{"id":46910,"date":"2017-10-17T07:46:05","date_gmt":"2017-10-17T12:46:05","guid":{"rendered":"https:\/\/www.dejusticia.org\/?p=46910"},"modified":"2018-11-27T07:46:42","modified_gmt":"2018-11-27T12:46:42","slug":"a-nobel-prize-winner-in-economics-to-take-care-of-water","status":"publish","type":"post","link":"https:\/\/develop.dejusticia.org\/en\/a-nobel-prize-winner-in-economics-to-take-care-of-water\/","title":{"rendered":"A Nobel Prize Winner in Economics to Take Care of Water"},"content":{"rendered":"

Population growth, the economic development model, urbanization and pollution are leading to\u00a0a water shortage.<\/a><\/span>\u00a0Given that we are still not able to create new sources of this liquid, what can public policy makers do so that citizens take care of water?\u00a0The answer is to follow the advice of the latest economics Nobel winner and help people through small “nudges”\u00a0to waste less water, as some countries have already done.<\/p>\n

One of the major contributions made by Richard H.\u00a0Thaler,\u00a0who received the Nobel Prize in economics on October 9th,\u00a0is the \u201cnudge\u201d theory. It shows how small nudges can result in people making different decisions than the ones they normally would.\u00a0This type of nudges are very useful for public policy because they allow government leaders help citizens to make better use of resources without taking away their freedom,\u00a0which is key on issues like water.<\/p>\n

Costa Rica is a water-rich country that is already facing the first water cuts:\u00a0although 99% of the population has access to the water supply,\u00a017% do not have it in a constant fashion.\u00a0Bel\u00e9n,\u00a0a small town in Costa Rica with 21,633 inhabitants, has a particular characteristic:\u00a0water consumption was 1.25 times higher than the national average.\u00a0Experts predicted that the entire city could face cuts in less than two decades, which would have caused the public administration major headaches. How to make residents consume less water?\u00a0Economists had the answer.<\/p>\n

To solve this problem, a group of researchers decided to make three interventions with a different nudge.\u00a0The first was called the “neighborhood comparison,”\u00a0in which households received a blue sticker with a congratulatory sign for having used less water than the neighbors or a yellow sticker with a series of recommendations to reduce water consumption if it had been greater than the average.<\/p>\n

\"The<\/p>\n

 <\/p>\n

The second nudge was “city-level comparison”,\u00a0which worked like the previous one,\u00a0but made the comparison with the entire city. Households were not compared with people that they probably knew (since they were neighbors), but with more than 21,000 residents.<\/p>\n

\"The<\/p>\n

The third group,\u00a0“make a plan,”\u00a0received information on the average consumption of the city during the previous month so that the household could propose its own goal.\u00a0 This nudge sought a self-reward, in which household members had the satisfaction of achieving their goals.<\/p>\n

The results of this intervention corroborated the nudge theory: with the “city-level comparison”\u00a0there was no change, but the “neighborhood comparison”\u00a0was able to achieve a reduction in water consumption between 3.7% and 5.6% per household, while “make a plan”\u00a0reduced between 3.6% and 5.6%.<\/p>\n

This contradicts what economics schools have taught for over the last half century: that we are\u00a0homo economicus.<\/em>\u00a0The term refers to us being merely rational beings that only seek to maximize our own benefit through a series of mathematical derivatives.\u00a0If we were\u00a0homo economicus<\/em>, we would consume a specific amount of water, regardless of a sticker on our bill.\u00a0But in reality, we are irrational.\u00a0Literature has shown that among all the factors that lead us to act in one way or another, there are two that stand out: monetary motives and social motives.\u00a0With this in mind, a group of researchers decided to test 9 different nudges to see which one humans are most responsive to.<\/p>\n

Monetary Nudge<\/p>\n

\"pic<\/p>\n

 <\/p>\n

Social Nudge<\/p>\n

\"pic<\/p>\n

 <\/p>\n

Cape Town researchers<\/a><\/span>\u00a0used these 9 nudges for households to save water and found that all these interventions reduced water consumption between 0.57% to 1.87% This was between 159 and 467 liters of water saved per month!\u00a0Of all the nudges, the most efficient was the “social recognition” one,\u00a0in which those who saved more water would appear on the city\u2019s website.<\/p>\n

The Cape Town case shows that as humans, we like to feel admired by other people. However, the truth is that we are also egocentric.\u00a0The most incredible thing is that we are so irrational, that our ego cannot resist a nudge, as in the case of Bogota.<\/p>\n

In 1997, part of a tunnel that provides water to Bogota collapsed and created a water crisis:\u00a070%\u00a0of the city would be left without water if consumption was not reduced.\u00a0The first thing the government did was to publicize the emergency hoping that people would save water.\u00a0However, the opposite happened and the\u00a0homo economicus<\/em>\u00a0within us increased water consumption (if water is going to run out, everyone wants to have liters saved at home to survive the crisis).\u00a0To correct its error, the government used different nudges.<\/a><\/span>\u00a0First, it gave stickers to households, offices, and schools so that they could be placed near a faucet, where they would be motivated to save water.\u00a0The government also awarded those who saved water with the help of the aqueduct\u2019s manager,\u00a0who delivered a badge to those with exceptional savings that read “Here we follow a rational plan to use the precious liquid.”\u00a0The amazing thing about these nudges it is that they did not only avert a crisis in the town, but also reduced water consumption for years!<\/p>\n

\"pic<\/p>\n

These are just a few examples of how governments can use very cost-effective strategies (in every sense) to get citizens to make better use of resources.\u00a0Our development model has led us to exploit resources as if they were unlimited, thinking only about our own benefit and without taking into account the world we will leave to future generations.\u00a0There are hundreds of mechanisms that as a society we can use to protect the environment, but policies are often based on humans being\u00a0homo economicus<\/em>\u00a0and on the assumption that we need changes in prices or penalties to change our habits.<\/p>\n

These examples have shown us that there are already nudges for households to save water.\u00a0However, the reality is that most water consumption does not occur in households.\u00a0For example,\u00a0gold mining uses 450 to 1,060 liters of water per gram in Colombia<\/a><\/span>.\u00a0It would be great if public policy makers created nudges to reduce water consumption by industry as well.\u00a0And not just water: fuel, timber, minerals and other hundreds of resources. \u00a0What if governments listened to the new Nobel Prize in Economics?<\/p>\n

 <\/p>\n

Featured Photo:\u00a0Steve Johnson<\/span><\/a>, Flickr<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

There are hundreds of mechanisms that as a society we can use to protect the environment, but policies are often based on humans being\u00a0homo economicus\u00a0and on the assumption that we need changes in prices or penalties to change our habits.<\/p>\n","protected":false},"author":95,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1022],"tags":[],"class_list":["post-46910","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"yoast_head":"\nA Nobel Prize Winner in Economics to Take Care of Water - Dejusticia<\/title>\n<meta name=\"description\" content=\"Small nudges can be used by public policy to drastically change individual behavior, such as water consumption, without limiting freedoms.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" 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