Dant03 is right, focus groups are very much me just thinking out loud, but my train of thought is that if we agree that in some instances people do silly things because of a lack of information (due to search costs or lack of availability) or lack of computational power (bounded rationality), then it might be that some central body can improve outcomes through regulation (assuming away regulatory failure).

Evidence for this is that many actions seem contrary to personal interest (wearing seatbelts, spending money on insulation) and if you do the math for any plausible range of imputs, it’s almost universally a good idea.

There are a few ways that we can overcome this. Rauparaha very correctly points to education. The big downside with education is that it’s often costly and difficult (getting people to you about an issue they don’t even think is a problem can be tough). Regulation is the alternative, and focus groups was just my way of exploring how we could set a bar for regulation.

He’s right that striking the balance is tough, how do you weigh up the costs. At a guess it’s fundamentally unknowable. All we can do is rack it up the best we can, make a few guesses and keep reviewing if it’s working.

I agree that the announcement was made on ideological grounds. I suspect with good reason that the ideological stand was taken without considering the TTMRA issues. National has to do something now that it has made an announcement, but it will be a tricky task given that continuing to allow incandescents to be sold here would undermine any Australian ban. Under the TTMRA any product that can legally be sold in NZ can be sent to and sold in Australia. I suspect that Australia may not be very happy about that.

Weighing up the expense of education against the costs of regulation and any ideological objections that the government has is an empirical matter that I don’t have the information to do. Finding that information would probably be a very difficult and imprecise exercise.

I’m not sure why you think peoples’ suggestions are so impractical. I infer from what you’ve written that you think regulatory consistency with Australia is an issue. However, since National has chosen not to proceed with the standard on largely ideological grounds, it appears that consistency is not as great a problem as you’ve implied.

That is a really interesting and provocative post. So you think that if there are people who, for whatever reason, choose to persist with incandescents (for a wee while until they realise that they are mistaken) it would be okay to regulate against them if the large mass of people think doing so is really silly and not in the national interest?

If so, I basically am okay with that.

Rauaraha:

Information and labelling are all good. But what if people are slow to realise their errors – ie they would change, but it takes a year of information campaigns (expensive) to get through, then there is a period of change. Would it not be more efficient, if we could be sure that ULTIMATELY the large mass of people don’t want incandescents, to regulate? What do you think?

I think that ultimately the approach taken to date differs from your (impractical) suggestions because of a minor thing called the TRANS TASMAN MUTUAL RECOGNITION ACT.

That way people like my flat mate could get beyond the perception that energy efficient light bulbs are just for hippies.

That’s an interesting idea. I guess you’re saying that focus groups could help us to figure out what sort of things are stopping people from buying CFL bulbs. Once we’ve figured out what the problem is, we can form our model and take appropriate regulatory action.

If, as you suggest, it’s an information problem then maybe education and labelling would work well. I’m not sure how availability heuristics or time inconsistency could cause the problem, though. Could you elaborate on that, maybe?

Yup, totally correct. It’s entirely possible, and a suggestion that goes to the heart of economics, when we say that we can’t be sure that individuals aren’t consciously choosing to buy rather than bulbs.

I suggest though, that we can’t necessarily say that people always know what’s best for them, that’s an ingoing assumption. We can hypothesise that, and I guess I’m exploring how we might work things if we relaxed that a bit.

@Rauparaha

Perhaps the policy response is to get some people in a room. Have some “neutral party” (let’s assume away the problems associated with this for a moment) explain to a group of 30 people about light efficient bulbs. Have them do the math themselves. Then ask them again whether they’ve changed their minds and would choose to buy them.

If more than X% of people opt for the bulbs, then legislate it on the basis that pretty much everyone would buy them if they understood, but just don’t for some reason. If you want a model for why not, how about classic information asymmetry and searching costs, as well as availability bias and time inconsistency.

Practically I think we could get a pretty good approximation of this scenario, and then the government could look at policy responses, whether it’s subsidising lightbulbs, banning normal ones, whatever. Then look at the resultant ineffencies (overconsumption, loss of sparkle etc.) and weight up the intervention on that basis.

I think if you ran this exercise for seat belts, you’d decide to legislate for them…

(1) the government won’t (or rather, wouldn’t) be banning incandescents per se. They would be applying minimum energy performance standards (MEPS) to household lighting. Much the same way as we have been doing for years for a number of other appliances

(2) to learn more about MEPS, go to http://www.eeca.govt.nz/labelling-and-standards/meps.html

(3) the web-page in (2) will refer to the full range of MEPS being listed on an Australian website.

WTF?!?!? So I am not talking about trade talks, more existing trade arrangements.

If people don’t behave in a predictable (on average), boundedly rational fashion then what policy would you recommend? If you have no idea what they want because you can’t use revealed preferences, and don’t know how they will react to regulation then it’s pretty hard to justify any regulation.

By proposing anything you’re making SOME assumption about how people will react to regulation and forming some model. I don’t know what better model we have at present than the boundedly rational one that most eocnomists use.

dant03:

Do you think that we will be discriminated against in trade talks because of the lightbulbs we use in our homes???