Exerting Behavioral Economics to Household Energy Use

Abstract

It is a critical, lasting for years between scholars to research the ways to effectively enforce energy conservation plans. Even though individuals have received environmental protection education to some extent, they were still unable to effectively implement the knowledge or awareness into pro-environmental behaviors. Inadequate access to affordable or sustainable green energy services deprived households of opportunities for a better life. The discrepancy between the assumption of our disciplines appeared very large indeed so that usual economic models or utility-maximizing functions cannot explain the irrational behaviors. Therefore, modern economists have turned their attention to the concept of cognitive bias. In parallel, private families were the main target of behavioral intervention. Households can save energy in two ways: First, they can make voluntary changes to their energy consumption, such as reducing lighting use. Second, they can change their buying behavior and invest in energy efficiency, such as buying energy-efficient air conditioners. Both purchasing decisions and consumption behaviors can be achieved through policy interventions with the help of behavioral economists and psychologists. In this paper, the author discussed several major psychological factors which deviate human behaviors the best interests, and brought corresponded behavioral interventions to solve bias. While the field of behavioral economics has provided some evidence for interventions, the author will focus on those that are particularly relevant to the context of energy saving. All the measures were based on rigorous reasoning and experiments. Understanding these psychological phenomena can help institutions to design cost-effective and satisfactory solutions, encouraging consumers to correctly and effectively use green energy.