I thought that this story: Capital takes bag tax in stride, is an interesting example of a negative incentive. And it got me to thinking about incentives affect behavior. Incentives are entertainingly the central theme of the best selling book Freakonomics, which I disussed here.
So the story is that Washington D.C. enacted a law that mandates that anyone who sells food must charge 5 cents for each bag given. Customers can either bring their own bags, or not use a bag, or pay the nickel. There were the usual predictions of the world coming to an end, however the WSJ story claims no major disruptions have occurred, and even some who opposed the tax initially now have changed their minds.
The bags often become floating trash and muck-up the Chesapeake watershed — a negative externality. The tax is designed to cut disposable plastic bag consumption and, it is hoped, plastic bag waterway pollution by 50%.
Here where I live, we have no such bag tax, of course, but it is trendy for grocery retailers to offer customers a nickel credit for each bag brought in that is then reused — a positive incentive.
Looking around here, it is obvious that the (coincidentally) equal positive incentive has had very little impact on bag usage, whereas the incentive in D.C. has had a large impact. I’ve also noticed that initially the grocers offering the incentive volunteered the credit, and now they seem to “forget” or not notice to give the credit unless the customer points it out, and most/many aren’t likely to do that to earn a nickel or a dime.
I’m thinking there must be a lesson here for things like free parking; which is that positive incentives have little impact, while negative incentives have a huge influence on behaviors.