Vol.3: Sharing Information on Other People
In Japan, the risk of large-scale power outages due to electricity shortages rises in the summer and winter of FY2022. To reduce households’ electricity usage, the government and electric power companies have announced plans to grant monetary rewards for the households’ cooperation in saving electricity and the achievement of such cooperation.
Economics research has shown that not only such monetary rewards but also the provision of information on others, called "a social-comparison nudge," have some effects in promoting electricity savings. Specifically, this nudge delivers a mailing called "Home Energy Report (HER)," in which each household can compare their electricity usage with that of neighboring households or households with good energy-saving practices.
If one household uses electricity more than another, they will see the report and think they need to make more efforts to save electricity. Humans tend to prefer to behave the same way as others, and the social-comparison nudge reflects this tendency.
In experiments in the U.S., households who receive the HER reduce electricity usage by around 2 percentage points, on average, more than those who do not. A similar effect has been reported through the Ministry of the Environment project in Japan.
The social-comparison nudge is also effective in preventing non-payment of taxes. In the United Kingdom, a reminder letter with the message, “Nine out of ten people in the UK pay their taxes on time. You are currently in the very small minority of people who have not paid us yet,” increased the tax payment rate by 5.1 percentage points.
However, the effects of devising information provision, such as the social-comparison nudge, are often small and short-term. One of the reasons for the small effect is that information provision can be effective for a part of the population who properly view the provided information. Effective promotion of electricity savings requires that information be made more easily accessible to households with high usage and electricity-saving potential.
One possible countermeasure to the short-term effect is to encourage people to replace their appliances with more energy-efficient ones during the period when they are becoming more conscious of saving electricity by receiving the social-comparison nudge. It is essential to promote a transition to an environment where electricity use does not rise significantly even after people's awareness of electricity savings diminishes.
*This column is an English translation of a column I wrote for the Nihon Keizai Shimbun (a Newspaper) in Japanese. I have confirmed permission from the Nihon Keizai Shimbun to publicize this translated version.
Economics research has shown that not only such monetary rewards but also the provision of information on others, called "a social-comparison nudge," have some effects in promoting electricity savings. Specifically, this nudge delivers a mailing called "Home Energy Report (HER)," in which each household can compare their electricity usage with that of neighboring households or households with good energy-saving practices.
If one household uses electricity more than another, they will see the report and think they need to make more efforts to save electricity. Humans tend to prefer to behave the same way as others, and the social-comparison nudge reflects this tendency.
In experiments in the U.S., households who receive the HER reduce electricity usage by around 2 percentage points, on average, more than those who do not. A similar effect has been reported through the Ministry of the Environment project in Japan.
The social-comparison nudge is also effective in preventing non-payment of taxes. In the United Kingdom, a reminder letter with the message, “Nine out of ten people in the UK pay their taxes on time. You are currently in the very small minority of people who have not paid us yet,” increased the tax payment rate by 5.1 percentage points.
However, the effects of devising information provision, such as the social-comparison nudge, are often small and short-term. One of the reasons for the small effect is that information provision can be effective for a part of the population who properly view the provided information. Effective promotion of electricity savings requires that information be made more easily accessible to households with high usage and electricity-saving potential.
One possible countermeasure to the short-term effect is to encourage people to replace their appliances with more energy-efficient ones during the period when they are becoming more conscious of saving electricity by receiving the social-comparison nudge. It is essential to promote a transition to an environment where electricity use does not rise significantly even after people's awareness of electricity savings diminishes.
*This column is an English translation of a column I wrote for the Nihon Keizai Shimbun (a Newspaper) in Japanese. I have confirmed permission from the Nihon Keizai Shimbun to publicize this translated version.