Addressing Climate Change in an Era of Denial
by Howard Kunreuther and Bob Meyer
Wharton Risk Center
Sixty-seven percent of people around the world believe global climate change is a major threat to their nation according to a Pew Research Center survey conducted among 27,612 respondents in the summer of 2018. In fact, it’s seen as the top threat in 13 of the 26 surveyed countries, more than any other issue the survey asked about. According to the survey, 59% of respondents from the United States view climate change as posing a serious concern. Yet there has been little action taken at the federal level to address this issue. Nevertheless, there are ways that state and local governments can take effective steps to address the risks posed by climate change.
In our recent book, The Ostrich Paradox: Why We Underprepare for Disasters, we sketch out how this can be accomplished. The key, we suggest, is to design “psychologically smart” policies through a behavioral risk audit without constraining freedom of economic choice. The policies are thereby more likely to achieve widespread support among conservatives and liberals alike.
Although there may be many reasons why people are reluctant to support adaptation measures for reducing future losses from natural disasters exacerbated by climate change, we suggest that these reasons can be distilled down to a series of six psychological biases that we all share. They are: (1) myopia (we focus on short time horizons); (2) amnesia (the tendency to forget too quickly the lessons of recent disasters such as Hurricane Sandy); (3) optimism (if scientists say that the world could warm anywhere from 1 degree to 5 degrees over the next fifty years, our instinct is to focus on the 1 degree scenario); (4) inertia (a tendency to do nothing if we are unsure of the best action to take); (5) simplification (the tendency to selectively attend to a subset of relevant factors when taking or not making choices); and (6) herding (when in doubt, imitate what others do).
Once we have a handle on these six biases, we can design a playbook that can nudge people toward cost-effective adaptive behavior without requiring that their fundamental attitudes toward climate change be changed. As an example, consider the bias of inertia—the tendency to look for easy ways out of difficult choices by choosing the “status quo” option. Choices that will protect us against climate impacts tend to be the ones that require greater mental and economic effort; it is time consuming and costly to install water recycling systems in the face of drought risk, buy flood insurance to protect against increasing flood damages, or install solar panels to reduce greenhouse gas emissions and the consequences from climate change.
But there is an easy way for this cognitive liability to become a cognitive asset: turn the tables such that it is the sustainable or safer choice that is the status quo, not the opposite as is almost always the case. For example, even conservatives are likely to support legislation that requires water recycling systems be a default component of any new home design—but one that potential buyers could elect to opt out of if they so choose. Such a policy would not limit economic freedom of choice. The major difference is that the burden of thinking is now shifted from whether one wants to opt-into adopting a measure to whether one wants to opt-out of a measure already in place—a change that would likely greatly enhance rates of adoption.
Myopia is another reason people have a hard time seeing the benefits of protecting against the future effects of climate change. Our tendency to consider only short future time horizons when making decisions often precludes people who live in hurricane-prone areas from making investments that would make their homes more resilient to wind and flood. An easy fix: provide long-term loans to property owners that spread the cost of adaptation measures over the life of their mortgages. This does not change the cost of the improvements, but makes a decision less psychologically difficult and more economically feasible, particularly if it leads to a reduction in the homeowner’s insurance premium given lower expected claims payments. Existing programs to encourage widespread adoption of renewable energy might serve as a model for loans for reducing future disaster losses. For example, to encourage investments in renewable energy to reduce carbon emissions, some companies are paying the upfront costs of installing solar panels on homes and recouping the cost with a loan tied to the mortgage. The savings in electricity costs are normally greater than the loan costs in many areas of the country.
We concede of course, that while psychological nudges such as these can help, they are no substitute for forceful legislation such as regulations and standards designed to protect property (e.g. well-enforced building codes) and our environment (e.g. land-use restrictions). Ultimately, we have to hope that our leaders will learn to see the wisdom of distant foresight to preserve our environment for future generations.
Howard Kunreuther is James G. Dinan Professor Emeritus of in the Operations, Information and Decisions Department and Co-Director of the Risk Management and Decision Processes Center
Robert Meyer is the Frederick H. Ecker/MetLife Insurance Professor of Marketing and Co-Director of the Risk Management and Decision Processes Center