Can a small charge make a difference to the choices we make?
Several governments have made charges for plastic carrier bags compulsory in stores – and some authorities have banned the bags completely. It taps into the behavioural economics idea of using small “nudges” to encourage bigger changes in life. In a blogpost on the topic, ING senior economist Ian Bright writes that experiments have shown that penalties (such as charging for plastic bags) are typically more effective than incentives (such as an equivalent cash-back for using reusable fabric bags).
Pay now – play later
Ideas behind a plastic bag tax can actually be applied more widely to other parts of life, including to saving and investing. In addition to the nudge theory, it also demonstrates a need to overcome the barrier of doing something unpleasant now in order to get a better future. Like paying for plastic bags, saving is not necessarily instantly pleasant. It diverts the pleasure of spending now in the hope of obtaining something in the future.
Experiments show that imagining yourself in the future can encourage higher saving for retirement. It can help overcome the effects of hyperbolic discounting.
So think about keeping an eye on the future – whether is on your retirement provision and savings or on the environmental impacts of using too many plastic bags.