Monday, March 30, 2009

Earth Hour, Buy Nothing Day, and Gas Boycotts

Last Saturday my wife and I experienced Earth Hour during the intermission of a play (On the Town) at Belmont College in Nashville. It reminds me of Buy Nothing Day, or the occasional gasoline boycotts that occur when gas prices are high.

In general, these sorts of boycotts should not be expected to do much. This is because refraining from buying a good on a particular day, with the intention of buying it on a different day instead, doesn't really change supply and demand for the good. If you decide to buy gasoline on May 16 instead of May 15, it really doesn't matter much. If a really large number of people went along, then prices might fall on the 15th, if prices are flexible enough, but it's not likely--and even if the price did drop, this would just lure more people in to buy on that day, pushing the price back up. That is, the drop in price that one person is trying to create is an opportunity for someone else to buy cheaper gas. The likely result: gas prices don't change at all. The same goes for Black Friday.

Of course, the intended goal of these sorts of events may not be to affect prices. They may be intended to simply get publicity and encourage consumers to behave differently. This is more plausible than changing prices, but I still think it unlikely to have large effects.

Is Earth Hour like this? To some extent, yes. A factory that turns off its lights for an hour is probably just going to make up that hour later. Also, some people will end up driving around in their cars in the hopes of seeing what their city looks like with the lights off, creating more pollution, both in terms of particulates and in terms of light pollution.

Having said that, Earth Hour is also different. If you turn all your lights off and just sit there enjoying the darkness, you don't turn on double your usual lights afterward to make up for lost time. Because that hour in the dark is a sunk cost, it can't be recovered. Some people might stay up later to do things they would otherwise have already finished, using more energy, but some will not. It is therefore possible that Earth hour could, on net, reduce energy consumption. Of course, a more efficient way to do this would be to simply raise the marginal cost of energy using a tax. This way, people could decide for themselves when the best time to save energy was, or whether or not, in their particular case, saving energy was worthwhile.

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