you don't bother trying to compare price per pound of two similar products with different weights and prices; or deciding when to refinance a mortgage.
The proposed government mandated switch from incandescent bulbs to fluorescents is far sillier. Incandescents used in winter climes will both heat the house and provide light for the house, which no furnace will do. Their lower cost, not to mention less-polluting technology, makes them a better choice than fluorescents for a lot of folks.
Methinks you're leaning over backwards to see the other fellow's point of view. I rather doubt that the analogy between economic and moral decisions is a good one.
If using even a little petroleum is 'immoral', then both products are immoral and we shouldn't buy either of them. Surely petroleum is used in transporting both products to the shop, and it may also be used elsewhere in the production process.
The puritan solution here is to go and wash your clothes in the river as your ancestors did, without using any detergent.
There is a qualitative asymmetry between small good deeds and and small wrongdoings from a reputational perspective:
Since wrongdoings are typically performed in secret, one who is caught committing some petty misdeed may be assumed to be capable of worse. Doing small-time symbolic good, however, is not necessarily an indicator of being capable of greater good, because good deeds are typically not shrouded in secrecy. For instance, tossing a penny into a beggar's hat is both offensive and humiliating.
Small symbolic good deeds "count" when they are somehow indicative of a consistent behavior. Always being polite is a good example. Or not buying anything petroleum-derived, if alternatives are available. And, I guess, it is such consumers to whom the detergent's advertised property appeals.
P.S. I've read that the Ancient Romans used to wash clothes in urine: surely an even greener (yellower?) solution than the vegetarian detergent.
Everyone produces urine anyway, but usually it goes to waste without doing any useful work.
Maybe if they just do a lot more laundry, then the green detergent will make a difference :-)
Chris asks:
"Is there some corner of economics that deals with how people balance the desire to make optimal choices, against the time to work through the math?"
There is a literature on information costs and, I think, calculation costs, but it's not one I know a lot about.
Do you vote? All the arguments about lack of meaningful effects, symbolic payoffs, and irrationality apply just as strongly to voting in nearly any election, even down to the purely local level, and certainly at the national level. And both you and I, in particular, can be virtually certain that whoever we vote for for president next year, the Democratic nominee will get our state's electoral votes. But I follow the election news, I have opinions about the relative ghastliness of the different nominees, and I expect that next November I will pay the trivial cost of actually voting for someone, even knowing it's a purely symbolic gesture, assuming there is some candidate who is not entirely revolting. How about you? If you do vote, the same calculus seems to apply, doesn't it?
voting is yucky. It really seems to be a way of making people feel as though they have adequate say witout giving them anyhting of the sort. At the same time, there is the threat that if one does not vote, one has abdicated whatever power was available.
I think the claims on laundry soap etc. are really designed for people whose threshold for "too much work to calculate" is very very low. People who are in the habit of making all their decisions symbolically rather than rationally. Often, I think for more social than pragmatic effect.
(lying can be appropriate, too. Never lying is really a social good, not a pragmatic one IMO. When small children fail to lie appropriately the reaction amongst grownups is generally nervous laughter. People who "never lie" are usually just good at presenting the impression that they never get caught in a damaging lie by the person damaged. People who truly do not lie are generally not appreciated at all in really any context. )
Voting is considerably less effective than non-violent civil disobedience. The fact that people vote, even with knowledge of its futility, instead of engaging in non-violent civil disobedience goes to show that anarchists have a lot of work to do still.
People that really do not lie do require an extraordinary amount of tact. They are not altogether unknown or unappreciated.
My usual approach to decisions like this is what I gather Kant called the "categorical imperative": I try to do things which, if a lot of people did them, would lead to a world I would like. I know that my doing these things doesn't cause anybody else to do them, but to the extent that other people are similar to me, the fact that I've decided to do them means that other people are also deciding to do them. And the more people are similar to me, the better this works. (OTOH, if things go wrong, I have the feeling of satisfaction that at least it's not my fault -- I did my part :-))
Consider also that although any one consumer's impact on petroleum consumption by choosing this detergent is trivial, the advertiser's impact (by convincing a large number of people to choose this detergent) may be significant.
Is there some corner of economics that deals with how people balance the desire to make optimal choices, against the time to work through the math?
See the pop-economics book of a year or two ago, The Paradox of Choice, which illustrates a number of circumstances in which people faced with a choice among a lot of alternatives choose badly, or choose "none of the above" even when all of the alternatives are clearly better than that non-choice.
Jimbino writes.. The proposed government mandated switch from incandescent bulbs to fluorescents is far sillier. Incandescents used in winter climes will both heat the house and provide light for the house, which no furnace will do.
In which climate do you claim
incandescents to be superior?
Incandescents and fluorescents both provide heat and light. Incandescents provide more heat as they consume more electricity. Their ratio of electricity used to heat produced is about 1, same as a resistance heater. A typical cold-climate heater (say, a heat pump design) can produce 2-5 times that amount of heat with the same input of electricity by taking advantage of indoor/outdoor temperature differences. If you need heat, it's far more efficient to use a heat pump than to use light bulbs.
In summer, fluorescents have obvious advantages in heat production and electricity usage, so they provide a dual benefit.
Mercury pollution is a comparable downside for both types of lights. Improperly disposed fluorescents release mercury, and the additional coal burned for the inefficiencies of incandescents releases a similar amount of mercury. Here's some numbers on that.
One potential large win for fluorescents is in productivity. Better lighting and better color rendition are provided by good fluorescents. This gain is difficult to quantify, though.
I wonder what the cost differential between the vegetable detergent and a reasonable mainstream one is. If the vegi detergent is more than a few cents more expensive, it would make more sense to simply pay to heat 19.5 K homes.
I suspect the claim is bogus for another reason.
I'd guess laundry detergents aren't literally made from oil, but by-products of refining oil.
Our refineries generally try to maximize the cut of transportation fuels they refine (gasoline, diesel, jet fuel) and sell the by-products to whatever markets are available.
Cutting the demand for a barrel of by-product that makes up a small portion of the refiners revenue on processing the barrel of oil does not cause a one-for-one drop in the demand for oil.
If the refiner can't sell the by-product stream to a detergent maker, he still buys about as much crude, makes about as much gasoline, diesel and jet fuel and sells the by-product into the next best available market.
No, I haven't read it all yet, but honey: LOTS of families (most that have children) do one or two loads of laundry a DAY, not per week. I know, it's still negligible...but I've never forgotten presidential candidate Rockefeller's remarks about "the average American family with an income of $100,000"/year. Ha ha ha. But he needed his advisers to tell him to knock a zero off.
O jala.
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