An excellent example of how behavioural change was achieved on a large scale, without using financial incentives, was the reduction of water consumption in South East Queensland during a period of extended drought.
There are many ways in which asset management interacts with sustainability. Asset management principles are critical to achieving sustainability targets, such as more resource efficient manufacturing and transport systems. Asset management also has an essential part to play in managing our natural resources and providing essential services, such as water and energy.
Asset managers face many challenges that are related to sustainable outcomes. For example, in the water sector challenges, such as how to make recycled water more palatable to the public, or how to convince people not to flush baby wipes down the toilet, are critical to the success of sustainability initiatives. Many of these challenges require significant cultural change, which can be difficult to initiate and sustain.
During the so-called ‘Millenium’ drought, dam levels in South East Queensland (SEQ) reached record low levels and the region’s water supply was under threat. An estimated 29% of household water usage is from showers
(McCullagh, 2017). Therefore, changing shower habits had the potential to significantly impact total water consumption. In 2007, reducing the average shower length from 7 minutes to 4 minutes would save 36 litres of water per shower (Barrett, 2007).
In many cases the market is the appropriate mechanism to drive changes. Usually, if something costs more, people will buy less of it. However, in this case the marginal cost of 36 litres of water was not sufficient to induce people to take shorter showers. An externality, something which is outside the control of the market (in this case the weather), had led to market failure. The market alone could not deliver the desired outcome for the welfare of the community. In these cases, governments will often make
a policy decision to introduce a financial incentive or penalty. This applies the neo-classical economic principle that ‘people respond to incentives’ (Joshua Gans, 2014). An example is imposing a tax on cigarettes to reduce the prevalence of smoking.
Level 6 water restrictions did apply in SEQ during the drought. Fines were issued for breaking restrictions, such as washing your car, or hosing your lawn. However, it is impractical to enforce shower times, without intrusive privacy implications. So, instead of imposing a tax or a fine, the authorities in SEQ provided each household with a free 4-minute shower timer.
This approach was a recognised success. In 2002, SEQ’s per-resident daily water consumption was 292 litres. At the height of the drought, residents reduced this daily consumption to 140 litres. Despite full dams and eased restrictions, water consumption has never returned to pre-drought levels. In 2015, per resident daily usage was 156 litres. (Rodgers, 2015)
Since we can’t explain the 4-minute shower phenomena with orthodox neo-classical economic principles, another explanation is required. Behavioural economics provides some insights into questions that don’t fit the orthodox economic model. In this case, the behavioural economic principle is that ‘people want to feel involved and effective’ (New Economics Foundation, 2005).’ Psychology studies have shown that the most important factor in whether people behave in an environmentally friendly way is
‘personal control’ defined as ‘the extent to which participants felt their actions could benefit the environment’ (Kaplan, 2000).
The shower timers were delivered to letter boxes and additional timers were freely available. These factors were important because they reduced the transaction costs, including time and money, for people to participate. However, people were under no obligation to use the timer. Therefore, people felt they had some power or control in the situation.
This is a paradoxical response, which directly conflicts with the ‘people respond to incentives’ principle. It’s easy for individuals to feel that they have no control over an environmental factor like weather and drought. However, through simple actions, like taking a shorter shower, people felt that they were doing their bit to alleviate pressure for the whole community. Likewise, people feel more in control when fewer choices are available (Kaplan, 2000).
Therefore, a clear instruction to ‘limit your shower to four minutes’ and a simple tool to help them measure this, reduced people’s anxiety and empowered them to take action. This approach contrasts with a vague instruction such as ‘use less water’.
If the authorities had tried to enforce strict shower times, this may have led to clandestine water use, in an attempt to evade the penalties. Instead, the change in habits brought about by this campaign have extended well beyond the initial crisis and these habits are now being passed to the next generation, as parents teach their children water conserving behaviours.
We can learn from this example in designing our systems to encourage preferred behaviours that drive cultural change for sustainable outcomes. Behavioural economic approaches can be useful in asset management, to create value for stakeholders. Active engineering of choice architecture is an approach that policy makers can use to initiate and sustain cultural change. For further reading, Richard H Thaler, winner of the 2017 Nobel Prize in Economics, and his colleague Cass Sunstein have explored the research on these ideas in their book Nudge.
Barrett, R., 2007. Land of the four-minute shower. Courier Mail, 8 March.
Joshua Gans, S. K. R. S., 2014. Principles of Economics. Chaper 1: Cengage Learning Australia.
Kaplan, S., 2000. New Ways to Promote Proenvironmental Behavior: Human Nature and Environmentally Responsible Behavior. Journal of Social Issues, 56(3), pp. 491-508.
McCullagh, P., 2017. One Minute Shower. [Online] Available at: www.oneminuteshower.com.au [Accessed 1 Nov 2017].
New Economics Foundation, 2005. [Online] Available at: http://neweconomics.org/2005/09/behavioural-economics/
[Accessed 1 Nov 2017].
Rodgers, S., 2015. In southeast Queensland, water-friendly habits are new normal. The Australian, 6 October.
Thaler, R.H., Sunstein, C., 2008, Nudge: Improving decisions about health wealth and happiness. Penguin. London.
This article appeared in the Asset Journal March 2018.
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