Saturday, January 21, 2012

The Economics of Green Identity or How to Get Newt and Al Gore to Hold Hands and Jointly Support Reducing GHG Emissions

Joe Romm presents some useful time trends on public opinion focused on concern about global warming broken out by political party. You will see the divergence between liberals and conservatives on this issue.  The calm Dr. Romm (good rhyme?) seeks to defend Al Gore against the charge that he has caused climate change as conservatives have opposed this issue because Al Gore has been so associated with concern about this issue (good rhyme?).

Economic analysis offers some useful insights here.  The Nobel Laureate Akerlof and Rachel Kranton published this paper  that greatly influenced my thinking in two pieces of my research.   Their paper considers how identity, a person’s sense of self, affects economic outcomes.

 Dora Costa and I have written about the role of community social norms in influencing where Civil War deserters live after the war.  Are they welcomed back in their original pre-war residential community?   Second, in my work on Prius and solar panel demand, I have studied how your neighbors' attributes affects your probability of purchasing such products.  If you live in a "green Berkeley", why does this increase the likelihood that you purchase green products?

The open question in the green identity literature is to understand the divergence across political parties.  As the Democrats embraced climate change as a "serious issue", why did Republicans embrace opposition to this issue as part of their platform up there with "opposing abortion" and "gay marriage"?  The economics of identity posits that people gain utility from taking actions that adhere to the community's norm.  Where this norm comes from remains an open question.

I have written a political economy paper with Mike Cragg, titled

Carbon Geography: The Political Economy of Congressional Support for Legislation Intended to Mitigate Greenhouse Gas Production


"Stringent regulation for mitigating greenhouse gas emissions will impose different costs across geographical regions. Low-carbon, environmentalist states, such as California, would bear less of the incidence of such regulation than high-carbon Midwestern states. Such anticipated costs are likely to influence Congressional voting patterns. This paper uses several geographical data sets to document that conservative, poor areas have higher per-capita carbon emissions than liberal, richer areas. Representatives from such areas are shown to have much lower probabilities of voting in favor of anti-carbon legislation. In the 111th Congress, the Energy and Commerce Committee consists of members who represent high carbon districts. These geographical facts suggest that the Obama Administration and the Waxman Committee will face distributional challenges in building a majority voting coalition in favor of internalizing the carbon externality."

Our paper focused on voter self interest while assuming away social interactions and economic identity effects. Such "identity" effects will re-enforce the initial differences in support for green legislation based on self interest.

Think of Berkeley, California.  If Matt Kahn lives there and has an initial low carbon footprint then it is easy for me to support policies and politicians that vote for carbon taxes.  As I travel to the UC Berkeley campus and talk to other greens then further re-enforces my "green support" as I meet like minded people and I recognize that the social norm is to be "pro-green".

So, how do we break out of this bad equilibrium?  What would shock conservatives into action?  Do we need to nudge them to visit Berkeley , California?