15 Dec 2010Working Paper Summaries

Cognitive Barriers to Environmental Action: Problems and Solutions

by Lisa L.Shu and Max H. Bazerman

Researchers have long studied the cognitive barriers that cloud our thinking and decision-making. In a recent book chapter, HBS doctoral student Lisa L. Shu and professor Max H. Bazerman look at three barriers that can prevent clear decision-making, specifically on environmental issues. They also propose ways in which these biases could be put to advantage in promoting sound environmental policy and practice. Key concepts include:

There are three cognitive barriers impeding sound individual decision making that have particular relevance to behaviors impacting the environment: people discount the future to a greater degree than can be rationally defended; positive illusions lead us to conclude that energy problems do not exist or are not severe enough to merit action; we interpret events in a self-serving manner, a tendency that causes us to expect others to do more than we do to solve energy problems.
These biases can be used advantageously in directing humanity toward better judgment. For example: Because people tend to steer away from choosing and accept the default, companies should make presets on refrigerators, computer displays, and air conditioners environmentally friendly.
Key questions remain on the research frontier from the behavioral decision-making perspective. It would be helpful to learn which behaviors leading to energy conservation are easiest to change.
Although the behavioral decision-making perspective and the neoclassical economics perspective recommend very different solutions for the same problems, the two academic approaches do not have to be in opposition. Rather, the behavioral approach can actually be used to supercharge the incentive-compatible recommendations of the neoclassical approach.

Author Abstract

We highlight three cognitive barriers that impede sound individual decision making that have particular relevance to behaviors impacting the environment. First, despite claiming that they want to leave the world in good condition for future generations, people intuitively discount the future to a greater degree than can be rationally defended. Second, positive illusions lead us to conclude that energy problems do not exist or are not severe enough to merit action. Third, we interpret events in a self-serving manner, a tendency that causes us to expect others to do more than we do to solve energy problems. We then propose ways in which these biases could actually be used to our advantage in steering ourselves toward better judgment. Finally, we outline the key questions on the research frontier from the behavioral decision-making perspective and debunk the myth that behavioral and neoclassical economic perspectives need be in conflict.