Euston Quah and Mona Chew Business Times 31 Mar 12;
HERE'S how you can save the Earth: If you were to yell continuously for eight years, seven months and six days, you would have produced enough sound energy to heat one cup of coffee.
This is, of course, not a sensible or workable action, but it does drive home a point. This is what the annual Earth Hour - a globally synchronised event, which is observed in Singapore in March each year also seeks to do. For the past four years, the World Wide Fund for Nature (WWF) has sought to raise awareness by the countdown to 'lights off' on Orchard Road complete with a live concert. But, just how much impact can we really garner from this annual celebration?
Naysayers will dismiss Earth Hour as a movement driven by empty rhetoric with little substance. But Earth Hour is supposed to bring about a desire to change human behaviour by preserving Gaia (nature's household in Greek), starting with our energy usage.
However, while the Earth Hour might help to raise some awareness, once it is over, nothing much changes afterwards. Perhaps, it will be more meaningful if we all pledge to power down on a sustained basis and by better management of energy, water and other scarce resources.
Take, for example, Singapore's difficulty in finding land to construct landfills. At present, there is the offshore island, Pulau Semakau, which serves as the country's only landfill but with the rising trend of waste generation in a relatively affluent society, how do we prolong the lifespan of this landfill site? Efforts must continually be directed towards sustained waste minimisation and waste recycling, and optimal pricing of waste generated.
Whether it's about prudent resource use or waste recycling, we must do it all, as stakeholders of the Earth's resources. For much of the time, society tends to focus more on production activities, probably because these are much easier to regulate. But the role of consumers is equally crucial as consumption activities are also important drivers of environmental pressure. Although Singapore's recycling rate is already high, largely due to its industrial recycling, more needs to be done by households.
Successful Earth protection will require lifestyle changes and, in Singapore, public policies have for the most part been largely guided by the rigours of economic rationality, such as getting 'prices right' and using financial incentives. But in reality, consumers' responses to public policies may not be totally consistent with pure economic logic. How can we predict en masse consumers' response to incentives when some of them will react differently, in nuanced ways?
Recent research in behavioural economics has also suggested that high dependence on financial incentives and disincentives as a public policy tool may significantly weaken social norms and intrinsic motivation. If individuals seriously care enough about environmental protection, they may even be prepared to incur personal cost to help achieve collective outcomes we perceive as good. Correct incentives or disincentives are certainly necessary in public policy but understanding human behaviour other than through the price mechanism should also be important in the design of public policies.
For example, in a system of fines (which are disincentives) for littering, or giving rebates(which are incentives) for recycling, the problem may not be sufficiently addressed if people's behaviour is also influenced by inconvenience and transaction costs such as the need to easily locate garbage bins, the size of these bins, the ease of separating different types of garbage, how fast rebates are given and existing social and cultural norms.
Paying attention to people's valuation of things that matter, and their priorities is important in designing public policies and allocating scarce resources optimally.
The recent controversy relating to the lost heritage and historical value of the Bukit Brown cemetery versus the need to alleviate traffic congestion (which would save time, increase productivity, reduce injuries from traffic accidents and may even save lives) requires a good understanding of society's preferences, norms, priorities and trade-offs in terms of benefits and costs of the proposed project.
It is crucial to solicit these values not just from road-users, but also from the rest of society - just as we try to determine the best use for a given piece of land, whether it should be commercial, residential or recreational.
How people value such things cannot be readily determined from available market prices. The reality is that so-called 'non-market' intangibles such as aesthetics, scenic beauty, history and heritage, quietude, pride and environmental quality do matter to people. The fact that these things cannot be easily measured in terms of market value does not make them less valuable.
Discovering these non-market values is important in any proper and complete cost-benefit studies of proposals. There are already established methods used by economists and social scientists, and they should at least be explored.
But knowing the methods is only part of the solution; estimating a whole society's values is the other daunting - though not impossible - task that would probably require a public agency.
Balancing economic growth and protecting the environment is not easy. We, as a society, need to understand the trade-offs by knowing the benefits and costs of any proposals; getting the values for both market and non-market intangibles from both users and non-users; soliciting society's priorities and preferences; and getting the incentives and disincentives right.
This would go a long way towards resolving seemingly difficult questions on allocation of scarce resources while protecting the environment.
It would be worthwhile to reflect on this during the coming Earth Hour today.
Euston Quah is professor and head of economics at the Nanyang Technological University, Singapore. He is also president of the economic society of Singapore. Mona Chew is completing her PhD in development economics at the same university.
