Steven Levitt, Earth Hour and Benevolent Dictators

I spoke at the International Home and Housewares show earlier this week and stuck around for a breakfast function featuring Steven Levitt, co-author of Freakonomics.  (fascinating read…I highly recommend it.)

Levitt calls himself an economist.  In the ad agency world, we’d call him a planner. He finds insight and meaning in numbers, and his explanations for human behavior revolve around incentives (we call them drivers and motivators).

According to Levitt, the bedrock of economics is the idea that all people are selfish/self-interested.  That’s also pretty much the bedrock idea in advertising, and something I preach about in reference to motivating mainstream consumers to make sustainable choices.

Despite this being a bedrock of economics – or maybe because of it – a team of his professor colleagues went about trying to prove or disprove this idea via a little game called Dictator.  They invited college students into the lab, two at a time, and placed them in separate rooms so they never met each other.  They were each given ten dollars and one was randomly chosen as the Dictator.  The Dictator was given an extra ten dollars and told he could keep it, give some of it away to the person in the other room, or some combination thereof.  The expectation, following the theory that people are selfish, was that he’d keep the entire extra ten dollars.  Instead, on average the Dictator gave away three dollars and kept seven for himself.

The conclusion, Levitt posits, is not that people aren’t selfish…but that in this case the Dictator’s thought was “how much do I have to give away so I don’t look like a jerk to all these professors watching me?”  So social pressure factored into his decision.

After hundreds of these studies had been conducted, arriving at relatively the same answers, another colleague came along and tweaked the rules of the game:  now the Dictator could steal one dollar of the other player’s ten.  The average gift dropped to a dollar and the same percentage who originally would give nothing now stole the dollar.  Further, when the Dictator was told he could steal all ten dollars of the other player’s money, this became the single most popular choice.

Thus, there’s a dollar figure tipping point at which people will stop worrying about what others think and go for the money.

Then there was a final tweak.  In the new version the two students did meet beforehand, and they were made to stuff envelopes together.   After that they played the game with the updated rules – the Dictator could steal the other guy’s ten dollars.  In this case, 90% of the Dictators chose zero – they didn’t give any of their money away, but they didn’t steal any either.

Again, it’s a bit of a social pressure/guilt conclusion… but Levitt says it proves that when people involved in a situation realize that the others around them are also working hard, they kind of leave each other alone.

So this was a lot of groundwork laying for a thought about the upcoming Earth Hour – the movement for all of us to turn out our lights for one hour to do our part for the earth.  The same morning I heard Levitt speak I heard a TV spot for this event.  The spot tells us that “there’s a global election going on where we all get to cast our vote for the earth.”  Now, according to our research, this is NOT a motivating message for many consumers.  First, 40% of the population is not bought into the idea that global warming is caused by man.  Secondly, 96% of the population doesn’t understand the link between electricity and the environment (that burning coal to make power creates a lot of CO2 emissions).  So I was prepared to write a blog deriding their approach.

But after thinking through Levitt’s story, I see that the Earth Hour folks have a few things on their side:  social pressure for starters.  Some folks won’t want to be seen as the only jerks on his block who couldn’t be bothered to get off the couch and flip the light switch.  Secondly, it’s free, low-risk and low-effort (all elements present in the green and energy efficient activities most consumers buy into now).  But lastly, maybe Levitt’s idea that you don’t want to steal from the guy you stuffed envelopes with will bear out here – maybe some people will look at the earth as “working hard and doing its part” and, as Levitt put it, leave it alone.

The story that we tend to find in our numbers is that this won’t play out that way.  The first two components are far more effective incentives/drivers.  But maybe I’ll be proven wrong. Maybe we’ll turn out to all be benevolent Dictators after all.