Behavioral Economics: Why We Want Good and Don’t Do It

After all, all these little tricks make us believe that we really are really good. However, they can be avoided. First of all, one thing is required for this: to be honest. Not allowing small everyday excuses, not avoiding the action situation and wanting to know the effects of the action.

Diffusion of responsibility threatens moral action

Often, however, we do not create the effects of our actions solely through our own decisions, but together with others, in groups or teams. Collective action carries a real threat to morality because the individual cannot be sure that his behavior is really decisive: responsibility is dispersed. A good example is the emission scandal, in which the responsible ones can hardly be identified in the maze of responsibilities and decision-making chains. Or the transfer of responsibility to subcontractors, which creates precarious working conditions.

We also showed in an experiment how group decision making weakens morale: people are less likely to give up money to save the lives of a laboratory mouse if they make group decisions. Because an important motive for moral behavior is the question of whether the actor is “key”, that is, whether his actions determine the progress of things.

Responsibility is particularly scattered in the markets. The production and trade of almost all goods causes negative externalities, i.e. damage to third parties, whether it is damage to health caused by poor working conditions, suffering of animals due to improper farming methods, or damage to the environment due to the release of toxic substances.

But since a person in the markets can practically never influence the outcome through their decision, there will always be someone to step in and fill the gap. If I don’t buy a cheaper, unethically made T-shirt, someone else will. This is the difficult logic of the markets.

“Wanting to abolish the markets is the wrong approach.”

However, wanting to lift the markets for this reason is the wrong approach. Besides the fact that the spontaneous formation of markets cannot be prevented, they also have beneficial benefits. Their most important function is to express scarcity through prices, a task which, due to its enormous complexity, overwhelms any form of ‘planning’. So it must be a matter of harnessing the advantages and minimizing the disadvantages.

Because the markets are like good drugs. It helps and it works, but sometimes it also has unwanted and sometimes serious side effects. This is where state intervention and regulation must step in. An example is the Supply Chain Traceability Act. This also includes product labels and labeling requirements. They turn us into conscious consumers and allow us to consume according to our moral ideas.

Where convenience prevents you from making the ‘right’ decision, so-called defaults or presets can help, for example if green energy is predetermined as a standard for new contracts and not as an option. This does not limit the electricity consumers’ freedom of choice.

However, the state should also have a direct influence on prices in order to internalize externalities in the act of purchase, i.e. burden those who cause negative externalities with costs. The most important example of this is protecting the climate by properly pricing CO2, be it through taxes or CO2 limits.

Social norms influence individual actions

One of the basic principles of human behavior is reciprocity: we are far more likely to treat others fairly if they have shown kindness to us beforehand. One form of mutual behavior is conditional cooperation: we cooperate when others do too. After all, nobody wants to be a “fool” who is the only one in a shared apartment to clean the toilet.

“We collaborate when others do.”

This knowledge can be used for the common good, for example in the case of climate change. In a recent study, we measure the willingness of Americans to forego monetary gain in favor of donating to climate protection. The participants of the study donated more of their money, the higher they rated the willingness of their fellow citizens to engage in climate protection. However, this desire is systematically underestimated.

If we informed the participants of the genuine willingness of others to protect the climate, the average donation amount increased significantly. In other words: targeted expectation management influences climate-friendly behavior. Proper information campaigns don’t cost much, but they can potentially do a lot for the common good.

Ultimately, however, it is up to each of us not only to want good things but to do them as well.

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