Nudges, Water Consumption and a Utility Bill

Behavioral interventions should form part of reducing resource consumption, but the main game is still old-school incentives.

A classic nudge — a tiny behavioral intervention that leads people to a particular behavior but doesn't force it — is the placement of graphs on power bills. Specifically graphs that compare your current rate of use to your neighbors and, sometimes, yourself.

But can a tiny graph really work? Yes it can. This little intervention has been proven to lead to a decrease in power use that is at least somewhat sustained over time. The best data on this comes from US energy provider Opower. The intervention was randomized and encompasses 11 different utility service areas and more than ¾ of a million households. All areas experienced a drop in power with an average of 1.8% and a peak of 2.9%. Put another way, that’s 3 less coal-fired power plants.

The psychological reason that this works is multifaceted, but the main explanations I saw was the impact of social heuristics; specifically the imitate-the-majority (follow the herd) and imitate-the-successful heuristic (follow the leader). For those who don’t know, heuristics are is a cognitive shortcuts we all make in everyday decisions; rules of thumb. They’re good because they ease the cognitive load. But the judgment is intuitive, even automatic, meaning the outcome isn't necessarily optimal.

So, knowing about this, I thought it was cool when a couple of years ago I saw graphs appearing on my utility bills in Australia. I’m pretty sure that I saw it on my electricity bill first. The water bill was soon to follow. I can’t find any studies on water, but I have no reason to think it wouldn't work just like electricity. You can shower faster just the same as you can turn of the lights more frequently. I don’t know if it worked us (but I assume I’m a lamb like everyone else).

Things got interesting to me when we moved to from Brisbane to Melbourne. We own our house in Brisbane and are renting in Melbourne. This move came with one unfortunate realization in regard to utilities. Though in Melbourne the renter pays the water, in Brisbane it’s the landlord. So we got stuck with 2 bills. I wasn't that concerned. The bill wasn't that big for us. But then the bill arrived. Our tenants use 3 to 4 times the amount of water we did. We are the ‘same period last year’ in the image below:

Our water consumption is the left bar. The following two is our tenants

Whilst we are not the same people nor totally comparable - there is only two of us and our tenants have just had a very cute baby - you have to admit that’s an extraordinary leap. When you consider they are a small household they don’t fare too well against the city averages.

The bottom graph shows how our tenants compare to the local and city averages.

This got me thinking of the current intellectual debate on what drives behaviour. Specifically, what Daniel Kahneman and Amos Tversky, the grandfathers of heuristics, dubbed system 1 and system 2 of the brain. Both are models of how we can make decisions in very different ways:

• System 1: Fast, automatic, frequent, emotional, stereotypic, subconscious
• System 2: Slow, effortful, infrequent, logical, calculating, conscious

The title of Kahnerman’s book helps me remember these systems: Thinking, Fast and Slow.

I always thought of the graph as a nudge that relied mainly on the subconscious effect of system 1. I can never remember making any specific changes to my power habits but, as I said, I assumed it worked on me. When I saw this bill from my tenants I was very quickly jolted into the conscious and calculating system 2.

If it was my house I’d be thinking ‘what can I do to save water?’. I might even come up with some behavioral interventions. Whilst I might internalise that down into various habits in system 1, I think I’d be very aware of the behaviours I was striving for at the beginning. It made me wonder if that 1.8% drop in power use I described above actually comes from thousands of little subconscious decisions, as I had assumed, or a much smaller group of people having ‘oh crap’ moments when they realised they use way more power than their neighbours.

Well to me it boils down classical economics and incentives. I’d never actually looked up the definition of an incentive before, but it’s “something that motivates an individual to perform an action.” That’s really interesting as my favourite behaviour change model — BJ Fogg’s — suggests that behaviour is driven by three things all converging at the same time; motivation, ability and trigger. In the case of large bills like the one I got, it seems that the motivation could be purely financial.

So what’s the lesson here? I feel that some of us who like psychology have thought we might be able solve big problems with nudges. The UK even has a government department nicknamed the nudge unit. It’s seductive to think that, perhaps, we could solve some really big problems without both government intervention or really noticing.

But if this is any indication, If you are looking to put a nudge in place you should first make sure the incentives are right. Otherwise it might be like trying to make water run uphill. So, just like the larger battles of climate change, if we want to conserve resources we should make those who use it pay up; my tenants should pay for their water.

In the meantime I think I’ll just send the bill to see. The motivation of pissing-off their landlord might be enough to make them turn a couple of taps off or use the half-flush. I might also send them 4-minute-shower egg timer just to nudge the ability and trigger.

Egg timers like this were distributed by the government in my drought effected home state about 5 years ago. Ironically, my city’s dams filled up we were flooded.