05 January 2010

Free Goods Change Behavior

Marketplace: The price of free

ARIELY: Obviously, what other connections would you make? So think about it, pollution, carbon trade, or recycling, or whatever it is, is in the public goods domain. We think about our kids, the next generation, the welfare of the world. But if it's not costing us money now we start to apply different norms and different rules. Now I don't think about the welfare of others. It's just about what is it worth for me to pollute and not to pollute.

I'm actually worried that when we move from a system that we care about our pollution and CO2 emissions, and so on, because of the welfare generally of the world, we're going to apply a certain norm. If they charge us a lot of money then of course we would be very careful, and we might try to reduce dramatically pollution. But if they don't charge us that much, it could actually end up backfiring.

Ryssdal: Right, so you're worried that the politicians won't be able to agree on a higher price of carbon, so it will be something so small as to be meaningless and maybe even harmful?

ARIELY: That's right. If we started charging a lot of money for it, it would really dramatically change the economy, and I don't think we understand how this will work. And at the low level I think that rather than getting us to care more, it will actually end up getting us to care less.

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