Complex systems including climate change, health care policy, and consumer behavior are difficult to comprehend because they have many overlapping factors that influence each other; it is hard to accurately model an outcome. The further out the time horizon the more challenging it becomes to make an informed decision. The concept of bounded rationality, which is the idea that decision making is limited by the information that individuals have—or choose to pay attention to—further complicates the decision-making process. We often favor short term results from simple binary choices, which hampers resolving multilayered far-reaching problems.
This may explain why the international response to something as varied and long-term as climate change has been achingly slow. Each country has their own needs and desires, with more countries benefiting from keeping the status quo, for the moment, than those who are in peril. Building consensus on environmental issues through the use of framework conventions over the last 50 years has helped define the terms and potential resolutions to climate change. This United Nation’s coordinated effort led to the recent adoption of the Paris Agreement. The legally-binding treaty calls for a reduction in greenhouse gas (GHG) emissions to prevent the average global temperature from rising over 2˚ C above pre-industrial levels, however recent reports from NASA indicate that in the it has already increased by 0.87˚ C. While we have slowly built consensus on what is impacting the climate, we have continued business as usual. Instead of mitigating GHG emissions to reduce future consequences we are more likely to adapt to changes in our biosphere because we perceive that it is happening very slowly; 200 years is like a flash of lightening in relation to the earth’s 4.5 billion-year history but generations for humanity.
Caring for and protecting the earth for future generations has been a key to driving many of these treaties forward, and one may look at the success of the Montreal Protocol on Substances that Deplete the Ozone Layer for hope that we can influence positive change. When it was originally drafted there was no scientific consensus that human activity was causing ozone depletion, nor that its impact had significant consequences, but the prospect of global environmental damage, increases rates of skin cancer and cataracts were enough to build swift consensus among all nations. As opposed to climate change, the problem had immediate consequences, and was easier to understand and resolve. Reducing GHG emissions is also easy to accomplish, but it will take significant shifts in consumer and development behavior. Building on the public understanding and empathy for generations that have yet to be born may help drive this change, but we must agree on a collective action and move forward.
When a decision is forced, or when some parties are not part of the decision-making process—or choose not to be—implementation of a policy or treaty may be difficult. A prime example is in the hotly contested Affordable Health Care Act in the United States. Prior to its adoption the majority of the American people agreed that the health care system was broken and understood that runaway costs were bankrupting individuals, Medicare and Medicaid. In opposition to this finding, a majority also wanted to retain their own insurance and feared it being taken away. Parties interested in preventing the act from being successful, including the Republican party, leveraged these fears and launched misinformation campaigns, including the threats that death panels would make end-of-life decisions or that there would be a scarcity of resources. What started out as an effort to help all Americans get affordable health care became a toxic bill. Democrats were rightfully worried about backing the legislation; they were voted out of office in the midterm elections due to the misinformed public’s outrage. In order to push the legislation through Obama was forced to make many compromises that undermined its impact and may be its eventual undoing. Today Republicans continue to try to repeal the act because they had chosen not to participate in the legislation.
Building an understanding of what motivates individuals may help with both efforts. A study on the relevance of environmental issues in relation to green products was conducted in Turkey. The results were measured against the Schwartz value survey, which includes ten basic values: power, achievement, hedonism, stimulation, self-direction, universalism, traditionalism, benevolence, obedience and security. While this study may have been skewed by being completed predominately by older affluent women, some of their findings may help the producers of green products or environmental policy makers succeed. Environmental concerns do drive consumer behavior, especially among affluent consumers who are more educated, particularly about the environment. As a group they have a higher willingness to pay for environmentally friendly goods, but most individuals do not have the means to pay more; we must make these goods more affordable for wider adoption. One interesting observation was that younger consumers where more informed about environmental concerns and their consumer habits were more flexible; they were also more interested in innovative products. Tapping into this segment might help drive future behavior changes in protecting the environment.
Managing decisions in complex systems can be completed with the right tools and methodology. Breaking a large problem into sub-components makes them easier to measure, which is the goal of mediated modeling. Building consensus is one step, but surveying and engaging the community, building understanding, and modeling various outcomes of a decision will facilitate the decision making process.
The Green Economist 