Friday, August 19, 2005

GIVING 'HYBRIDS' TRACTION: "VEBLEN" STATUS FOR BUYING GREEN CARS

I've published only one editorial piece in my life. It was published in the Boston Globe February 25, 2001, Sunday ideas section. After 9/11/2001, I wrote an editorial titled "Will Wall Street Leave Wall Street?" but I was unable to publish that one so my batting average is .500.

Here I show you my editorial and then offer a few thoughts.

"It seems as though everything has been tried. In St. Louis, a new tailpipe testing program was launched to cut down on polluting emissions. In Europe, 800 cities and towns closed off their central streets to traffic for one day each year for "Car Free Day." In Glasgow, a tiny device known as a "green filter" was attached to cars' fuel systems, with environmentalists looking to introduce the product in China, Taiwan, Malaysia, and Singapore.

Unfortunately, despite some progress against their pollution, we are confronted by a more basic reality: We love our cars, but our cars don't love us - or at least not our environment.

In 1994 alone, residential vehicles in the United States traveled 1,793 billion miles, a distance equal to more than 70 million trips around the world - along the way creating hazardous smog and contributing to the serious threat from global warming.

What's an environmentalist to do? Some have been pushing for electric cars. To reduce its smog, California initiated a controversial program in 1990 designed to force automobile manufacturers to sell electric cars by 2003. Such cars would have zero tailpipe emissions. To date, however, battery-powered cars have proved very expensive and can travel only 50 to 100 miles before needing to be recharged.

A more realistic approach is through so-called hybrid or "clean" cars, which combine gasoline and electric power. Japan has led the way with Toyota's Prius and Honda's Insight, two new hybrid vehicles that run on battery power when stuck in traffic and switch to the gasoline engine on the highway. They cost 20 percent more than similar old-style vehicles, but they are highly fuel efficient, achieving over 50 miles per gallon, and emit 75 percent less than standard low-emissions vehicles.

And now US automakers have announced that they are planning their own version of hybrid, albeit at a lower voltage than the Japanese models. The models to be offered by General Motors and Ford will feature electrically assisted gasoline engines. They won't be quite as environmentally friendly as the "full hybrids" made by the Japanese automakers, but they also won't be quite as pricey. And the electric-assist feature is expected to be widely available, in a variety of models.

But will people buy these cars?

In marketing surveys, people invariably say the right thing - that they will purchase environmentally friendly products even if they cost a little more. Unfortunately, this talk often does not translate into purchases for the same reason that so many people don't vote. Each person reasons that his or her actions will have no overall impact. If no one is watching what you do, why bother?

So the trick may be in getting people to watch.

In his late 19th-century work, "The Theory of the Leisure Class," the economist and social scientist Thorstein Veblen coined the now-famous phrase "conspicuous consumption" to refer to consumer preferences often dictated less by quality than their high price.

Veblen's message is still relevant. Peer pressure and social status remain important motivators for consumers. Our car sends a message about us. Our boss and our neighbors know what car we drive. Ownership of a Mercedes or a Porsche signals that a person is wealthy and sophisticated.

So, using the "conspicuous consumption" principle toward a better end, how about promoting "clean cars" as similar status symbols? Indeed, if vehicles such as the Prius and Insight could achieve the social status of a Mercedes, the environmental movement's goals - specifically, the 7 percent reduction in greenhouse gas emissions required by the Kyoto Protocols - could be met, even without an active federal environmental policy.

On the surface, auto manufacturers - the very group that has traditionally opposed tighter environmental standards and fuel-economy regulations - would seem an unlikely source for championing clean cars. But such companies, needing to distinguish their product from their competitors', are always seeking their niche. Thus, Volvo is pitched as the "safe" car, Ford's T-Bird is the "macho" car, a VW the quintessential "yuppy" car.

Indeed, in this affluent age, there is evidence that marketing a product as "green" can pay; witness the success of Seventh Generation products, made from recylced materials.

Only last summer, in an effort to reposition itself as the environmentally friendly gas station giant, BP Amoco unveiled a $7 million rebranding campaign, complete with a new green, yellow, and white BP sunburst-shaped symbol.

To successfully market hybrid cars as coveted status symbols, auto manufacturers would need to be creative. Strange bedfellows such as the Sierra Club and Toyota might work together to generate "green" buzz. Celebrities might be enlisted to promote the virtues of clean cars as green cars. The manufacturers could come up with distinctive colors - a classy, unusual green, or perhaps a sky blue - so that green cars would stand out in a crowd. On a new Web site called cleangreencars.com, buyers of green products could be eligible to post a blurb or a video about themselves.

The possibilities are endless and the need is real. Between 1988 and 1994, average household vehicle miles grew from 18,600 to 21,100 due to sprawl, income growth, and low gas prices. And it will only get worse, unless we act.

What better way than to appeal to human nature's desire for recognition? After all, we want fame and we want clean air. Two for the price of one is a pretty good deal."

This popular piece was well received but what frustrates me is that I have been
unable to get my hands on data to study "who buys hybrids". Returning to my post
a couple of days ago on Green Party communities and their consumption patterns, I wanted to extend that study to examine whether the Berkeleys and Cambridge, MASS of the world are more likely to buy these hybrids. Unfortunately, I haven't been able to acquire this data.

The even harder empirical question to answer is whether greens buy these cars because they seek to minimize their environmental impact or because they care about the Warm Glow of doing a good deed and being seen doing it. To answer this question, I would need to collect some data on the car purchasing patterns of hermits!

1 comment :

Tony said...

you should check out terrapass.com - it was started by some wharton b-school grads and is an interesting take on environmental economics.