36. Hey Baby, Is That a Prius You're Driving?

While there is certainly a push towards eco-friendly practices, some individuals may prioritize the appearance of being environmentally conscious over actual impact. This is highlighted in popular culture, such as South Park's 'Smug Alert!' episode, where a hybrid car is mockingly referred to as a 'Pious.' A study by Ph.D. students, Alison and Steve Sexton, reveals that people who opt for greener options may indeed place a higher value on being seen as environmentally responsible rather than the environmental impact of their actions. While gestures like installing small windmills or using reusable bags are steps in the right direction, prioritizing actual impact over appearances is key to ensuring true sustainability.

The Sexton twins, both economists, have noticed a trend in which people are engaging in 'conspicuous conservation' - showing off their environmental concern through costly efforts. This phenomenon is a form of competitive altruism, whereby individuals compete with their neighbors to reduce energy consumption or donate to charity. Unlike conspicuous consumption, which can be wasteful, conspicuous conservation provides benefits to society. The idea came about when Steve Sexton noticed the prevalence of Priuses on the road and wondered why they were more popular than other, similar hybrid cars. Economists have studied this behavior, known as 'signaling theory,' and view it as a way of showing off or demonstrating status.

Managing our appearance is a significant part of human behavior, and understanding signaling is crucial in various fields like business, jobs, school, and even medicine. The Prius Effect study by the Sexton twins aimed to measure the signal sent out by people who drive hybrid cars. The Prius's success can be attributed to its unique design that signals to others the driver's environmental consciousness, making it a valuable signal in areas where people care about the environment. The study shows the importance of understanding signaling and how it impacts consumer behavior, which can be useful for companies looking to position their products and services.

The Prius Effect shows that the value of a hybrid car like the Prius is higher in green-leaning communities than in places where environmentalism is not a big deal. Economists Alison and Steve Sexton found that, while hybrids sold disproportionately well in Boulder and Seattle, the Honda Civic hybrid did not have a statistical effect in green ZIP codes. On the other hand, Priuses were in abundance in these areas. The Sextons measured and determined that 10-23% of the Prius' market share is due to the conspicuous conservation effect, translating to a willingness to pay between $500 and $4,000, which highlights the value of signaling one's greenness in these communities.

The Prius' unique design sets it apart as an obvious hybrid and Toyota understood and capitalized on the concept of conspicuous conservation to drive sales. In addition to the Prius, solar panels on the street-facing side of homes are also examples of conspicuous conservation where people are willing to pay more for the feeling of being seen in a positive light. This concept has implications for firms looking to market similar products and for governments investing in such products. It is essential to understand the willingness of consumers to pay more for the idea of doing good as part of their self-image, and the value this concept can bring to the overall market.

Energy conservation policies should focus on inconspicuous investments like insulation, window sealing, and energy-efficient appliances, as they are more cost-effective and have greater impact. Conspicuous conservation efforts like installing rooftop solar panels are less effective and serve more for competitive and reputational motivations. To maximize the impact of conservation dollars, a program can be developed to allow individuals in areas with less sun to pay for rooftop solar installations on homes in areas with more sun. However, incentives for inconspicuous conservation should be provided through government policies, as the current subsidies include both conspicuous and inconspicuous investments. Altruism-driven conservation efforts are fundamentally selfish, consistent with traditional neoclassical economics.

The cars we drive and how we present ourselves through them are a form of signaling to the world. Our choices convey messages about our personality, values, and social status. Economists like Robin Hanson may deliberately engage in counter-signaling to assert their intelligence or strategic thinking, such as not tipping at a restaurant or not voting in elections. However, for most people, their car choices are a genuine reflection of their desires and self-image. The discussion highlights how even seemingly irrational or frivolous choices can hold significant meaning and reveal insights into our identity.

Voting is not always done out of civic duty, but can be a way to simply talk about politics with peers. While it's important to make efforts towards reducing energy consumption, it's important to also be aware of what actions truly benefit the planet. For instance, choosing to not make toast for breakfast to reduce energy consumption might seem like a good move, but getting a glass of milk instead might actually be more detrimental to our planet due to the methane produced by cows. While driving a Prius can contribute to reducing emissions, it's small efforts like consuming toast over milk that can also make a difference in saving our planet.