The Economics of Climate Change and the Change of Climate in Economics [1 ed.] 9781136305085, 9780415693752

Climate change is without question the single most important issue the world faces over the next hundred years. The most

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The Economics of Climate Change and the Change of Climate in Economics [1 ed.]
 9781136305085, 9780415693752

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The Economics of Climate Change and the Change of Climate in Economics

Climate change is without question one of the most important issues the world faces over the next 100 years. The most recent scientific data have led to the conclusion that the globally averaged net effect of human activities since 1750 has been one of warming and that continued greenhouse gas emissions at or above current rates would cause this process to continue to the severe detriment of our environment. This unequivocal link between climate change and human activity requires an urgent, world-­wide shift towards a low-­carbon economy and coordinated policies and measures to manage this transition. The starting point and core idea of this book is the long-­held observation that the threat of climate change calls for a change of climate in economics. Inherent characteristics of the climate problem, including complexity, irreversibility and deep uncertainty, challenge core economic assumptions and mainstream economic theory appears inappropriately equipped to deal with this crucial issue. Kevin Maréchal shows how themes and approaches from evolutionary and ecological economics can be united to provide a theoretical framework that is better suited to tackle the problem. Kevin Maréchal is an Associate Professor and co-­director of the Center for Economic and Social Studies on the Environment (CEESE-­ULB) at the Free University of Brussels (ULB), Belgium.

Routledge studies in ecological economics

  1 Sustainability Networks Cognitive tools for expert collaboration in social-­ecological systems Janne Hukkinen   2 Drivers of Environmental Change in Uplands Aletta Bonn, Tim Allot, Klaus Hubaceck and Jon Stewart   3 Resilience, Reciprocity and Ecological Economics Northwest coast sustainability Ronald L. Trosper   4 Environment and Employment A reconciliation Philip Lawn   5 Philosophical Basics of Ecology and Economy Malte Faber and Reiner Manstetten   6 Carbon Responsibility and Embodied Emissions Theory and measurement João F.D. Rodrigues, Alexandra P.S. Marques and Tiago M.D. Domingos   7 Environmental Social Accounting Matrices Theory and applications Pablo Martínez de Anguita and John E. Wagner   8 Greening the Economy Integrating economics and ecology to make effective change Bob Williams   9 Sustainable Development Capabilities, needs, and well-­being Edited by Felix Rauschmayer, Ines Omann and Johannes Frühmann

10 The Planet in 2050 The Lund discourse of the future Edited by Jill Jäger and Sarah Cornell 11 Bioeconomics Edited by Mauro Bonaiuti 12 Socioeconomic and Environmental Impacts on Agriculture in the New Europe Post-­Communist transition and accession to the European Union By S. Serban Scrieciu Takayoshi Shinkuma and Shusuke Managi 14 Global Ecology and Unequal Exchange Fetishism in a zero-­sum world Alf Hornborg 15 The Metabolic Pattern of Societies Where economists fall short Mario Giampietro, Kozo Mayumi and Alevgül H. Sorman 16 Energy Security for the EU in the 21st Century Markets, geopolitics and corridors Edited by José María Marín-Quemada, Javier García-Verdugo and Gonzalo Escribano 17 Hybrid Economic-­Environmental Accounts Edited by Valeria Costantini, Massimiliano Mazzanti and Anna Montini 18 Ecology and Power Struggles over land and material resources in the past, present and future Edited by Alf Hornborg, Brett Clark and Kenneth Hermele 19 Economic Theory and Sustainable Development What can we preserve for future generations? Vincent Martinet 20 Paving the Road to Sustainable Transport Governance and innovation in low-­carbon vehicles Edited by Måns Nilsson, Karl Hillman, Annika Rickne and Thomas Magnusson 21 Creating a Sustainable Economy An institutional and evolutionary approach to environmental policy Edited by Gerardo Marletto

22 The Economics of Climate Change and the Change of Climate in Economics Kevin Maréchal

The Economics of Climate Change and the Change of Climate in Economics Kevin Maréchal

First published 2012 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2012 Kevin Maréchal The right of Kevin Maréchal to be identified as the author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data The economics of climate change and the change of climate in economics/ edited by Kevin Maréchal. p. cm. 1. Environmental economics. 2. Climatic changes–Economic aspects. I. Maréchal, Kevin, 1977HC79.E5E27796 2012 333.7–dc23 2011047963 ISBN: 978-0-415-69375-2 (hbk) ISBN: 978-0-203-11766-8 (ebk) Typeset in Times New Roman by Wearset Ltd, Boldon, Tyne and Wear

Contents



List of figures and tables Foreword List of abbreviations

1

Introduction 1.1 Aims and scope  3 1.2 Criticisms regarding the use of mainstream economics to analyse environmental and climate policy  5 1.3 Building the framework  9 1.4 Technological change, path dependence and Veblen’s legacy  11 1.5 Structure  16

2

The economics of climate change and the change of climate in economics 2.1 Introduction  26 2.2 Impact of analysing climate policy using traditional economics  27 2.3 Impact of adopting an alternative framework  31 2.4 Policy recommendations  39 2.5 Conclusions  41

3

An evolutionary perspective on the economics of energy consumption: the crucial role of habits 3.1 Introduction  43 3.2 Mainstream economic analyses of energy consumption and the energy “paradox”  44 3.3 The evolutionary framework of analysis  46 3.4 An evolutionary view of energy consumption: the importance of “habits”  48

x xi xiii 1

26

43

viii   Contents 3.5 Defining “habits” and assessing the strength of their influence on behaviour  51 3.6 Conclusion: the need to break unsustainable energy “habits”  54 4

Changing habits and routines in energy consumption: how to account for both individual and structural influences while integrating the motivational dimension 4.1 Introduction  57 4.2 Habits and routines in the evolutionary framework  59 4.3 The distinctive features of habits and routines  61 4.4 The formation and persistence of habits and routines  66 4.5 Habits, routines and energy consumption  69 4.6 Changing habits and routines: implications for policy-­making  71

5

Not irrational but habitual: the importance of behavioural lock-­in in energy consumption 5.1 Introduction  77 5.2 The theoretical framework  78 5.3 The role played by the characteristics of habits  80 5.4 The importance of habits in domestic energy consumption  83 5.5 Disturbing the context: a first step in changing energy consumption habits?  90 5.6 General discussion and policy recommendations  93

6

Overcoming inertia: insights from evolutionary economics into improved energy and climate policies 6.1 Introduction  97 6.2 Climate policy analyses and their limits  98 6.3 An evolutionary approach to climate policy: the importance of path dependence  101 6.4 Implications for policy-­making in the field of climate change  104 6.5 Conclusions  109

7

The sustainability of EU agricultural systems: insights from evolutionary economics 7.1 Introduction  111 7.2 The prevailing economic rationale and its implications  113 7.3 Post-­war agriculture in France: a revolution under influence  114

57

77

97

111

Contents   ix 7.4 The Cartesian-­Newtonian legacy and the rise of productivism in EU agriculture  116 7.5 Towards a paradigm shift: an evolutionary and ecological perspective  119 7.6 Implications of the evolutionary perspective for policy-­making in agriculture  121 7.7 Conclusions  125 8

Conclusions 8.1 Downward implications: managing the transition towards a low-­carbon STS  127 8.2 Upward implications: insights for theoretical debates in evolutionary economics  136 8.3 Distributed generation: a potential way forward?  141 8.4 The needed change of climate in economics  142

127



Notes References Index

144 160 184

Figures and tables

Figures 2.1

The three-­dimensional co-­evolutionary framework of technological change 3.1 Veblenian process of institutional self-­reinforcement 5.1 Complementary explanation for the existence of the “efficiency paradox” in energy 5.2 Perceived importance of different barriers to the adoption of alternative vehicles 5.3 Purchase intentions of alternative vehicles 5.A.1 Graphical results for the action “switching off the television” 5.A.2 Graphical results for the action “turning up the heating”

33 52 80 81 82 95 96

Tables 5.1 Perceived importance of habits in domestic energy consumption 5.2 Differences in perception with respect to habits in domestic energy consumption between landlords and tenants 5.3 Average perceived importance of the different dimensions of habits in concrete energy consumption behaviours 5.4 Proportion of “newcomers” in the sub-­samples and their corresponding districts 5.5 Proportion of “newcomers” and incumbent by type of subsidies

84 85 87 92 93

Foreword

The core topic of the research undertaken and presented in this book consists of an analysis of the economics of climate change. In doing so, we have assumed that, despite the few sceptical voices that remain,1 the scientific evidence regarding the anthropogenic contribution to climate change is robust enough to provide a strong starting basis on which to ground our analysis. To support this point, it is useful to turn to the extensive work performed under the authority of the Intergovernmental Panel of Climate change (IPCC). This scientific body – set up by the World Meteorological Organization (WMO) and by the United Nations Environment Programme (UNEP) – comprises an unprecedented number of experts (i.e. more than 450 lead authors, 800 contributing authors, and an additional 2,500 reviewing experts from more than 130 countries contributed to the Fourth Assessment Report published in 2007) that work in a consensual fashion (i.e. a two stage review process by experts and governments).2 The main message of the IPCC’s report can be summarised using a sequence of four illustrative quotes. The first diagnosis of importance is that “[w]arming of the climate system is unequivocal, as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice and rising global average sea level (IPCC, 2007b, p. 30). In parallel, scientific data show that “[g]lobal GHG [greenhouse gas] emissions due to human activities have grown since pre-­industrial times, with an increase of 70 per cent between 1970 and 2004” (IPCC, 2007b, p. 36). Due to the accumulation of these emissions in the atmosphere, the most recent measurement show that “[g]lobal atmospheric concentrations of CO2, CH4 and N2O have increased markedly as a result of human activities since 1750 and now far exceed pre-­industrial values determined from ice cores spanning many thousands of years” (IPCC, 2007b, p. 37). Taken together, these three documented facts lead the authors to formulate a crucial conclusion and claim that “[t]here is very high confidence that the global average net effect of human activities since 1750 has been one of warming (IPCC, 2007b, p. 37). In addition to this unequivocal link between climate change and anthropogenic activities, another major factor behind our stance is the observed trend of scientific assessments. Indeed, as science progresses in this field, the more

xii   Foreword evident becomes the link between climate change and anthropogenic activities and the more pessimistic are the forecasts. This trend, which can be observed from the four different assessment reports produced by the IPCC since 1990, still continues as the “developments in climate change science (that) have been reported since the publication of the comprehensive 2007 Fourth Assessment Report [. . .] indicate that the consequences of climate change are already occurring at a faster pace and are of greater magnitude than the climate models used by the IPCC” (UCS, 2009, p.  1). This raises the hypothesis of “enhanced” climate change, where the effect of climate change induces more climate change, as discussed in, among others, Weitzman (2009b).3 All together, this leads us to fully embrace the claim formulated in the Stern Review that the “scientific evidence is now overwhelming: climate change is a serious global threat, and it demands an urgent global response” (Stern, 2006, p. vi). With respect to policy-­making in this field, a world-­wide shift to a low-­ carbon economy is required, and thus also the elaboration of coordinated ­policies and measures to manage this transition.

Abbreviations

BPC CBA CCS CGE CHP CNG ECEEE ETC FAO GHG ICE LPG LWR NEP NIE RCA SNM SRHI STS TC TIC TR

Beliefs-­Preferences-Constraints cost–benefit analysis carbon capture and storage computable general equilibrium combined heat and power Compressed Natural Gas European Council for an Energy-­Efficient Economy endogenous technological change Food and Agricultural Organization of the United Nations greenhouse gas(es) internal combustion engine liquefied petroleum gas light water reactor New Environmental Paradigm New Institutional Economics returns to adoption strategic niche management Self-­Report Habit Index socio-­technical systems technological change techno-­industrial complexes technological regimes

1 Introduction

The starting point of the research presented in this book is the long-­held observation that the threat of climate change calls for a change of climate in economics. Borrowing from the jargon used in climate policy, adaptation measures could also usefully target the academic discipline of economics. Given that inherent characteristics of the climate problem (e.g. complexity, irreversibility, deep uncertainty, etc.) challenge core economic assumptions, mainstream economic theory1 does not appear appropriately equipped to deal with this crucial issue. As claimed in Ackerman (2007, p.  2), this means that “new assumptions and analyses are needed in economics in order to comprehend and respond to the problem of climate change”. In parallel (and without environmental considerations being the driving force), the mainstream model in economics has also long been (and still is) strongly criticised and disputed by numerous scholars – both from within and outside the field of economics. For the sake of functionality, these criticisms – whether they relate to theoretical inconsistencies or are empirically based – all challenge part of the Cartesian/Newtonian legacy of economics. This legacy can be shown to have led to a model imprinted with “mechanistic reductionism”. The mechanistic side refers to the Homo oeconomicus2 construct while reductionism refers to the quest for micro-­ foundations materialised into the representative agent hypothesis (see Chapter 2). These two hypotheses constitute, together with the conjecture of perfect markets, the building blocks of the framework of general equilibrium economics. Even though it is functional for the purpose of this work to present them separ­ately, the flaws of economics in dealing with the specificities of the climate issue are not considered independent from the fundamental objections made to the theoretical framework of mainstream economics. The former only make the latter seem more loaded while the current failure of traditional climate policies informed by mainstream economics render the need for complementary approaches more urgent. The ecological imperative – magnified by the potential threat of strong climate change – is used throughout this work as a guiding post (i.e. an objective functionality) that is helpful when looking for an alternative framework with which to analyse the climate issue. Although the works developed within the realm of ecological economics have greatly contributed to emphasise that the

2   Introduction economic sphere is embedded in a finite biophysical universe (i.e. the biosphere), it has yet to develop a new synthesis. As acknowledged in Gowdy and Erickson (2005a, p. 20), ecological economics is at a crossroads and should be careful not to become “a caricature (. . .) as Walrasian wine in a new bottle”. The stance of this research is that the coupling of insights from the framework of evolutionary economics with the perspective of ecological economics provides a promising way forward both theoretically to avoid the above-­mentioned dead-­end feared by Gowdy and Erickson (2005a) as well as on a more applied basis with respect to a better comprehension of the climate problem. Such a coupled approach is not new as illustrated by the pioneer work of Kenneth Boulding who linked both concepts of evolution and ecology (Boulding, 1978, 1981; see also Chapter 6 in this volume). As claimed in van den Bergh (2007, p. 521), ecological economics and evolutionary economics “share many characteristics and can be combined in a fruitful way” – which renders the coupling approach both legitimate and promising. As argued in different chapters of this work, the choice of evolutionary economics as the alternative perspective through which to analyse the economics of climate change is quite straightforward starting from our initial observation. Indeed, given the type of criticisms formulated against mainstream economics, a framework resting on a different view of individual rationality and allowing for richer and more complex causalities to be justified, is required. Besides, a short detour through the historical development of economics as a discipline came to reinforce this choice given that it underlined that the Newtonian influence on economics was made to the detriment of biology as a potential alternative source of inspiration. Intuitively, a perspective inspired by biological metaphors and which thus theorises economic evolution in a totally different manner than in mainstream economics seemed worth investigating for dealing with the climate issue and its aforementioned characteristics. The remainder of this chapter is structured as follows. Before fully entering on the description of the content of the research per se, we take the following section to briefly evoke the objective pursued in this introductory chapter. In Section 1.2, we discuss the criticisms formulated against the mainstream framework with respect to environmental and climate-­related issues. Based on these considerations, Section 1.3 sketches the first elements on which our approach is based. These elements are further detailed in Section 1.4, which discusses the important notions of technological lock-­in and path dependence and relates them to insights from the work of Thorstein Veblen. Finally, the fifth section of this introductory chapter presents an overview of the content of the research.3 The main objective of this last section is to describe how the respective chapters are linked with each other as well as the path followed throughout the research. More specifically, this concluding section serves to explain how the elements raised in the previous sections have been used in our analysis and where this had led us, both in terms of theoretical considerations regarding the central notion of habits and with respect to policy implications for energy and climate policy.

Introduction   3

1.1  Aims and scope The importance of the introductory chapter is made all the more essential by the fact that this research consists of a collection of articles. Although these articles have not been written in isolation from each other, it is nonetheless necessary to provide a brief overview of how they relate to each other. However, it seems fundamental to also provide a clear description of the path followed throughout the research since we consider that the process that leads to a given outcome is at least as rich as the outcome itself in generating useful inputs. Accordingly, beyond describing the context of the research, the objective of this introductory chapter is also to explain the logic that has been used throughout the research. This means looking at the methodological and conceptual paths followed in getting from the initial broad idea to its materialisation in terms of theoretical implications, policy recommendations and empirical findings. This will partly be done through explaining the structure of the research (i.e. how the different chapters are linked with each other) but will also require further complementary elements aimed at unveiling the “backstage” of the work. Especially, this will serve to highlight how this research has been performed in a circular fashion with ideas developed in one paper feeding back to the framework sketched in a previous one and paving the way for the empirical elements of the next one. It is essential to bear in mind that what constituted the framework of the PhD on which this book is based was shaped and fine-­tuned throughout the research process and not a given prism that was taken for granted and applied as such to the issue of climate change. Following these considerations, the idea is thus to provide the readers with the keys for grasping the building process that led us to the perspective eventually adopted for our analysis which, in retrospect, could be qualified as being grounded on Veblenian evolutionary economics. However, it is beyond the scope of this introductory chapter to treat in detail every element and literature stream that has been helpful for our analysis. For instance, the whole debate regarding the puzzling presence of some degree of altruism among humans (under the form of “strong reciprocity”, as proposed in Gintis, 2000) has been of a fundamental importance in sketching our framework by highlighting the importance of group-­level approaches (see Chapter 2).4 Nevertheless, here it is not possible to provide an exhaustive account of this debate which transcends the academic spheres of economic, biology and anthropology. Still, it is important to note that the idea according to which group-­level considerations matter has been essential in developing the approach used throughout this research. Most notably, it appears that the well-­documented flaws of the Homo oeconomicus paradigm (e.g. Henrich et al., 2001; Richerson and Boyd, 1998) can be attributed to the fact that it does not take into account the social construction of individual preferences (Bowles and Gintis, 2004). The key thus lies in accounting for group dynamics in the analysis. To this respect, Henrich (2004) develops a convincing argument that cultural group-­level selection and the related transmission mechanisms are able to

4   Introduction provide a robust explanation to the observed large-­scale cooperation among unrelated strangers in one-­shot situations. The essence of Henrich’s framework is that the developed specificities of human psychology (e.g. such as his “high fidelity” imitative abilities) and the mechanisms of cultural transmission that go along with it allow for the presence of some degree of altruism among humans. This means that another relation between the different levels of analysis than the one implied in the micro-­foundations approach must be looked for. More specifically, there needs to be a framework that can accommodate not only upward but also downward causation, without giving analytical priority to any level over the other (Hodgson, 1997, p. 405). Understanding this view of causation is essential as it is a founding hypothesis of our analysis, giving rise to a view that institutions and habits as mutually constitute each other (as explained in Section 1.5). In addition, the self-­ reinforcing dynamic that this view implies is an important aspect to be underlined since it constitutes a major difference with the perspective of New Institutional Economics (NIE),5 where this characteristic is overlooked (see Hodgson, 2004, p.  656). Furthermore, as mentioned in van den Bergh and Gowdy (2003, p. 79), based on a thorough analysis of the similarities between micro-­macro debates in economics and biology, “the advantage of such a multi-­ layered feedback system is that it can incorporate theories that so far have been presented opposite, partial and incomplete perspectives”. Beyond this crucial element relative to the importance of accounting for both types of causation, it is also worth mentioning that many studies have shown that the cognitive abilities of individuals are limited (i.e. compared to those required for optimisation). This makes that they cannot behave as perfect optimisers for other reasons than the socio-­cultural ones exposed above.6 For instance, people often misjudge probabilities when they take decisions under risk (Kahneman and Tversky, 1979), while they also suffer more from losses than they enjoy corresponding gains (this is the loss aversion problem raised in Kahneman, Knetsch and Thaler, 1990). People also tend to display what is called “hyperbolic” discounting (i.e. their behaviour implies lower discount rate for choices that are situated farther in the future) as exposed in Laibson (1997).7 Preferences are then no longer stationary, which is a problem as they need to be in order to calculate present values.8 Although hyperbolic discounting is easily accommodated for within the mainstream framework with minor modifications, it is still of importance per se in the case of a long-­term issue such as climate change (as explained in Section 1.3). The limits to human cognitive abilities are of great importance for the perspective of this research on climate policy (see, for instance, Gowdy, 2008). However, they will not all be discussed in more detail since, during the research it appeared more functional to concentrate on the sole notion of habits. The conjecture of this research is that this notion of habits is not only important for the thematic perspective of this research as well as for our theoretical framework (as shown in Chapters 3,4 and 5), but it can also be viewed as a locus embracing most of the elements relative to the limited cognitive abilities of human beings.

Introduction   5 Indeed, not only is the presence of habits explained by the need to save cognitive resources, it can also be argued that reduced cognitive abilities may often contribute to the reinforcement of anchored habits.9 In a similar vein, this scope-­related reasoning is also valid for the field of evolutionary economics itself. As already mentioned, the purpose of this chapter is to explain the sequence that drove us, step by step, to adopt an analytical framework building on Veblenian insights and with the notion of habits playing a central role (see Section 1.4). Since the objective of this research was to inform climate policy with a complementary economic contribution, we investigated the field of evolutionary economics spurred on by a necessary functionality: how could it provide responses to the theoretical drawbacks raised in the previous stages of the analysis, and how could these responses provide enlightening elements with respect to climate policy? This is the main reason why the seminal work of Nelson and Winter (1982) has not been much used in our analysis, although we obviously acknowledge that their contribution to the field of evolutionary economics is incommensurable. This does not mean that their work and the much research that has followed are not insightful at all. For instance, their concept of routines is shown in Chapter 2 to be relevant to our perspective.10 However, they did not appear as readily useful to our perspective as, for instance, the literature on path dependence. Our stance with respect to the field of evolutionary economics is further detailed in Section 1.3.

1.2  Criticisms regarding the use of mainstream economics to analyse environmental and climate policy Prior to developing our approach, it is important to present a brief overview of what we see as the main drawbacks of mainstream analyses related to environmental and climate policy. The application of mainstream economics to policy issues is known as welfare economics, an analytical model based on two fundamental theorems that enthrone competitive markets as the best way to ensure welfare efficiency (known as Pareto optimality in economic jargon).11 As Gowdy claims, these ideas turned economics away from questions of genuine well-­being by shifting the policy focus from utility to consumption. They also justified the neglect of questions of distribution and the emphasis on economic growth as a general solution to basic economic problem such as poverty and environmental pollution. (Gowdy, 2005, p. 3) The use of welfare economics for analysing ecological issues started with the foundational work of Solow (1974) in a Special Issue of the Review of Economics Studies dedicated to the notion of “exhaustible resources”.12 One of the objectives of this work was to find the optimal depletion path for exhaustible

6   Introduction resources. The conclusion of this endeavour can be illustrated by the following quote: The finite pool of resource [. . .] should be used up optimally according to the general rules that govern the optimal use of reproducible assets. In particular, earlier generations are entitled to draw down the pool (optimally, of course!) so long as they add (optimally, of course!) to the stock of reproducible capital. (Solow, 1974, p. 41) It follows from this framework that, in order to ensure that social welfare is non-­ declining through time, the transformation of the natural capital into manufactured goods is recommended (Gowdy, 2006, p.  6). Accordingly, in this perspective, the substitutability between natural and human capital is not only possible but necessary if it is welfare-­enhancing. In a context characterised by the dominance of welfare economics, the debate quickly centred on the fact that the Walrasian theory overestimates the possibilities of substitution given its difficulty to apprehend ecological issues and their related characteristics (interdependence, potential irreversibility, discontinuous change, etc.).13 However, as will be shown, the problem of welfare economics in dealing with environmental issues is larger than the questions of getting the price right and the degree of substitutability between natural and human-­made capital. As summarised in Gowdy (2006, pp. 15–16), beyond near perfect substitutability, the Walrasian model of sustainability also relies on four major assumptions: welfare is measured in terms of consumption; money is a perfect substitute for everything (i.e. including natural capital); there is no irreversibility; technical progress is smooth and continuous. All these assumptions are highly disputable – all the more so when it comes to environmental issues – and all have their root in the Cartesian/Newtonian legacy of economics.14 Still, in spite of the general criticisms and the debates on the notion of substitutability,15 many important environmental policy analyses have been guided based on a strict application of the Walrasian framework. This is the case of general analyses on consumption and its related environmental impacts (Arrow et al., 2004) as well as policy guidance in climate change (Nordhaus, 2001). As mentioned in Laitner et al. (2000), the main consequence is that people face a trade-­off between environmental assets (i.e. climate protection in this case) and economic benefits. On this basis, Nordhaus (1991, 2001) advocates a laissez-­ faire approach to the problem of climate change, which is presented as a result from an economic analysis but which is actually already implied by the underlying assumptions of the model (Laitner et al., 2000; Gowdy, 2004, van den Bergh, 2004).16 Accordingly, the climate issue has been framed in terms of optimal growth theory through the systematic use of the technique of quantitative cost–benefit analyses (CBA; van den Bergh, 2004; Ackerman, 2007; Spash, 2007). Moreover, the models used were almost exclusively computable general equilibrium

Introduction   7 (CGE) models (i.e. models embodying strictly all the above-­mentioned assumptions contained in the Walrasian framework of economics). Even though it can be argued that the CBA technique may differentiate between alternative measures aimed at achieving a fixed emission objective (e.g. scientifically defined and/or politically acceptable), it is surely not adapted for choosing a global trajectory with respect to climate policy. There are three different reasons for this. More precisely, there are three (related) angles through which apprehending a critical assessment of the use of cost–benefit technique for the purpose of climate policy. First, bearing in mind the general criticisms mentioned above, CBA can be rejected on the ground that it is rooted in a fundamentally flawed framework which, in addition, is intrinsically not equipped for dealing with such a complex and far-­reaching issue as climate change.17 For instance, the basic idea that a move towards a more stringent emission reduction policy would inevitably make someone worse off is built on the premise that the world economy is currently located on a Pareto-­optimal state of equilibrium.18 However, most economists would agree that this ideal state does not correspond to practice. Still, many economists stick to this model given the usefulness of this framework for the purpose of mathematical and normative analyses (Ackerman, 2007, p.  5). In turn, this allows them to study economic reality from a perspective that sees it as consisting of minor deviations from this state. The problem with such a perspective is that it has been strongly contradicted by the theorem of “second best” choices which states that: if one of the Paretian optimum conditions cannot be fulfilled a second best optimum situation is achieved only by departing from all other optimum conditions. It is important to note that in general, nothing can be said about the direction or the magnitude of the secondary departures from optimum conditions made necessary by the original non-­fulfilment of one condition. (Lipsey and Lancaster, 1956, p. 12) In other words, if the ideal general equilibrium cannot be reached, nothing in mainstream economic theory supports the idea that getting closer to it would yield greater welfare. As mentioned in Gowdy and Erickson (2005a, p. 18), the main consequence of this argument it that it “leaves no reference point to use in cost–benefit comparison”. The second angle of criticism arises from the increasingly recognised implaus­ibility of making relevant measures of benefits given that the issue of climate is fraught with complexities and deep uncertainties while it is also global in scope and has long-­term consequences (van den Bergh, 2004; Ackerman, 2007; Dasgupta, 2007, 2008; Spash, 2007; Weitzman, 2009a, 2009b). Following the argument of van den Bergh (2004, pp. 386–387), there are four basic problems in undertaking CBA analyses in the field of climate policy. The first problem arises from the fact that the consequences of climate change are not known with sufficient precision to be adequately measured as the whole causal

8   Introduction chain is fraught with uncertainty.19 This uncertainty is due to the inertia of climate systems and the complexities involved. However, what are striking among the data on CO2 and CH4 levels trapped in tiny ice-­core bubbles, unveiled in Dieter et al. (2008), are both the magnitude and the speed of the change caused by anthropogenic activities. This unprecedented nature of change makes previsions even harder, not to mention the translation of this change of concentration into a change of temperature (climate sensitivity20). This is reinforced by the difficulty of dealing with extreme events – potentially irreversible – with low probability of occurrence (Weitzman, 2009a). The second problem is related to the difficulty in assessing the benefits (i.e. avoided costs), which are uncertain and involve the use of estimated values for a statistical life. Due to the methods used and the heterogeneity of world population, these values can diverge by a factor of 15 (Pearce et al., 1996). The third problem is less often raised than the others but is nonetheless of importance. Given the magnitude of the changes at stake, it becomes quite absurd to employ the income compensation principle used in monetary valuation techniques. Indeed, these are only valid for assessing changes that are small when compared to income. The fourth and last problem is the well-­discussed issue of intergenerational discounting and the ethical considerations that go along with it. The basic issue with discounting is that it reduces the importance, in today’s values, of potentially extreme events that will occur in the longer run.21 To some authors (Spash, 2007; Ackerman, 2007), discounting is no longer justified when intergenerational equity is present. One argument is that society and its overlapped generations cannot be viewed as having a finite life (which constitutes the basis for time preference and thus discounting). Other arguments come from the aforementioned notions of hyperbolic discounting and loss aversion. Given that events further in the future are discounted less, that people tend to discount losses less than gains and that this reduced discounting is accentuated in the case of large amounts, it then follows that potential long-­term climate-­related large losses should be discounted less than other phenomena (Ackerman, 2007, p. 8). Finally, the third angle through which the use of CBA for climate-­related analyses can be criticised is that the way costs have been measured is also disputable since it is built both on an erroneous description of the behaviour of agents and on an inappropriate way of modelling economic evolution. Although we definitely agree both with the general argument regarding the flawed framework of mainstream economics and with the inherent difficulty of dealing with the specificities of climate change with traditional evaluation techniques and instruments,22 the initial perspective of this research is more focused on the “costs” argument (as can be seen in Chapter 2). However, on a more general basis, the idea of this research has clearly been motivated by a long gestation process which was animated by a global impression that the “dice were loaded” regarding the economic guidance in the field of climate policy. This could be considered as a perspective embodying all three arguments raised above.

Introduction   9

1.3  Building the framework The empirical evidence concerning the behaviour of economic agents, together with theoretical inconsistencies and the many problems raised by the micro-­ foundations approach, not only questions the relevance of mainstream economics but also the current policy-­making approach that is based on that framework. As claimed in Ball (2006), “if mainstream economic theory is fundamentally flawed, we are no better than doctors diagnosing with astrology”. This becomes even more important in the case of climate policy given that it may be deemed as one of the most challenging issues that our civilisation will have to face this century. It follows from these considerations that there is a need for an alternative economic framework on which to build policy guidance on the field of climate change. Accordingly, the idea of this research was to further explore the framework of evolutionary economics. The choice of this perspective was initially motivated by two reasons. On the one hand, this framework appeared promising with respect to the initial observations on the state of economic analyses of climate change in that it is built on a different view of individual behaviour while also allowing for richer and more complex causalities to be accounted for.23 Based on our analysis of that issue, these two elements are crucial in explaining the presence of the aforementioned strong reciprocity of human beings. On the other hand, it was also challenging to use this framework to shed a complementary light on environmental policy issues where it had not yet been much used. As explained at the beginning of this chapter, the theoretical and conceptual apparatus borrowed from the broad evolutionary perspective of economics has always been considered as a means to an end rather than as an end in itself. In a circular fashion, the usefulness for the issue of climate policy was to guide us through the field of evolutionary economics while the insights from this branch of economics were to help us through the debates and paradoxes that agitate the researchers from the climate community. In line with a recent paper from Hodgson (2010), our framework is viewed as a “meta-­theoretical framework within which auxiliary explanations must be placed”. The nature of these auxiliary explanations is dictated by a need to shed a new light on climate policy. As can be seen from the structure of this thesis described in the last section, the whole process is not sequentially linear but rather displays overlap and feedbacks. In retrospect, the approach of this work can be qualified as resorting on Veblenian evolutionary economics,24 but neither was it fully the case in the beginning nor was that precise direction planned ex ante. Accordingly, it seems appropriate to trace back the building process that has led us to explore in more detail some of the numerous insights from the Veblenian perspective. This will be performed through both the theoretical discussions contained in this and the following section, and the description of the structure of this research in Section 1.5. The first reflections about the evolutionary framework started with the ­aforementioned debate on altruism together with the questions raised by the

10   Introduction micro-­macro debate in biology. The latter is very interesting in that it echoes the similar debate relative to the micro-­foundation approach in economics (see van den Bergh and Gowdy, 2003). Most notably, the idea that accounting for group-­ level (but not only) selection does matter for understanding economic phenomena is reinforced by the related controversial debate in biology on the theory of punctuated equilibrium developed in Gould and Eldredge (1972). This theory – built on a palaeontological re-­interpretation of fossil records – states that most species display long period of stasis and that, when a change occurs, it is both localised and rapid (i.e. in geological terms). Again, it is clearly not the purpose of this research to take position in this passionate debate which still persists.25 The aim is rather to infuse our analytical prism with insights that could broaden our vision of the processes that are play in the evolution of economic phenomena.26 What can usefully be captured from this debate and carried over for our purpose is that evolution is a process operating at different levels. Accordingly, what exists today is not the sole product of natural selection at the level of individual units (i.e. which is the mechanism through which gradual evolution happens). Efficiency is thus no longer the only selection criteria but relational and institutional complementarities also have a crucial role. In order to better formalise the importance of the multi-­level perspective, Gould and Vrba (1982) proposed to distinguish between the well-­known concept of adaptation and their new term exaptation. Adaptation is to be understood as something that “is designed for the task it performs” (Gould and Vrba, 1982, p. 4). But then it is essential to also analyse the process that led to the state where a characteristic is adapted to a special circumstance. In this respect, adaptation refers to a characteristic shaped by natural selection for its current use while ­exaptation refers to a characteristic previously shaped by natural selection for a particular function27 and currently selected for another use (Gould and Vrba, 1982, p. 5).28 As shown in van den Bergh and Gowdy (2003, pp. 74–75), there are numerous examples of exaptations in the evolution of products and technologies such as the microwave oven, the phonograph and Viagra. In a similar vein, the presence of emotions is clearly an efficient adaptation to the circumstance in which they emerged but they could also be viewed as having become an exaptation since they are now useful for other purposes (e.g. when speed is requested as explained in Cohen, 2005, p. 5) than those they were initially selected for.29 Interestingly, this notion is also useful for explaining the presence of altruism. In line with Gintis (2004, p.  62), strong reciprocity can be considered as an ­exaptation from the human capacity to internalise norms, which is an adaptation (in a context of complex and rapidly changing cultural systems).30 The presence of exaptations is explained by the interplay between selection forces at different levels. Acknowledging the importance of both upward and downward causation is likely to highlight the existence of emergent properties (Hodgson, 1997; Corning, 1997) which, by definition, cannot be depicted in a reductionist framework relying on a micro-­foundation approach. An often quoted analogy is that of

Introduction   11 the brain, the functioning of which is an emergent property in that it is something more than the mere sum of the functioning of its constitutive neurons. Social institutions, for instance, can be considered as an emergent property of the complex interactions between individuals (van den Bergh and Gowdy, 2003, p. 77). Going back to the proposed framework used for explaining the presence of some degree of altruism in human behaviour (Henrich, 2004), the mechanism at play in conforming to institutions is likely to be connected to Herbert Simon’s concept of docility which is “the human propensity for accepting information and advice that come through appropriate channels” (Simon, 2005, p. 95).31 One important consequence of such transmission mechanism is that there is thus a sort of path dependent of the information that is used by individuals to make their decision.32 From all these considerations on the processes involved in economic evolution, a question then arises: how much change is due to incremental or gradual processes and how much is due to rapid and radical change?33 This inevitably poses the question of the process (and not only of the outcome) and thus highlights the importance of historical circumstances. This echoes the notions developed in Mokyr (1990) with respect to technological change and where the author distinguishes microinventions (incremental improvement) from macroinventions (radical change) acknowledging that both are often at play in a complementary rather than substitute manner. As explained in Henrich et al. (2008, p. 130), the role played by luck and recombination in the history of technological development should not be overlooked while the role played by those called great inventors is often to make incremental improvements to the knowledge of their times.34 In sum, at this stage of the investigation of the evolutionary framework, there are two significant (related) ideas that appear essential to be integrated in our analysis: evolution is both a multi-­level and a path dependent process. As Witt (2006, p.  1) puts it, the consequence of this approach is that “the question is therefore not how, under varying conditions, resources are optimally allocated in equilibrium” but rather “why and how knowledge, preferences, technology and institutions change in the historical process, and what impact these changes have on the state of the economy at any point in time”.

1.4  Technological change, path dependence and Veblen’s legacy Given that much of our initial perspective was on the assessment and framing of costs and on the related unsatisfactory treatment of technological evolution within GGE modelling of climate change (see Laitner et al., 2000), it seemed straightforward to further investigate this notion of path dependence and, most notably, the connected concept of technological lock-­in. That is, it was crucial to comprehend the important question of how technological change (TC) arises, acknowledging that historical circumstances do matter and that evolution is a multi-­layered process with many feedbacks involved.

12   Introduction Although technological evolution has an ambivalent relationship with respect to ecological issues – as it can be viewed as both a source and a remedy (Gray, 1989) – it has increasingly been considered as offering the solution to many environmental threats. It can also be argued that the development of technologies has allowed for the better understanding of environmental problems such as the processes involved in climate change or ozone layer depletion. 1.4.1  Contextualising TC It follows that the way TC is accounted for in economic analyses will inevitably have an impact on how the debate is framed with respect to the management of environmental issues such as that of climate change. This explains why this particular issue has been hotly debated within the community of economic modellers working on climate change.35 The modelling of TC started with the pioneer work of Robert Solow and Trevor Swan.36 In this early model, TC was typically modelled as an exogenous variable (i.e. the very Newtonian invariant and exogenous “manna from heaven” type of modelling). This excessive baggage of the neoclassical model was strongly criticised (Nelson and Winter, 1982, p.  14), which gave rise to many attempts towards a more endogenous (or induced) type of modelling of TC.37 This tendency culminated with the development of New Growth Theory (with economists such as Paul Romer, Robert Barro, Xavier Sala-­i-Martin) and the extension of TC to include the notion of human capital. These developments went from a view of TC as “a secondary effect of economic activity” to a more “intentional” R&D-­driven one – from learning by doing to learning by searching (Mulder et al., 1999, p. 3). This idea of how best to model TC in an endogenous manner also penetrated the sphere of climate modelling and generated numerous debates.38 At first glance, it can be argued that these developments mean that the criticisms formulated against TC modelling in mainstream economics by, among others, Nelson and Winter (1982) no longer apply as they have mostly been addressed. This is the conclusion of the comparative study performed in Mulder et al. (2001, p. 165) where the mainstream and evolutionary39 model are said to have converged in what is known as the Schumpeterian Growth Theory such as in the work of Aghion and Howitt (1992).40 However, a deeper analysis means that these developments cannot be deemed as satisfactory based on the aforementioned argument on economic evolution being both multi-­layered and historically contingent. Besides, as discussed in more detail in Chapters 2 and 6, not only the most recent developments in endogenous technological change (ETC) modelling do not account for all of the fundamental arguments raised by the evolutionary approach of TC (i.e. historicity, systemic interdependencies, heterogeneity) but these most recent attempts did not have an impact on climate policy, which is dominated by the use of CGE models (Laitner et al., 2000). Moreover, the model developed by Nelson and Winter (1982) – which is also criticised for focusing only on competitive

Introduction   13 e­ fficiency (Gowdy, 1992) – is recognised in Nelson (1995, p. 70) as being only applicable in contexts where the market is the dominant selection mechanism and is thus not suitable for other purposes such as regulatory or policy-­related matters. Bearing these elements in mind, it is necessary to characterise what would be an account of technological evolution that is compatible with the two fundamental aspects of evolution identified in the above discussion. In line with the early critics in David (1975), it is important to have a model that is not only evolutionary but also not a-­historical. Technologies can not be simply considered to have arisen by “chance”. It is also important to note that technologies are neither mere input–output relations nor isolated artefacts but should be considered as being interrelated with other technologies (Rosenberg, 1982; Arthur, 1991). It would thus be more appropriate to talk about technological systems (Hughes, 1983; Martin, 1996). Following Unruh (2000, p. 819), technological systems can be defined as “inter-­ related components connected in a network or infrastructure that includes physical, social and informational elements”. In a broader perspective, technologies are not only related to other technologies but also are in connection with the rest of economic activity and with the institutional and cultural aspects of their environment as described for railway systems in Kindleberger (1964) and later developed in more general terms in Freeman and Perez (1988). Putting this together, we end up with what has been called socio-­technical systems (STSs) in Geels and Kemp (2007).41 The approach adopted in this research was a sort of synthesis between the David and Arthur theory and a systemic evolutionary perspective.42 The added value of such an approach is that TC is “contextualised” and no longer viewed as merely occurring ((Mulder et al., 1999, p. 29). 1.4.2  The concept of technological lock-­in The main insight from the David and Arthur theory is their description of the dynamic process that leads to the dominance of a technology over another. The key concept is that of increasing returns to adoption (RCA) which are crucial for our perspective in that they have profound implications for the characterisation of TC and for the related question of the possibility to change its course with non-­market instruments. Unlike the commonly used function with constant returns,43 the idea of the RCA concept is that positive feedback increases the attractiveness of a technology and the more it is adopted (i.e. thus both produced and used). These RCA then can amplify an initial lead (whether accidental, intentional or policy-­ induced) gained by a given technology to the detriment of its competitor (David, 1985; Arthur et al., 1987; Arthur, 1989).44 Thus, unlike in the mainstream framework, a completely different technological configuration can arise from the same initial distribution and homogenous preferences depending on how things happen in the beginning (Economides, 1996).

14   Introduction It must be noted that the hypothesis raised in David (1985) on the path dependent process leading to the lock-­in of inferior designs has been strongly criticised (Liebowitz and Margolis, 1990, 1994, 1995).45 The main concern has to do with the supposedly superiority of the alternative designs.46 For instance, Liebowitz and Margolis (1990) claim that the whole QWERTY story is a “fable” as they contest the studies showing the higher efficiency of the Dvorak keyboard.47 It follows from this controversy that it is extremely difficult to prove the counterfactual superiority of an alternative technological trajectory. This problem has been referred to as the “counterfactual threat” (Cowan and Foray, 2002). However, as recalled in Perkins (2003) and Foray (1997), these criticisms do not undermine the general idea of technological lock-­in (i.e. that technological choices have long-­lasting influences which can be costly to escape from).48 Besides, our in-­depth analysis of this issue as documented with respect to various technological case studies would lead us towards validating David and Arthur’s hypothesis.49 For instance, the nuanced claim that “(w)hether steam might have been superior given equal development is still in dispute among engineers” (Arthur, 1989, p. 127) – and thus that the internal combustion engine (ICE) might not have been the best design for cars – has been judged “difficult to take seriously” in Liebowitz and Margolis (1994, p. 148). However, this hypothesis is supported by historical data showing that the credibility of the steam engine in the crucial period of 1890–1920 should not be underestimated (Mokyr, 1990, p. 131). In fact, it was quite difficult at the beginning of the twentieth century to determine which engine technology would eventually dominate the nascent automobile market (Kirsch, 1994, p.  4). All technological options had their respective flaws (i.e. including the third option, the electric engine) and the ICE did not necessarily appear as the most promising option since it was viewed as noisy, prone to vibrations and difficult to start (Arthur, 1989, p.  127; Foreman-­Peck, 2000, p.  53). The ICE eventually dominated the market due to different elements (both intentional and accidental) which conferred this technology a decisive lead (i.e. giving rise to an insurmountable snowball effect) in the crucial first five years of the twentieth century.50 This idea that the lock-­in process may lead to enthrone a technology that does not necessarily offer the best development potential is all the more valid when technological systems – whose development is obviously unforeseeable for those that initially choose a trajectory over another – are accounted for in the analysis instead of simple technologies (i.e. the automobile systems rather than the simple car). The systemic perspective also sheds an interesting light on the above-­ mentioned “Battle of the motors” in that it serves to highlight the important role played by the related sector of electric batteries (Cowan and Hulten, 1996). Nevertheless, in the perspective of our research, this issue is no longer of major importance given that there is a science-­based political consensus that we need to turn to a low-­carbon economy regardless of whether the carbon-­based path was the optimal one or not.

Introduction   15 In order to be useful for the analysis of energy and climate policy where rapid technological improvement have been experienced in the past with wind and solar energy (Laitner et al., 2000), economic models must thus be able to accommodate both the historically contingent and multi-­layered process of technological evolution and its socio-­economic and institutional context which affects its nature, direction and rapidity (Martino, 1999). The self-­reinforcing dynamic described in David and Arthur theory will even apply with more strength if it is acknowledged that it operates on a larger range of elements. What get locked-­in are thus not mere technological artefacts but broader STSs. An example of a locked-­in STS is the carbon-­based STS, which includes the whole myriad of technologies, sectors, institutions, norms, codes and habits that are centred on the use of fossil fuel (Unruh, 2000). 1.4.3  Veblenian insights The implications of this idea of path dependence and technological lock-­in are discussed in more detail in Chapters 2 and 6. Nevertheless, given the importance of the notion of path dependence in our perspective, it seems important to provide a brief discussion of its underlying theoretical content and come full circle with respect to the description of our framework. Complementary aspects to this regard will also be discussed in the concluding chapter. The idea that STSs may become “locked-­in” can be considered to have its roots in the concepts of cumulative causation and embeddedness which, as claimed in Brette and Mehier (2008), are both integrant part of Thorstein Veblen’s evolutionary approach of economics. As described in Hodgson (2002, p. 268), part of the underlying philosophy of Darwin’s work on evolution is the principle of determinacy according to which there can not be a first and “uncaused cause”. Hodgson claims that Thorstein Veblen is one of the few economists that “understood this idea well” through the concept of cumulative causation (Hodgson, 2002, p. 277). This concept is important as it can be viewed as having inspired the notion of path dependence as recognised in David (1985, p. 336). This vision is crucial for our perspective as, as explained in Brette (2004, p.  200), it is compatible with the aforementioned idea of a continuous and incremental process of evolution which nonetheless allows for major changes to take place under the form of threshold effects resulting from the accumulation of minor variations.51 Given that Veblen’s approach is also characterised by its adhesion to the idea of economics as an open system and by its rupture with the Newtonian notion of reversible time and linear causality (Dopfer, 1986), it follows that this approach is well equipped for analysing a delicate policy issue such as that of climate change. This is even more the case since Veblen’s approach also is in line with the notion of embeddedness, according to which economic phenomena can not be fully grasped without an account of the wider institutional and social environment (Brette and Mehier, 2008). Thus, it follows from these two characteristics of Veblen’s perspective that economic phenomena can not be adequately studied without accounting for both

16   Introduction their historically contingent nature through cumulative causation and their interlocking with the wider context in which they occur. Applying this two-­fold argument to the issue of how climate-­friendly technologies evolve inevitably leads to the idea that our economies need to escape from the current lock-­in of the carbon STS as first suggested in Unruh (2000, 2002). This issue and its related policy implications, which are first sketched in Chapter 2, are discussed in detail throughout the research. They constitute a core insight of this research.

1.5  Structure This last section is dedicated to a brief description of the content of the remainder of the book. The objective is to explain the global sequence of the research as well as how the different chapters relate to each other in order to put them in a broader perspective. Before turning to the description of the content, it is necessary to start with a categorisation of the different types of papers. Obviously, such a classification will involve drawing arbitrary dividing lines between categories – the boundaries of which are inevitably loose and subject to interpretation (and overlap is clearly possible). Nevertheless, this classification seems very helpful in that it makes the sequence of the thesis easier to explain and to picture, notably with respect to the three chapters that can be considered as the main core of this research (Chapters 2, 3 and 5). As explained below, the sequence and articulation between these three chapters is most likely the easiest to explain as it seems more logical and linear (i.e. unwinding the thematic thread from the general idea down to empirical hypotheses). However, as mentioned earlier, this research has been performed in a circular fashion which makes the other three chapters as important since they also greatly contributed to the building process of the framework (as can be illustrated by the importance of Chapter 4 in strengthening our understanding of habits prior to the empirical analysis performed in Chapter 5). The three categories of papers that are possible to distinguish are the framework paper, the applied theory paper and the empirical paper. The main purpose of a framework paper is to sketch a framework in a robust manner. The idea of such a paper is to clearly state what is intended to be shown throughout the work, how it is intended to be shown and why it is interesting that it be shown. This is done through framing a policy question in order to show the interest of an approach and its implications for policy-­making in the field under investigation (climate policy in this case). The most delicate issue with a framework paper is to find a good balance between robustness and openness. That is, it is important for the framework to be both sufficiently defined to be useful and not so locked-­in that it cannot be fed back with the insights and findings arising from the subsequent phases of the research. Such a framework can also serve as a filter through which analyse the data. As far as the applied theory paper category is concerned, the objective is to shed a new light on a policy issue through applying a concept. This often implies

Introduction   17 resorting to an interdisciplinary approach and bridging the gap between different streams of literature. The added value of such a paper thus partly builds on the insights that arise from trying to see the essence (or the common ground) behind a concept or a theory that is used and discussed in different academic spheres. The other element that can enhance the interest of a paper in this category is to provide a complementary explanation to a well-­discussed debate or paradox. The rationale is to apprehend an important debate through an unexplored perspective with the aim of providing a different account of the phenomenon under investigation and thus suggesting new policy measures. This is in line with Nelson and Winter’s view (1982) that the “ability of a theory to illuminate policy issues ought to be a principal criterion by which to judge its merit”. The third type of paper is the probably easiest to grasp and best known category of empirical paper. Within the perspective as described here, the basic idea behind an empirical paper is to put a whole sequence (i.e. the general policy question sketched in the framework paper and the insights on a related debated issue that arise from applying a new concept to it) into practical terms in an experimental fashion. In line with the prerequisite of modern science, the objective is to make a set of hypotheses (i.e. supporting the views expressed in the other two categories of papers) replicable and testable. As mentioned above, the choice of these three different categories is partly explained by functionality as it mirrors the core sequence of this book, which has three chapters (Chapters 2, 3 and 5) with one in each paper category. 1.5.1  Chapter 2 Based on the definition given above, Chapter 2 is typically a framework paper and has been written as such. More precisely, writing this chapter was very helpful in setting the analytical framework and formulating the main question driving this research: what if the issue of climate change is studied through an alternative economic perspective? Accordingly, the core objective of this chapter is to introduce the framework of evolutionary economics as a potentially insightful perspective for the economics of climate change. This is done through showing both how the evolutionary approach provides an answer to the identified drawbacks of mainstream economics and how this has important implications for energy and climate policy. In line with the elements mentioned above, this chapter starts with a brief discussion of the core assumptions of mainstream economics that are being challenged, highlighting the fact that the Homo oeconomicus paradigm is flawed regarding experimental and empirical evidence, and suggesting the related importance of group-­level dynamics. Then it is shown that mainstream economics is not neutral in dealing with the issue of climate change by underlining how its core assumptions lead to a biased framing of the cost issue. More particularly, we point to the problem known as the efficiency gap in energy (and the broader ‘no-­regret’ emission reduction potential) and to the inadequate

18   Introduction ­ odelling of TC. Taken together – as it is the case in most economic analyses of m climate policy – these two factors give a pessimistic view of the possibility to tackle the climate issue at an affordable cost. Accordingly, the evolutionary perspective offers a promising perspective since it both departs from the perfect rationality hypothesis while also focusing on economic dynamic resulting from innovation, selection and accumulation. These two dimensions – which are obviously linked – provide an alternative answer to both the problem of the no-­regret paradox and the exogenous modelling of TC. However, the idea that locked-­in habits and routines may serve to explain the no-­regret paradox is touched upon but not discussed in detail in this chapter. The remainder of the chapter is dedicated to introducing the meso scale of analysis and show how the notions of path dependence and lock-­in are useful for energy and climate-­related policy. The meso scale is discussed as it allows for the problems raised about the micro-­foundations to be surmounted in providing an alternative to the simple aggregation while it also provides a conceptual ground for systemic interdependencies to be based upon. Given the role played by systemic interdependencies and heterogeneity in the field of energy, it follows that the meso level is of crucial importance for energy analyses. Through building “on the notion of circularity between individual and population” (Dopfer, 2006, p. 18),52 the micro-­meso-macro perspective is also essential for the study of technological evolution, which is best explained through a co-­evolutionary framework allowing for circular and self-­reinforcing interactions between economic agents. Obviously, the meso level is also crucial theoretically for the evolutionary framework so far as it has been deemed to be the “conceptual heart of evolutionary economics” (Dopfer et al., 2004, p. 269). Bearing this framework in mind, the analysis of TC modelling is based on an approach that is both systemic and historical. As explained above, such a perspective of technological evolution inevitably leads to underlining the fact that industrial economies are currently locked-­in into a carbon-­based STS. This argument is introduced by an in-­depth analysis of various documented lock-­in stories.53 This analysis describes in more detail the self-­reinforcing dynamic that characterises the lock-­in process by explaining the role of dynamic complementarities (technical interrelatedness, complementary goods and triggering events). In turn, this detailed description reinforces the case for the adoption of a systemic approach which appears all the more relevant and makes the notion of path dependence more difficult to discard as illustrated in Carlsson (1997). The main consequence from the existence of a locked-­in carbon-­based STS is that it restores the merits of policy intervention and calls for complementary instruments that are of a different type of than those traditionally proposed (e.g. incentive, tradable permits, etc.). Accordingly, the remainder of Chapter 2 discusses the problems that may arise in a context of policy intervention aimed at escaping from a lock-­in (notably the risk of committing to an inextricable technological trajectory before knowing whether it offers the best potential with respect to achieving a low-­carbon economy).54 More importantly, the last

Introduction   19 s­ ections of the chapter briefly discuss some of the strategies that can be deployed to trigger the necessary technological transition from the current locked-­in carbon-­based STS to a more climate-­friendly configuration. Hybridisation and strategic niche management are thus explained taking into consideration the three-­dimensional co-­evolutionary framework on which our approach is based. This allows the differentiation between the management of niches and the more traditional massive subsidisation, and emphasises the need to consider the broader societal context when designing policies. All together, this chapter shows how the adoption of an evolutionary perspective has important repercussions on the way climate policy is envisaged and framed (and thus dealt with). 1.5.2  Chapter 3 Starting from the elements raised in Chapter 2, it is essential to go one step deeper into illuminating climate policy with an evolutionary perspective. As suggested earlier, the rather “techno-­centric” approach followed in Chapter 2 lacks a more detailed analysis of the actual behaviour of economic agents. Given that tackling the issue of climate change is urgent, not only is it important to change the way produce and convert energy but it is also essential to modify current energy consumption patterns and reverse the trend. This observation is the driving rationale behind the topic of Chapter 3 which deals with the crucial role played by habits in energy consumption. Also, it is important to note that Chapter 3 is a first theoretical and conceptual dive into Veblenian evolutionary economics, as illustrated by its introductory quote. More precisely, the starting point of this chapter comes from a sentence taken from Chapter 2: “Pushing this reasoning one step further, we can consider that we are somewhat “locked in” to our (emotionally based) consumption’s routines. These routines could provide an explanation for the existence of an efficiency gap in energy. This has been showed to be the case of consumers as their intrinsic (i.e. not determined by market signals) habits and preferences were important determinants of energy-­inefficient choices in motor technologies”.55 Since Chapter 2 does not deal with this “individual” part of the global inertia that characterises a locked-­in STS and accounting for the unexplored fourth element mentioned in David (1985, p. 336) as potentially giving rise to a process of lock­in,56 it appears promising to further investigate this notion of habits. Besides, as required by the (functional) definition of an applied theory paper, analysing the role played by habits is also motivated by the wish to shed a new light on the hotly debated issue known as the “efficiency gap”. The aim is to provide policy-­makers with a complementary explanation on a topic that has yet to be fully explained in a satisfactory manner. Drawing on Veblenian insights, the objective of this chapter is to further explore the notion of habits while keeping in mind that habits contribute to maintain the lock-­in of an incumbent STS. This chapter introduces the notion of habits as an integrant part of our framework relying on the idea that economic evolution is both multi-­layered and historically contingent. The theme that

20   Introduction guides us through the process of conceptual formalisation is the efficiency paradox in energy. At the beginning of Chapter 3, mainstream economic analyses of energy consumption are discussed, insisting on the idea that the core focus of the mainstream framework is to secure efficiency as well as on the fact that this led to the promotion of incentives as the main policy instrument. A connection is then made between these considerations and the state-­of-the-­art practice in energy policy through a brief historical account of the debate among experts regarding the efficiency paradox. Then the analytical framework (as presented in Chapter 2) is re-­introduced and summarised with the aim of explaining the broader context within which the notion of habits is studied.57 The notion of habits is first discussed in connection with the notion of bounded rationality and the related path dependence of information (i.e. through the predisposition to conformism called “docility” exposed in Section 3.4). Starting from this cognitive basis of habits, Chapter 3 quickly recasts the notion of habits as an important explanatory factor for the existence of a locked-­in carbon STS with the idea of mutual constitution The most important feature of habits for the purpose of Chapter 3 is that they become counterintentional when they are deeply anchored. The persistence of habits even when they contradict formulated intentions to act otherwise is explained by different elements such as short-­term rewards, information overload and risk-­adverseness and is further reinforced in a contingent manner through confirmatory practices in both information search and value judgement. Acknowledging the fact that the presence of habits offers a potential explanation for the efficiency paradox in energy and that evidence gathered on the influence of habits on behaviours shows similar features to energy consumption behaviours, it seems reasonable to consider that habits are at play in this field. Furthermore, energy consumption behaviours meet the set of conditions identified in Jackson (2005) as constituting a favourable breeding ground for habits to develop. Based on the specific features of habits, the rest of Chapter 3 suggests ways of breaking unsustainable habits in the field of domestic energy consumption. This is important since, as argued in Chapter 3 and further detailed and explored in Chapter 5, the presence of habits is likely to reduce the effectiveness of traditional instruments such as economic or informational incentives. Based on all these considerations, it follows that changing habits will inevitably involve breaking the self-­reinforcing process that contributes to their persistence through time even in cases where they contradict intentions to act otherwise. From the definition of habits as a propensity to automatically elicit behaviour upon encountering a specific contextual cue, it appears that the strength that arises from automaticity (especially in settings where speed is important) also offers a point of vulnerability. This is why we suggest that information campaign and/or subsidies for energy efficiency are likely to be more efficient if targeted towards new residents whose prior habits have been disturbed. This hypothesis is further studied in Chapter 5, using empirical data on Brussels Energy Subsidies granted in 2007.

Introduction   21 Other possibilities such as commitment strategies and comparative feedbacks are discussed as potential ways to solve the “temporal asymmetry” problem (i.e. the presence of short-­term rewards for habits as compared to the long-­term and less tangible benefits attached to the alternative behaviour) through raising motivation and increasing the cost of not acting. Finally, the role of wider influences in sustaining a newly adopted behaviour is considered. Disturbing a habit is only a first step as it does not guarantee that an alternative behaviour will be tried and sustained in the long run (since habits have to be accordant with the prevailing STS to be efficient in economising cognitive resources). 1.5.3  Chapter 4 Chapter 4 may be seen as a framework paper on the notion of habits as it looks at theoretical considerations. Chapter 4 thus forms conceptual “detour” where essential underlying issues raised in Chapter 3 are discussed more thoroughly in order to clarify the place of habits within Veblenian evolutionary economics. In line with the micro-­macro debate mentioned earlier, this chapter aims to show how habits are essential in a framework with circular causation. They provide a locus that can accommodate the levels of agency and structures. This is necessary given that both upward and downward causation are important without any of the two being analytically superior to the other. Although there are obviously many important insights that came out of the work performed within the school of structuralism in sociology, this stance is no more useful than the methodological individualism that characterises mainstream economics as they are both too reductionist in their respective approach. That is why in our approach, institutions condition or enable behaviour but do not determine it (see also Postel and Sobel, 2009). This is in line with Hodgson (1997, p. 404) where it is mentioned that “[a] preferable stance is to argue that parts and whole, individuals and institutions mutually constitute and condition each other”. Although Chapter 4 may appear to reframe and recast the main insights from Chapter 3, it has been essential with respect to the formalisation of our framework (as summarised in Figure 5.1). The two-­fold explanation of the efficiency paradox was a necessary step in the building process of our approach. Accordingly, much of Chapter 4 is dedicated to showing that habits are useful for our framework in that they provide stronger foundations for the understanding of the relationship between agency and structures which, then, allows us to better depict the essence of meso dynamics and their related emergent properties. This serves to better formalise the interplay between accordant habits and the wider STS and thus provide a two-­fold account of the inertia that inhibit policy action even in the face of scientific evidence on the risk related to climate change (see also Unruh, 2002). Chapter 4 also clarifies where the notion of habits stands with respect to the notion of routine which is much more discussed within the realm of evolutionary economics. More precisely, routines should be regarded as organisational habits. Routines are one ontological level above habits and thus display emergent

22   Introduction p­ roperties. In consequence, they are not reducible to the sum of habits of the constitutive members of the organisation under object. Due to their function within an organisation, routines also involve some kind of coordination which further differentiates them from individual habits. Chapter 4 bridges a gap between two streams of literature. This is done through contrasting one definition from Hodgson (2007a) with one from Wood and Neal (2007); these appear to be representative of and authoritative in their respective fields of Veblenian (i.e. old institutionalist) evolutionary economics and social psychology. This constrast shows that habits are a context-­dependent form of acquired automaticity, being limited by a necessary correspondence with objectives. Habits can be reflected upon and changed by the context. This automaticity – considered as the most important feature of habits as explained in Chapter 3 – is then further described insisting on its articulation with more deliberative forms of behaviours. The process of habit formation is re-­explained in Chapter 4, which also discusses both the importance of habits and routines in energy consumption as well as ways to change them. These sections are similar to those in Chapter 3 but they are more infused with the insights mentioned above and also include routine. New insights in these sections also come from an inclusion of wider influences (i.e. institutions and social construction) that reinforce existing habits and routines as well as from a discussion of the interplay of emotions with habits. Finally, the concluding section of Chapter 4 – which discusses the implications for policy-­making with respect to habits and routines – adds some other dimensions to the aspects already suggested in Chapter 3. Most notably, these dimensions concern the notion of motivation (with a differentiation between its intrinsic and extrinsic compounds), the role of consumer groups and the social influences which contribute to shape value judgements and individuals’ beliefs. 1.4.4  Chapter 5 Chapter 5 is the only empirical paper contained in this research.59 The chapter’s main objective is to put the whole sequence developed in Chapters 2, 3 and 4 into practical terms so that it can be tested in an empirical fashion. Accordingly, the rationale behind this chapter is to validate a set hypothesis that ensues from the discussion regarding the role of habits in the field of energy consumption as developed in Chapters 3 and 4. Chapter 5 builds on analysis of three sets of data. The first two sets were initially conceived so as to “legitimate” our perspective since the general idea is to provide empirical evidence on the perceived importance of habits. Although these two first sets of data are less “objective” than the third one (as they have been constructed with a precise idea in mind with respect to their function), the outcome of the resulting analysis is very interesting. More specifically, the main result of the first two analyses performed in Chapter 5 lies in the illustration of the implications that arise due to the specific features displayed by habits such as a low degree of consciousness. Both analyses reveal that habits are not perceived as constituting an

Introduction   23 obstacle since they are considered as being easily changed. While this is rather implicitly inferred from the data in the case of alternative vehicles, it is more explicit in the analysis of the second set of data which allows for an assessment of the respective perceived salience of the different dimensions of habits. The rationale behind the third empirical analysis is to go beyond merely showing the importance of habits and assess the precise role they play in influencing consumption behaviours in the field of energy. More specifically, the tested hypothesis is that habits reduce the effectiveness of financial incentives. This builds on the documented fact that people with strong habits tend to display a biased information search process. Accordingly, recalling that contextual stability offers a favourable ground for a frequently practised behaviour to become a habit, the third empirical analysis contained in Chapter 5 is dedicated to demonstrate the higher receptivity to a given measure of those people that recently experienced a change of context (i.e. people whose previously acquired habits have been disturbed). To this end, the complete list of energy subsidies granted in the Brussels Region for the year 2007 is used. Based on the enhanced sensitivity towards changing habits during naturally occurring changes of context, this last empirical analysis is intended to demonstrate that a change of location does provide a “window of opportunity” to increase people’s receptivity to the proposed subsidy. Although some complementary explanations are discussed, the results provide support to the idea that the “habits-­disturbed-due-­to-context-­change” explanation does play an important role. Starting from the fact that our empirical results support the idea that habits do mediate the intention–behaviour relationship in the field of domestic energy consumption, the concluding section provides a brief discussion regarding the policy implications that follows from our analysis. 1.4.5  Chapter 6 Chapter 6 provides an illustration of the fact that the distinction between categories of paper is eminently subjective and of the circular approach adopted in this research. Indeed, this chapter mainly serves to recast our perspective with respect to important debates in climate policy and, as such, it may be viewed as building on both the insights from the applied theory chapter (Chapter 3) and the general framework (as sketched in Chapter 2 and strengthened in Chapter 7). Accordingly, it should be categorised as an applied framework paper which brings together and develops further the insights from our perspective. The first objective of this chapter is to shed a new light on the debate surrounding the highly mediated Stern Review, which is considered as representation of the state-­of-the-­art economic analysis of climate change. The idea is to build on these discussions to characterise our evolutionary perspective and to better formulate the policy implications that follow from this approach. This allows us to situate our perspective as compared to the most recent and important economic analyses of climate policy.

24   Introduction The first section of Chapter 6 summarises the problems posed by mainstream economic analyses of climate change given both the specificities of that problematic issue and the drawbacks of mainstream economics in general. Building once again on the debate regarding the “efficiency paradox” in energy, the increasingly recognised need to depart from formal quantitative analyses allows us to introduce the evolutionary perspective. This somewhat more qualitative perspective leads us to underline the importance of path dependence. The lock-­in process is then described in more detail for both the socio-­technical and individual levels. This gives rise to the formulation of strategies for both levels. More specifically, in a context fraught with path dependence and lock-­in, the role of policy-­makers is re-­ emphasised as it needs to go beyond the mere subsidisation of technologies. This is of crucial importance as it could be argued that policy-­making is itself locked-­in to some extent into the scheme of optimal policy. With respect to the behavioural part of the lock-­in process, the discussion summarises the elements raised in other chapters. Bearing in mind that habits interact with the broader STS in a circular and self-­reinforcing fashion, it is important to also design measures that take into consideration the interplay between the technical sphere and groups of users. This dimension becomes all the more important in a longer run perspective where policy-­makers are interested in sustaining climate-­friendly habits that would have been recently adopted. 1.4.6  Chapter 7 Chapter 7 is more easily classified as being a typical framework paper since it mirrors Chapter 2 with the exception that it deals with a totally different policy issue: the sustainability of EU agricultural systems.60 One of the objectives of this chapter is to introduce the framework of evolutionary economics as a potentially insightful perspective with which to complement policy analysis regarding the important issue of rendering agricultural systems more sustainable. Accordingly, this chapter starts with a brief introduction of this issue and the related importance of the economic discourse. The idea is to provide a clear picture of the socio-­economic processes at play in shaping agricultural systems as it appears that such diagnosis is a necessary first step in order to usefully complement policy-­making in this field. This diagnosis begins with a short characterisation of mainstream economics with a particular focus on its “mechanistic reductionism” and the related implications. Then, using the example of the transformation of post-­war agriculture in France, the analysis underlines the profound influence of the Cartesian-­Newtonian world view and the resulting economic rationale on the development path of agricultural systems. This chapter thus goes one step further with respect to agriculture policy as compared to Chapter 2 regarding climate policy. Indeed, not only does it show the interest of completing analysis with an evolutionary approach, it also suggests that, together with many other elements, the rationale of mainstream economics did play a role in putting agriculture on an unsustainable path.

Introduction   25 As a whole, this chapter, as peripheral as it may seem, is fundamental in that it serves to strengthen our framework by highlighting the aspects that are still valid when applied to the issue of agricultural sustainability. The idea is certainly not to generalise our framework and deem it universally applicable but rather to make it more robust through showing that it can be usefully applied to different policy issues.

2 The economics of climate change and the change of climate in economics 1

2.1  Introduction Economics has become an unavoidable discipline in the field of policy-­making. From a tool supporting decision-­making processes, it is now often used as the only decision-­making science. Its intertwining with policy-­making and the prominence of its jargon (words like competition, efficiency, etc.) seem deeply anchored in modern societies. This is largely due to the fact that economics is able to offer a theoretical framework that allows for a policy assessment based on metric values, which are highly appreciated by decision-­makers (Maréchal, 2000). Climate policy is surely no exception.2 From the very beginning of international talks on this issue, up until the most recent discussions on a post-­2012 international framework, economic arguments have turned out to be crucial elements of the analysis that shapes policy responses to the climate threat.3 This can be illustrated by the prominent role of economics in the different analyses produced by the IPCC to assess the impact of climate change on society (Toman, 2006). Paradoxically (or maybe not), despite its political popularity, traditional economics4 is also being challenged as never before (see Gowdy and Erickson, 2005b for a brief overview of different sources of criticism). Its relevance has been strongly questioned by scholars from several fields – both from theoretical and empirical standpoints. Indeed, its criticisms are no longer targeted solely towards theoretical inconsistencies, but a substantial body of empirical evidence is also being gathered to demonstrate that the Homo oeconomicus paradigm5 is, to say the least, highly disputable (see the abundant empirical literature dealing with actual economic behaviour of economic agents in, for instance, Fehr and Gächter, 2000; Henrich et al., 2001 as well as related ethnographic data in Richerson and Boyd, 2000). More particularly, experimental studies in the realm of “neuroeconomics” (i.e. experimental studies expanded to include measures of biological and neural processes involved during economic activities) have shown that economic decisions are partly guided by feelings and thus emotionally coloured (Camerer and Loewenstein, 2004). In some cases, emotional processes – which are a vital

The economics of climate change   27 part of our mental architecture (see Damasio 1995, 2000; Muramatsu and Hanoch, 2005) – can come into competition with evolutionarily more recent processes such as planning, problem solving or language and give rise to what is referred to as economic “anomalies” (Cohen, 2005). As Dopfer (2005, p.  25) nicely puts it, this brain configuration provides the human being with “intelligent emotions and emotional intelligence”. Those studies strike a fatal blow to the traditional paradigm’s assumptions of exogenous and self-­regarding preferences (Bowles and Gintis, 2004), by revealing the existence of some degree of altruism (under the form of “strong reciprocity”, as proposed in Gintis, 2000) and group-­level influence (most particularly through culture6). Needless to say, this empirical evidence should be fully acknowledged in analyses that deal with the behaviour of economic agents in, for instance, the field of energy consumption (where such “anomalies” are observed). Yet, the traditional paradigm – which totally ignores the crucial role of emotions – still remains the dominant standard among economists and their audience (Gowdy, 2004) and thus provides the theoretical background on which policy-­ making is based. And this is undoubtedly the case of climate policy where strict Walrasian CGE models7 – the primary tool of traditional economics – clearly dominate most of economic analysis (Laitner et al., 2000 and Löschel, 2002). The problem is that, despite the above-­mentioned criticisms and the proven non-­neutrality that ensues, the systematic use of traditional economics is not much discussed, so that its influence on policy-­making still goes unhindered (which is, somewhat asymmetrically, not the case of the scientific basis underlying climate policy-­making, which has been hotly debated despite the large consensus it generates among experts working under the auspices of the IPCC). This view of economics has been a key factor in designing climate policies (Toman, 2006).8 The purpose of this chapter is thus to fill this gap by providing some elements of thought based on a thorough analysis of the link between economics and climate policy. This chapter is structured as follows. The next section shows the concrete impacts of adopting the traditional paradigm on the way climate analysis is dealt with, using the illustrative case of abatement costs. In Section 2.3, we provide an alternative approach using evolutionary concepts with a strong focus on the issue of TC. Section 2.4 deals with the implications of that approach for policy-­ making, before conclusions being presented in Section 2.5.

2.2  Impact of analysing climate policy using traditional economics Although traditional welfare economics has been said by Nobel-­prize winner Joseph Stiglitz to be “of little relevance to modern industrial economies” (Stiglitz 1994, p.  28), it still lays the foundations of the economic guidance given to policy-­makers on a variety of critical issues (Gowdy, 2004). For instance, Arrow et al. (2004) base their environmental policy recommendations on traditional

28   The economics of climate change welfare economics and on the idea of perfect substitutability between manufactured capital and natural capital. In addition, as preferences are assumed exogenous, the main issue is to “get the price right”. The market outcome can thus be considered as the optimal allocation of resources, and consumers are left with the choice between environmental degradation and economic losses (DeCanio, 1997). The problem with environmental amenities – like the climate – is that they are non-­market “goods” for which there is no price. The climate issue is even more tricky to handle, because it is global in scope (even though its presumed impacts are geographically differentiated) and has implications that are long-­ term (which implies dealing with intergenerational equity) and potentially irreversible. Any framework inherently favouring the short term and assuming that damages can always be financially compensated is of little use in that context (Maréchal and Choquette, 2006). To illustrate the impact of analysing the climate issue through the paradigm of traditional economics, we can examine the crucial notion of abatement costs (i.e. the costs of reducing greenhouse gas emissions – which are said to cause climate change).9 In a trivial way, abatement costs depend on two elements: the reduction potential and the reduction effort (difference between the target and a business-­as-usual scenario). 2.2.1  Reduction potential and the “no regret” paradox In climate-­related literature, much research has been devoted to analysing what has been termed the “no regret” emission reduction potential, which triggered an extensive debate among economists (see IPCC, 1996, Chapters 8 and 9 for an overview; and the 1994 Special Issue of Energy Policy (Huntington et al., 1994) ). An emission reduction potential is said to be “no regret” when the costs of implementing a measure are more than offset by the direct or indirect benefits (not including climate-­related benefits) it generates based on traditional financial criteria. The most obvious non-­climate benefits are those arising from reduced energy bills following, for instance, the use of appliances that are more energy-­efficient. Many bottom-­up studies have shed light on the existence of such “no regret” investments in the field of energy efficiency, and showed that their magnitude can be substantial (see Krause, 1996; Interlaboratory Working Group, 2000; Tellus Institute, 1998). Yet, even though they are highly profitable most of these investments are not implemented spontaneously which leads to what has been termed the “efficiency gap” (see Jaffe and Stavins, 1994 and Krause, 1996). It is not surprising that the existence of a “no regret” potential was first highlighted by bottom-­up engineering approaches, as it is incompatible with traditional economic theory. This is the main reason why economists were quite sceptical about the existence of such profitable opportunities (DeCanio, 1998). Indeed, according to the traditional paradigm, if such a profitable potential did exist, economic agents (i.e. optimising machines) would eventually undertake the necessary investments to capture it (Sutherland, 2000).

The economics of climate change   29 Faced with overwhelming evidence on the “efficiency gap”, traditional economists resorted to the existence of hidden costs (mostly transaction costs) to rescue the Homo oeconomicus paradigm (see, for instance, Sutherland, 1991). However, while such costs do indeed exist, bottom-­up studies have shown that they do not quite offset the benefits from identified profitable energy-­efficient investments (see Brown, 2001, for a survey of such studies). More specifically, transactions costs can be drastically reduced when programmes are put in place so that synergy effect arise (Levine and Sonnenblick, 1994). EU decision-­makers understood this possibility quite well and launched labelling systems for electric appliances like refrigerators. In some EU regions, financial support (in the form of subsidies) is also given. Taken together, these measures allow economic agents to overcome two major obstacles hindering energy efficiency, namely the lack of access to capital and imperfect information. These two obstacles belong to the list of what are known to economists as “market failures” and which also includes distortionary taxes, unpriced costs (i.e. like environmental externalities), misplaced incentives, etc. (Jaffe and Stavins, 1994). As the market signal is erroneous, rational agents require higher rates of returns to compensate for the increased risk associated with the level of uncertainty (de Almeida, 1998). Provided the failures are corrected, excessive rates of return would no longer be needed.10 But again, empirical studies have shown that the picture was not as simple as thought by economists. The reason is that there are other obstacles to profitable energy-­efficient investments that are of a different nature than economic market failures. These are often referred to as “barriers” and relate to the “bounded rationality” of economic behaviours (term pioneered in the work of Nobel-­prize winner, Herbert Simon; see Simon, 1957). This notion has later been developed within the field of evolutionary economics among others (see Nelson and Winter, 1982) to correct the “scientific failure” of traditional theory in explaining why economic agents do not always act as optimising machines. In adapting to their limited capabilities, agents adopt decision “routines”11 to simplify their decision process and ensure satisfactory results (Nelson and Winter, 1982). Pushing this reasoning one step further, we can consider that we are somewhat “locked in” to our (emotionally based) consumption’s routines. These routines could provide an explanation for the existence of an efficiency gap in energy.12 This has been showed to be the case of consumers as their intrinsic (i.e. not determined by market signals) habits and preferences were important determinants of energy-­ inefficient choices in motor technologies (de Almeida, 1998, p. 650).13 This picture highlighting the potential inertia of routines also seems to fit with the results obtained in the study performed in DeCanio (1998) and which shows that organisational and institutional factors are least as important as economics arguments in explaining the efficiency gap in lighting. Indeed, the idea of routin­ ised behaviours appears intuitively even more appealing when it comes to aggregate levels such as firms and institutions where sources of inertia are multiple.14

30   The economics of climate change Non-­economic barriers – which have mostly been neglected by energy economists – are thus an important part of the explanation and would require a wider range of policies (i.e. beyond those aiming at correcting market failures) to be implemented if decision-­makers wish to tap the “no regret” potential (Schleich and Gruber, 2008). But this may well only be the emerged part of the iceberg. Indeed, a review of 52 case studies by Laitner and Finman (2000) has shown that the non-­energy benefits of certain efficiency measures could be of the same order of magnitude as their energy benefits. This enhances the credibility of the “Porter hypothesis”, which argues that investments undertaken to reduce environmental impacts may trigger productivity gains (Porter and van der Linde, 1995). This seems to have been the case for British Petroleum (BP). Between 1998 and 2001, BP reduced its emissions by 18 per cent, while gaining $650  million of net present value (BP, 2003, p. 23) – a gain that occurred because the bulk of the emission reductions came from the elimination of leaks and waste (Browne, 2004). Contrary to what traditional economic theory would suggest, it thus seems possible in some cases to reduce greenhouse gas (GHG) emissions and reap economic benefits at the same time. This has been proven to be possible in cities and companies (Climate Group, 2004), in US steel firms (Worell et al., 2003) and on a macroeconomic scale (The Allen Consulting Group, 2004). 2.2.2  Reduction effort A reduction effort – such as that imposed by the Kyoto Protocol on the developed countries that have ratified it – is defined as the difference between an emission target and a business-­as-usual scenario. By convention, reduction efforts within the framework of the Kyoto Protocol are estimated with reference to 2010, the central year of the first commitment period (from 2008 to 2012). Obviously, the only unknown data is the business-­as-usual scenario which is supposed to give an estimated answer to the question “Where will we be in 2010 if we do not do anything?” A careful analysis of these scenarios shows that the way technological progress is modelled is of crucial importance for the results (Maréchal et al., 2002). This fact is not more surprising than the “no regret” debate as in traditional modelling (i.e. as per Solow and Swann) TC enters the production function as an exogenous variable (Mulder et al., 1999). It has to be noted that during the 1980s with the work of Paul Romer and Robert Lucas, traditional modelling of TC was enlarged to include human capital (see Mulder et al., 2001). This was a first step towards modelling TC as an endogenous variable in response to the critics like those formulated in Nelson and Winter (1982). More recently Aghion and Howitt (1998) provided a Schumpeterian type of traditional modelling. However, both of these modelling schools still fundamentally differs from the approach we will adopt in this chapter.15 In energy-­related studies, only exogenous-­type of modelling were used, at least up until the mid-­1990s (see Azar and Dowlatabati, 1999 and Grubb et al.,

The economics of climate change   31 2006). This “manna from heaven” type of modelling takes the form of the AEEI (Autonomous Energy Efficiency Improvement) factor as in the model used in Manne and Richels (1992) and the famous and influential DICE/RICE model (Nordhaus, 1994). Economic modelling of climate change has obviously improved since that period. More particularly, a great deal of research has been devoted to elaborating models with ETC as illustrated by a Special Issue of The Energy Journal on that particular matter (see Edenhofer et al., 2006). While this is undoubtedly a major step, this approach still fails to incorporate some of the main features of an evolutionary view of TC (e.g. interdependencies and heterogeneity) as we will show in our analysis. Moreover, the third generation of ETC modelling16 appeared after major decisions (i.e. The Kyoto Protocol and the US withdrawal) were taken in the field of climate policy so that exogenous modelling of TC really had an influence on the way the climate challenge was posed.17 This was confirmed by a retrospective study that analysed previous energy forecasts made in the US and showed that they systematically overestimated energy consumption (Sanstad et al., 2004). This tendency is largely explained by an inappropriate way of modelling energy efficiency improvements (see also Craig et al., 2002). Varilek and Marenzi (2001) also came to similar conclusions when they compared forecasted and effective prices on the US SO2 emissions trading market. 2.2.3  The economic impact of reducing GHG emissions The fact that “no regret” measures are not taken into account and that TC is modelled as an exogenous parameter inevitably gives a pessimistic view on the possibility to tackle the climate issue at an affordable cost.18 Traditional analysis fails to integrate profitable energy investments, and underestimates the penetration of energy efficiency (Laitner et al., 2000). Thus, given that the main assumptions of traditional economics are strongly questioned, it seems interesting to investigate the impact that an alternative economic framework (more in line with empirical data) would have on climate policy in general, and on the modelling of TC in particular. This is even more interesting considering that technological evolution has historically had a tumultuous relationship with environmental problems, being alternatively envisaged as their cause and their remedy (see Gray, 1989, for an overview of this ambiguous relationship).

2.3  Impact of adopting an alternative framework Considering the criticisms formulated against traditional economics, it seems clearly necessary to reconcile the theoretical characterisation of the economic agent with recent empirical findings, while defining a framework that allows for the integration of such a characterisation. This calls for the opening of economics to insights from other disciplines such as psychology, anthropology and biology.

32   The economics of climate change Setting an entire alternative paradigm to traditional economics is beyond the scope of this chapter. Nevertheless, we make the premise that an evolutionary-­ inspired line of thought, applied to a specific issue such as TC modelling in energy-­related issues could provide an insightful alternative. This is due to the fact that evolutionary economics allows for the integration of concepts such as “bounded rationality” while also focusing on economic dynamics resulting from innovation, selection and accumulation giving rise to new insights in the framing of environmental policies (van den Bergh et al. 2006). In fact, what is exogenous in traditional economics “comprises the endogenous core of evolutionary economics” (Dopfer, 2004, p. 178). 2.3.1  A brief discussion of our evolutionary view As long ago as the turn of the nineteenth century, Veblen (1898) wondered “why economics is not a evolutionary science”. Today, more than 20 years after the publication of Nelson and Winter’s seminal article (1982), evolutionary economics is a well-­established branch of economics (Arena and Lazaric, 2003a). Yet evolutionary economics is far from constituting a stable alternative paradigm, because internal debates still agitate those who adhere to that school of thought (Arena and Lazaric, 2003a). The approach we adopt in this chapter analyses economic evolution in line with the vision adopted in Witt (2003, p. 15) and labelled the “continuity hypothesis”. This framework rests upon the idea that Darwinian-­type of selection has provided human beings with evolved cognitive and learning skills (Tomasello, 1999) that constitute the basis for other forms of evolution to take place (Witt, 2003). These other forms of evolution (cultural, economic, etc.) are different from biological evolution, one reason being that they take place on a shorter time scale. What is important in our perspective is to underline the need to analyse economic evolution as a process of continuous, double (downward and upward) and interactive causation (van den Bergh and Gowdy, 2003; Corning, 1997). That is to say, what exists today is not the result of the sole selection at the individual level. More precisely, some socially acquired characteristics of human beings (like the above-­mentioned “strong reciprocity”) are better explained by group-­ level analysis (Henrich, 2004). We will show that this group-­level approach (as opposed to studies analysing individual units) also applies to TC which is best explained through a co-­ evolutionary framework allowing for circular and self-­reinforcing interactions between economic agents. In fact, this picture of economic evolution arises from a focus on dynamics occurring at the “meso” level, a level which is wedged between the traditional micro and macro scales (see the “Micro-­meso-macro” approach in Dopfer et al., 2004). Interestingly, the meso scale highlights the role played by interdependencies of systems elements and the emergent nature of economic evolution. It thus provides an alternative to simple aggregation (i.e. the “representative agent” hypothesis on which the traditional framework of “general equilibrium” rests).

The economics of climate change   33 Furthermore, as our analysis will show, this co-­evolutionary framework must be analysed at three different but connected levels (see Figure 2.1): co-­evolution of supply and demand, co-­evolution of different technologies and co-­evolution of technologies and society (see also Kemp and Reinstaller, 1999). Needless to say, this kind of framework based on a “micro-­meso-macro” approach allows for the integration of the crucial notion of heterogeneity which is both micro-­founded (as it is the result of “bounded rationality” which results in economic agents adopting different strategies) and the “deep” macro result of meso dynamics. Accordingly, macro dynamics can be seen as the emergent property of micro diversity and meso change. Obviously, our approach (which clearly departs from the traditional framework) would shed a different light on energy-­related issues. For instance, the above-­mentioned systematic overestimation of energy forecast (Sanstad et al., 2004) can be explained by the fact that meso analyses have been lacking in the past. Indeed, as mentioned in Schenk et al. (2007, p. 1507), macro-­level dynamics in energy-­related top-­down studies were unable to foresee trend-­breaking events such as the decoupling of GDP and energy consumption. We have also seen that the notion of bounded rationality is important in energy-­related analyses as it can explain (together with other elements) the no-­regret paradox. 2.3.2  TC through evolutionary lenses To define what we consider to be an evolutionary view of TC, we start from two elements. First, we follow Foster (1997, p. 433) and identify the lack of formal

Supply

Demand

Society

Micro

Micro

Micro

Micro

Meso

Meso

Meso

Meso

Macro

Macro

Macro

Macro

Technology A

Technology

Technology B

Micro

Micro

Meso

Meso

Macro

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Figure 2.1  The three-dimensional co-evolutionary framework of technological change.

34   The economics of climate change historical connection as a major drawback of many analyses. This inevitably guides us towards what could be called, according to Dosi (1997), the “David and Arthur theory” of path dependence and lock-­in and which stresses the historically contingent nature of economic change (see David, 1985, and Arthur, 1989). Second, we agree with Mulder et al. (1999) that the added value of an evolutionary approach of TC, even compared to the most recent traditional analysis based on endogenous modelling of TC, is that TC is “contextualised” (i.e. the circumstances of its emergence are explained), which is highlighted through a systemic vision of technologies as “interrelated” (see Veblen, [1915] 2003, p. 130). As noted above, TC modelling has gone through major improvements recently especially in the field of climate policy where models with ETC were developed (see Edenhofer et al., 2006). However, even though these models incorporate a form of learning processes with increasing returns, they still fail to integrate the main features of an evolutionary-­inspired approach of TC, namely systemic interdependencies, heterogeneity of agents and historical contingencies. For example, Koehler et al. (2006, p.  24) clearly mention “David and Arthur theory”, but historical contingencies are nonetheless ignored in the surveyed models. This is also the case of the heterogeneity of agents, but this is explicitly recognised as a weakness (Koehler et al., 2006, p. 49). Unsurprisingly, systemic interdependencies are not mentioned at all.19 It is interesting to note that both systemic interdependencies and heterogeneity of agents are typical features of meso-­level analyses – the “missing link” of energy-­related studies (Schenk et al., 2007) and the “conceptual heart of evolutionary economics” (Dopfer et al., 2004, p. 269). In that context, our approach to TC can be described as a synthesis of the work of David and Arthur with an evolutionary framework in a systemic perspective. As mentioned in Dosi (1997, p. 1539), the two approaches are highly compatible. As a matter of fact, their synthesis is implicit in many recent works (Carillo-­Hermosilla, 2005; van den Bergh et al. 2006; Rammel and van den Bergh, 2003; Unruh, 2000, 2002). 2.3.3  Our evolutionary framework of TC Within this framework, it is more appropriate to analyse technologies as belonging to “technological systems” (see Hughes, 1983). Following Unruh (2000, p.  819), technological systems are defined as “inter-­related components connected in a network or infrastructure that includes physical, social and informational elements”. For example, the automobile transport system is composed of cars, roads, traffic signs, garages, etc. If we push the systemic logic one step further, we see that technologies are not only linked to other technologies, but are also interrelated with the cultural and institutional aspects of their environment (see the example of the railway system in Kindleberger, 1964, or the more general concept in Freeman and

The economics of climate change   35 Perez, 1988). In this case, we talk about “Techno-­Institutional Complexes” (Unruh, 2000) or, more common in the literature, “Technological Regimes” (Kemp, 1994). This characterisation of technological systems composed of multiple interrelated elements sheds light on the potential inertia of such systems – an element that could not be revealed by analyses focusing on isolated technologies. In turn, this potential inertia invites us to investigate the historical conditions that lead to the emergence of a technological regime. This is why the notion of technological lock-­in, pioneered by the work of David (1985) and Arthur (1989), has been the subject of a growing interest from scholars in different fields (Perkins, 2003). Recently, this concept has been applied in various studies that deal with environmental issues (see Carillo-­Hermosilla, 2005; van den Bergh et al. 2006; Kline, 2001; Rammel and van den Bergh, 2003; Unruh, 2000, 2002; van den Bergh and Gowdy, 2003). The notion of lock-­in is linked to (and could be considered as a result of ) the concept of path dependence (Arthur 1983; David, 1985), which refers to the fact that technological systems follow specific trajectories that it is difficult and costly to change. As shown in Arthur (1989), these trajectories depend on historical circumstances, timing and strategy as much as optimality (i.e. the main focus of traditional economics). That is to say, the presence of increasing returns to adoption (i.e. positive feedback that increases the attractiveness of a given technology when it is more and more adopted) can potentially lead to market domination (see Arthur, 1989, 1990, and 1994 and David, 1985).20 This mechanism is similar to a snowball effect, in the sense that a given technology which, for whatever reason, obtains an initial lead will eventually exclude other competitors as its early advantage is amplified through time because of increasing returns to adoption. Thus according to this process, and contrarily to what traditional economics says, the same distribution of technology and homogenous preferences of users could lead to different technological structures, depending on how things happen in the beginning (Economides, 1996). Lock-­in literature usually identifies four classes of increasing returns (Arthur, 1994). The first two classes – namely “scale economies” and “learning economies” – are well-­documented and commonly used by economists who have rested on them to build “learning curves” (Unruh 2000; Perkins, 2003). The impact of these two classes of economies is increased by a third type of increasing returns, namely “adaptive expectations”, which refer to a reduced level of uncertainty as both users and producers become more confident about the technology’s general quality (Arthur, 1991). Finally, the last class of increasing returns to adoption is known as “network externalities”.21 It is the one most commonly associated with the lock-­in literature, and clearly results from the adoption of a systemic approach for analysing TC. According to Katz and Shapiro (1985, p.  424), positive network externalities refer to the benefits that a user derives from a technology when the number of other users increases. They arise because physical and informational networks become more valuable as they

36   The economics of climate change grow in size. This is obviously the case of hardware or phone networks, for example (Katz and Shapiro, 1985; Unruh, 2000). The importance of network externalities is enhanced in our evolutionary framework, as they are thought to operate on technological systems that consist not only of multiple interrelated technologies and their supporting infrastructures, but also of technical, informational, economic and institutional relationships that enable them to work together (Perkins, 2003). This can be illustrated with the case of the automobile, the increasing use of which required parallel developments in supporting industries (steel, glass, etc.), infrastructures (service station, roads, etc.), academic research and lobbies (see the work of Flink, 1970, 1988). In addition, the codified standards (e.g. html, 110 and 220 V current, litres and gallons, etc.) that are used to co-­ordinate such technological regimes can also become a major source of lock-­in (Unruh, 2000).This picture is even reinforced by the fact that, as highlighted by the notion of technological paradigm in Dosi (1982),22 there is also a form of lock-­in of ideas, which are shaped by the cognitive frame of actors and therefore determine exploration frontiers (see also Dosi et al., 2005). This reduced scope of investigation could explain why, as underlined in Mulder et al. (1999, p.  6), most of TC consists in incremental improvements rather than radical breakthroughs. From our evolutionary perspective, the last two centuries can be described as a succession of three dominant technological regimes (TR): from 1800 to 1870, the dominant TR was composed of steam, iron and canals; then over the 1850–1940 period it was progressively replaced with coal, railways, steel and industrial electrification; and this last cluster has in turn been shifted to a TR made of oil, roads, plastics and mass electrification between 1920 and 2000 (see Grübler, 1998).23 If it can be said that the existence of such clusters has long been acknowledged by economists (Perkins, 2003), the idea that the aforementioned lock-­in process can lead to the dominance of an inferior design is highly disputed. The following examples give a brief overview of the debates and show how they evolved along with the different documented stories of technological lock-­in. The suggestion that locked-­in design could be inferior was first made in David (1985) using the example of the QWERTY keyboards – an example sometimes considered to be the “Founding Myth” of path dependence literature, as mentioned in Ruttan (1997, p. 1523). Indeed, the QWERTY keyboard is said to have been locked-­in through the above-­described process and to the detriment of superior keyboard designs (such as the Dvorak keyboard). Because of its acquired status in the literature, the alleged superiority of QWERTY has been strongly disputed, most notably by Liebowitz and Margolis (1990, 1994, 1995) who called it a “Fable”. The critics of the second most popular story, the “Betamax vs VHS” case (Arthur, 1990), were even more vehement, as they claimed that VHS came to dominate the market due to a real advantage: its longer playing time (Liebowitz and Margolis, 1994, p. 148). It is beyond the scope of this chapter to present the details of the controversy over

The economics of climate change   37 this symbolic case, but an analysis of the well-­documented study performed in Cusumano et al. (1992) would tend to contradict this version and give credit to Arthur’s version.24 Still, this controversy underlines the main problem with the “lock-­in of in­ferior designs” hypothesis: the difficulty of empirically proving the superiority of “locked-­out” alternatives (Cowan and Foray, 1999, talk about the “counterfactual threat”). For instance, when confronted with the idea that the gas-­ powered ICE might not be the best design (Arthur, 1989, p. 127), Liebowitz and Margolis (1994, p. 148) only oppose that they find this claim “difficult to take seriously”. However, in line with Mokyr (1990, p. 191) or Unruh (2000, p. 821), existing studies again clearly show that Arthur’s claim is at least worth analysing (our claim is based on an analysis of various papers: Arthur, 1989; Cowan and Hulten, 1996; Foray, 1997; Foreman-­Peck, 2000, 2001; Kirsch, 1994; Mowery and Rosenberg, 1998). The case of the emergence of the light water reactor (LWR) in nuclear plants, as explained in Cowan (1990), provides a more solid empirical example of the lock-­in of an inferior design.25 Even more robust yet is the evidence gathered in Scott (2001), which describes the lock-­in of the British railway into a system of small wagons that was undoubtedly less profitable that the larger wagons system almost universally adopted in other industrialised nations. It seems to us that all these examples26 make a case important enough to further investigate the lock-­in process and identify some insights it could bring for policy-­making in the field of energy and climate-­related issues. 2.3.4  The common background of the various “lock-­in” stories In all the aforementioned cases of suspected lock-­in of inferior designs, we may distinguish two different periods in the lock-­in process (Foray, 1997, p.  740). The initial period, the duration of which may vary, exhibits very low increasing returns to adoption and thus reflects preferences,27 which may be deliberate or not. This first period also varies in terms of the number of decisional events involved before a distribution of choices can be observed. In the nuclear example of Cowan (1990), there was one such event, whereas in the battle of the motors (Cowan and Hulten, 1996) or in battle of the videotape recorders (Cusumano et al., 1992), a succession of events was involved. The second period of the “lock-­in” process starts with the appearance of dynamic complementarities, that is, positive feedback which is introduced in the system and tend to amplify the initial distribution of choices (see Foray, 1997, p.  740). These can take the form of complementary goods, like pre-­recorded tapes in the VCR case (Cusumano et al., 1992); technical interrelatedness as in the case of the automobile (Flink, 1988); or triggering events, like the car races in France that undoubtedly had an impact on the selection of the gas-­powered ICE (Foreman-­Peck, 2001). In line with the work of Veblen ([1915] 2003, p. 130), complementarities are also important in that they provide an explanation for the persistence of obsolete

38   The economics of climate change intentions, as in the QWERTY case, where the typewriter design originated from the need to hinder typing speed to avoid type-­bar clashes – a need that is no longer relevant to computer keyboards (Foray, 1997, p.  745). Interrelatedness generates an analytical bias known as the “profit gap” (see Frankel, 1955, p. 306), which helps explain the persistence of locked-­in technologies (such as the small railway wagons in Britain, even though they were substantially less profitable, as shown in Scott (2001, p.  371) ). Technological lock-­in can even persist without increasing returns if other elements are in place (Balmann et al., 1996). The bulk of lock-­in stories that can be found in the literature also highlight the relevance of adopting a systemic approach to technology, as they all demonstrate how essential it is to take into account the unavoidable interactions that exist between related technologies, as well as the role played by related institutions, whether public or private. In fact, taking technological systems into consideration makes it difficult to circumvent historical contingencies, as their importance turns out to be fundamental (see Carlsson, 1997). A detailed analysis of four different technological systems in Sweden shows that, although these four systems were very different in terms of economic success, evolution trajectory, etc., in all cases their evolution and configuration could not be rightly understood without analysing initial conditions and path dependence (Carlsson, 1997, p. 796). What we also see is that such a systemic reasoning has often been lacking in the decision-­making process of crucial economic actors. This can be illustrated by the non-­anticipated exponential growth of the sales and rentals of pre-­ recorded tapes in the VCR story (see Cusumano et al., 1992). Most of the time, deliberate choices cannot be qualified as “irrational”, even in terms of financial profitability, but rather systemically myopic (or systemically “boundedly rational”, to use the term coined by Herbert Simon). David (2000, p.  14) adds that even Thomas Edison’s business strategy in the “Battle of the currents” – and especially its withdrawal from the flourishing electricity supply market – failed to correctly take into account the systemic aspects of his decision, even though it was driven by rational economic considerations (see also Rosenberg, 1982, p. 60). It is obviously rather complex, if not nearly impossible, for an individual decision-­maker to forecast all the complementary developments to his technology, and to make decisions that are optimal for the whole system built around it. For instance, it would not have been easy to foresee the explosion of the American pre-­recorded tape market, as market surveys indicated that only 8 per cent percent of VCR owners found this product to be important (Klopfenstein, 1985 quoted in Cusumano et al., 1992). The analysis of railway gauges performed in Puffert (2002) is interesting because it adds one element – the spatial dimension – to the “lock-­in of inferior designs” debate, and sheds a complementary light on the type of processes involved. It is also a very insightful analysis to deal with the dilemma of “standardisation vs diversity” (which we will return to in Section 2.4). Puffert (2002,

The economics of climate change   39 p. 285) provides convincing evidence for the existence of an initial period during which the “lock-­in” process – including the making of path dependent choices and the occurrence of positive feedback mechanisms – is clearly at play. However this study also shows that, even if the process never completely breaks free of early contingencies, in later stages the dynamics of choices are based on a rather systematic rationalisation (Puffert, 2002, p. 291) – which we could even call “systemic” rationalisation, as those later stages are driven by a quest for improved coordination and facilitated compatibility of neighbouring networks. The contrasted examples of the Netherlands and Spain (which does not use the most common gauge – the “Stephenson” one) provided in Puffert (2002, p. 285) underline the role played by conversion costs, which could also serve, for instance, to explain the persistence of the British system of standard weight and measures in the US (see Unruh, 2000, pp. 822–823). In the example of the Stephenson gauge, however, the historically produced inefficiency does not really come from a wrong choice of dominant design – the Stephenson gauge is considered to be close to the optimal size – but rather stems from the persistence of other, non-­compatible systems. The spatial dimension thus provides a complement to the model in Arthur (1989), as it allows for the lock-­in of a dominant design (a concept coined by Abernathy and Utterback, 1978) in parallel with the persistence of various small systems that are geographically spread out. A modelling exercise performed in Jonard and Yildizoglu (1998) shows that diversity can be sustained even in the context of increasing returns to adoption. It all depends on the importance of “spatially localised learning” with respect to “network externalities” (Jonard and Yildizoglu, 1998, p.  47). Small “network externalities” can be a source of diversity (ibid., p.  49). Therefore, lock-­in can only arise if network externalities are strong enough. As mentioned by David (2000, p.  3), this shows that empirical enquiries remain necessary in order to determine what proportion of economic change can be understood more adequately through the approach adopted in this chapter. Yet the most interesting result of the modelling exercise is that the biggest inefficiency comes from a reduction in the level of technological progress when “lock-­in” effects dominate as, in this case, the technological space is not fully explored (Jonard and Yildizoglu, 1998, p. 47). That is in line with Dosi’s (1982) concept of “technological paradigm”.

2.4  Policy recommendations The importance of historical contingencies, coupled with the impossibility of foreseeing future developments, is not without implications for public policies dealing with technological progress, including those related to climate change. As emphasised in David (2000, p.  14), this does not imply that governments should pick up the winners instead of letting markets decide – a choice that would involve a risk of locking-­in a “dead-­end” technology, as highlighted in Sanden (2004, pp.  327–328). On the contrary, as mentioned in Foray (1997,

40   The economics of climate change p. 748), public authorities should pursue the objective of securing a good balance between diversity and standardisation, knowing that the gains from each are vari­ able in time (see also David and Rothwell, 1996). As Foray (1997, p. 748) puts it, a technology could emerge too early, or it could become too deeply entrenched. Wisdom would thus require governments to delay their commitment to an inextricable future, in order to allow for the availability of sufficient information on any given option (David, 2000). In other words, governments should act to maintain a diverse range of technological options open (Berkhout, 2002, p.  3). For instance, in the “Battle of the motors”, US engineers were able to switch from electric to gas-­powered vehicles because they “did not put all the eggs in one basket, nor were they irrevocably committed to any particular technology” (Foreman-­Peck, 1996, p.  9). This allowed them to deal with conversion costs that were not as prohibitive as they were for Spain in the case of railway tracks (see Puffert, 2002). Furthermore, if we acknowledge that we are locked into an undesirable trajectory (as climate analysts could deem to be the case in our economies which strongly rely on the use of exhaustible fossil fuels28), then it follows that we must find ways to unlock out of it (see Unruh, 2002). After all such shifts have happened in the past (see Berkhout, 2002, p. 3, and the above-­mentioned three major TR of history from Grübler, 1998). Of course, unlocking ourselves from an undesirable trajectory is not a task that can easily be undertaken as it is quite difficult to identify the solution that would yield the best outcome. We must also bear in mind the risk inherent to what has been called the “paradox of entrenchment” – that is, the need to create the conditions for the lock-­in of a desired new technology to overcome the lock­in of an incumbent one (Walker, 2000). Unruh (2002, p. 323) adds that this risk increases when action is delayed, which implies that extreme measures must be implemented quickly.29 The new locked-­in technology could then prevent superior technologies or designs from developing, as might be the case of solar energy technology, where crystalline silicon photovoltaics are possibly locking-­ out thin-­film photovoltaics (Menanteau, 2000). In any case, when defining their position in the face of several competing technologies, public governments should bear in mind the need to manage the risk of committing to inextricable trajectories, but they should also promote the type of measures that have proven successful in overcoming lock-­in situations (see the set of necessary conditions in Windrum, 1999, p. 31; and the key aspects identified for regime shifts in Mulder et al., 1999, p. 9, and Cowan and Hulten, 1996, p.  65). This invites us to go one step further than the model of Arthur (1989), and to depart from its example of a competition between contemporaneous technologies (Windrum, 1999, p. 6). What is needed in the case of climate policy is a technological succession (Windrum and Birchenhall, 2005), which is considered as a necessary condition for attaining a low-­carbon society (Koehler et al., 2006, p. 18). The example of the gas turbine shown in details in Islas (1997) is very interesting as it illustrates both the need to create niches (i.e. a limited space where

The economics of climate change   41 new technologies can mature ) and the possibility of overcoming lock-­in with hybrid technologies. In that example, niches (namely aeronautics and peak power plants) allowed the gas turbine technology to improve through a process of increasing returns to adoption (Islas, 1997, p. 63). Then the emergence of gas turbines into the bigger electrical base market occurred through the hybridisation between the incumbent steam turbines and auxiliary gas turbines – the latter eventually becoming the main component (Islas, 1997, p. 64). In line with our described framework of TC highlighting the existence of a somewhat locked-­in technological regime and with Rosenberg (1982), a substantial body of literature focuses on “strategic niche management” (see Kemp, 1994, and Schot et al., 1994) in order to identify the key aspects that must be promoted for niches to be successful in overcoming incumbent lock-­in – a concern that arises because capturing a niche does not automatically lead to subsequent wider diffusion (see the example of the electric car in Mulder et al., 1999, p. 15). As mentioned in Unruh (2002, p. 322), niches are also an attractive policy target since incumbent producers do not fiercely defend them, removing some of the resistance towards new entrants. Niches are even more important within our co-­evolutionary framework as they facilitate learning not only about the performance of a given technology but also about social acceptance and users’ needs in general (Kemp and Reinstaller, 1999).31 They help to create a virtuous circle to build a supporting network and serve as an incubator for new technologies (Kemp and Reinstaller, 1999, p. 23). 30

2.5  Conclusions Our analysis shows that adopting an evolutionary approach to study technological progress could substantially alter the policies recommended by economic analysis, away from the current focus on the sole notion of efficiency.32 Particularly, the lock-­in process makes it unlikely that traditional cost-­efficient measures (such as carbon taxation or tradable emission rights) aimed at internalising external costs will be sufficient to bring about the required radical changes in the field of energy, because they fail to address structural barriers (del Rio and Unruh, 2007). Climate policy should instead create conditions enabling the use of the cumulative and self-­reinforcing character of TC highlighted by evolutionary analyses (Mulder et al., 1999) and take into account the current lock-­in of our economies in the fossil fuel era. By requiring a broader change (to include change of, for instance, the institutional environment), “strategic niche management” fundamentally differs from simple “technology-­push” policies, particularly in the role that states are to undertake. “Strategic niche management” is larger than simple niche promotion in that niches are managed (i.e. created, developed and then phased out), taking into account the broader context in which niches evolve (i.e. acknowledging that social and institutional factors do contribute to reinforce the locking-­in of the incumbent technological system). For instance, policies in Denmark were eventually more successful than those in the US in promoting wind energy because

42   The economics of climate change they were built upon ongoing socio-­technical dynamics rather than simple subsidies, as it is shown by a comparative analysis in both countries performed in Kemp and Reinstaller (1999). The existence of an untapped “no regret” reduction potential, as seen in Section 2.2, further illustrates the importance of enlarging the picture to also look at demand-­side aspects. Indeed, as it comes out of our approach, the existence of a “locked-­in” carbon-­based socio-­technical regime means that changing people’s behaviour would inevitably “be the result of collective, contingent and emergent processes of socio-­technical co-­evolution” (Shove, 2005, p.  119). Focusing solely on “bringing in” more efficient technologies could turn out to be counterproductive if it serves to sustain unsustainable patterns of consumption (one such counterproductive effect being the well-­known “rebound effect”33). It is thus important to take into account the evolution of routines, habits and practices that go along with technical change. Altogether, this confirms the need to look at TC through the aforementioned three-­dimensional co-­evolutionary framework (shown in Figure 2.1).34 Analysing technical evolution through this type of perspective shows the importance of contingencies, feedbacks and dynamic interactions and thus renders inevitable to acknowledge the emergent, complex and uncertain nature of economic evolution. Accordingly, policy-­makers should thus try to influence the selection environment and create conditions under which the evolutionary process defined in the previous sections would lead to the desired outcome (i.e. climate protection in our case). For all those reasons, adopting an evolutionary approach to treat the climate issue would give a different picture of the challenge ahead from what traditional analyses tend to suggest. For instance, Castelnuovo and Galeotti (2002) show that the costs of reducing greenhouse gas emissions are reduced by a factor of 3 or 5 when technological progress is modelled in a structurally endogenous way with respect to the outcome obtained using the same model but with exogenous modelling of TC. Thus, as claimed by Koehler et al. (2006, p. 19), the absence of endogenous TC bias policy assessment in the field of climate protection. Still, as mentioned earlier, modelling TC as endogenous is only a first step towards a better representation of technological evolution according to the framework we adopted in this chapter. It thus appears that, in order to deal with climate change in an appropriate way, economics must adapt. Most certainly, this calls for a better understanding of the key factors that explain how and in what context TC arises in order to adequately design climate policies aimed at promoting climate-­friendly technologies. As our analysis has shown, an evolutionary-­inspired line of thought coupled with a systemic and historical perspective of TC provides a very insightful alternative to traditional economics for that matter.

3 An evolutionary perspective on the economics of energy consumption The crucial role of habits1

3.1  Introduction At the same time men’s present habits of thought which tend to persist indefinitely, except as circumstances enforce a change. These institutions which have so been handed down, these habits of thought, point of view, mental attitudes and aptitudes, or what not, are therefore themselves a conservative factor. This is the factor of social inertia, psychological inertia, conservatism. (Veblen, [1899] 1994, pp. 190–191) The work of Thorstein Veblen is very enlightening for anyone who is interested in economic analyses of the climate change problem (which is often seen as one of the most challenging issues that our civilisation will have to face during the twenty-­first century2). Two different elements allow us to make that statement on Veblen’s contribution. First, through highlighting the importance of historicity and its embeddedness in a wider institutional and social environment, Veblen can be considered as a precursor of the “path dependence” approach pionneered by David (1985) and Arthur (1988).3 This approach and its related concept of technological lock-­in sheds a very insightful light on the economics of climate change as it has been shown extensively in Chapter 2. Second, as illustrated by the quote above, Veblen’s analysis raised the idea that individuals have certain habits and behaviours that are conditioned by experience (see also Veblen, [1919] 1990, p. 79). This notion of habits provides an interesting starting point in building an analytical framework that departs from the rational choice model4 which has clearly been misleading in providing guidance for climate and energy-­related policy-­making. In line with this context, the goal of this chapter is to further explore the role played by habits in the field of energy consumption while also integrating those insights on habits into a broader evolutionary view of the economics of energy. The idea is to show how the two aforementioned insights from the work of Veblen are interrelated in that they reinforce each other. Accordingly, the objective is to provide a clear picture of habit development while also showing how habits serve to maintain the incumbent “locked-­in” STS that relies on the use of fossil fuel energy.

44   An evolutionary perspective The next section provides a brief overview of the issues at play in mainstream economic analyses of energy consumption building on the illustrative example of what has been termed the “energy paradox”. Section 3.3 then describes the broader evolutionary framework within which the analysis of the habit concept is performed. In Section 3.4, we show why habits are important to consider in the field of energy consumption and how they fit into our broader framework. In Section 3.5, we try to provide a functional definition of habits. Section 3.6 concludes by looking at ways to break unsustainable habits in the field of energy consumption.

3.2  Mainstream economic analyses of energy consumption and the energy “paradox” The unequivocal link between climate change and anthropogenic activities that has been recently been reaffirmed in the IPCC Report (2007a) requires an urgent, world-­wide shift towards a low-­carbon economy (Stern, 2006, p. iv). Considering that energy-­related emissions amounts to a substantial part of global GHG emissions,5 this shift inevitably implies changing not only the way we produce and convert energy but also current energy consumption patterns. Insisting that energy consumption does matter per se is crucial as, for the past 25 years, the focus of energy policies has clearly been on energy efficiency rather than on energy conservation (Wilhite et al., 2000; Harris et al., 2007). Even though energy efficiency might be one way to reduce energy use, focusing solely on “bringing in” more efficient technologies could turn out to be counterproductive if it serves to sustain unsustainable patterns of consumption. The well-­known “rebound effect”6 is an example of such a counterproductive effect. The focus on energy efficiency as a way to tackle energy-­related environmental issues such as global warming is linked to the prevalence of “technology optimism” where future technologies will solve the problem by providing consumers with more efficient ways of using energy (Wilhite, 2007, p.  23). This view has consecrated energy efficiency as an end in itself rather than as a mean (i.e. towards a reduction of energy use). But there is another equally important causal factor: the dominance of the “rational choice” model in economics. First, as we argued in Chapter 2, the notion of efficiency itself is the inherent focus of mainstream economics which reduces human beings to their mechanical properties (Hodgson, 1993b; Foster, 1997). Indeed, the mainstream economic paradigm – known as Homo oeconomicus – rests on the Cartesian idea that the left hemisphere of the neo-­cortex (specialised in analytical abilities and computational operations) is dominant. This explains why efficiency is “at the centre stage of neoclassical economics” to the detriment of efficacy, a “fundamental economic problem – one that cannot be found at all in the neoclassical research agenda” (Dopfer, 2005, p. 25). Furthermore, the simple aggregation rule based on the concept of the “representative agent” contained in the theoretical framework of mainstream economics implies that macroeconomics “has shifted steadily from questions of distribution and

An evolutionary perspective   45 institutions to an almost exclusive concern with market efficiency” (van den Bergh and Gowdy, 2003, p. 65.). Second, the perfect rationality principle has rendered any question on energy demand trivial as it could be taken for granted. Based on this kind of framework, the goal is then to provide economic agents with the correct information to persuade them to invest in energy-­efficient measures. In other words, the rational choice model has paved the way for the current state of policy-­making where decision-­makers “obsessively invoke “incentives” as the panacea for any given social problem” (Hayes, 2007). Energy policy is no exception as can be illustrated by the debate on the “no regret” emission reduction potential also known as the “energy paradox”.7 For instance, after having strongly argued against the existence of such an untapped potential of profitable energy-­efficient investments at the beginning, mainstream economists then resorted to the traditional view of “market failures” that lead to erroneous market signals.8 Accordingly, policy-­makers were told to correct those failures by providing judicious incentives among which “getting the price right”, “providing accurate information”, and “facilitating access to capital” are the most common measures. Empirical studies have shown that the picture is not as simple as thought by economists and that there are different obstacles to profitable energy-­efficient investments.9 Non-­economic barriers – which have mostly been neglected by energy economists – are thus an important part of the explanation and require a wider range of policies to be implemented if decision-­makers wish to tap the “no regret” potential. Given that the focus on efficiency and the “incentives obsession” have failed in delivering energy consumption reductions, it suggests that turning to an alternative framework of analysis could provide an insightful alternative. This is all the more so since the mainstream economic model of rational choice – on which the “efficiency incentives” view is clearly founded – is being strongly questioned by scholars from different academic disciplines (see Gowdy and Erickson, 2005b, for a brief overview of different sources of criticism). As shown in the thorough review on sustainable consumption undertaken in Jackson (2005), all the three key assumptions contained in the rational choice model – namely rationality, individuality and self-­interest – have been challenged. For instance, there is a substantial empirical literature demonstrating that the self-­interested and rational Homo oeconomicus does not quite exist in reality (see the abundant empirical literature dealing with actual economic behaviour of economic agents in Fehr and Gächter, 2000; Henrich et al., 2001). More particularly, experimental studies in the realm of “neuroeconomics” have shown that economic decisions are partly guided by feelings and thus emotionally coloured (Camerer and Loewenstein, 2004). Needless to say, this empirical evidence should be fully acknowledged in analysing the behaviour of economic agents as in the field of energy consumption (where such “anomalies” are observed).

46   An evolutionary perspective

3.3  The evolutionary framework of analysis Given that economics developed “along some paradigmatic lines determined by the cultural crucible in which the stuff of our mind is initially mixed” (Perlman and McCann, 1998, p. 2), it was thus strongly influenced by the climate of Newtonian mechanistic science that was reigning at that time. As it is claimed in Foster (1997, p.  432), this Newtonian/Cartesian legacy means that we are left with a linear and a-­historical paradigm in economics insofar as it does not “depict a process unfolding in history”. All together, the Newtonian/Cartesian influence on economics has led to a model that could be called “mechanistic reductionism”. Having acknowledged this, and bearing in mind the fact that the core assumptions of mainstream economics about the behaviour of economic agents are at odds with empirical evidence (Dopfer, 2004, p.  186), the choice of an evolutionary-­inspired line of thought is rather straightforward. On the one hand, this is due to the fact that evolutionary economics can be said to have developed partly with the aim of correcting the “scientific failure” of mainstream theory in explaining why economic agents do not always act as optimising machines. Following Herbert Simon’s “bounded rationality”, agents are viewed as adopting decision “routines” to simplify their decision process and ensure satisfactory results (Nelson and Winter, 1982). On the other hand, the other cornerstone of the evolutionary framework in economics is a radically different interpretation of economic change. More specifically, what is exogenous in mainstream economics “comprises the endogenous core of evolutionary economics” as claimed in Dopfer (2004, p.  178). Given that it focuses on economic dynamics resulting from innovation, selection and accumulation, evolutionary economics may offer new insights in the framing of environmental policies (van den Bergh et al., 2006). It will be shown in the analysis that together with its departure from the perfect rationality hypothesis this shift of focus towards a better understanding of economic dynamics renders evolutionary economics an inevitable theoretical ground in setting up policies for sustainable energy consumption. In line with Veblen’s above-­mentioned concept of cumulative causation and with Hodgson’s recent work on economics becoming “progressively more reductionist and formalistic” (Hodgson, 1993a, p. 251), our approach emphasises that contrary to the deterministic and linear view that prevails in mainstream economics, economic change is better conceptualised as a process of cumulative, double (downward and upward) and interactive causation (van den Bergh and Gowdy, 2003; Corning, 1997, Hodgson, 1997). The group-­level approach10 is very insightful for analysing energy consumption which, as we will show, can be better understood through a framework allowing for circular and self-­reinforcing interactions between economic agents. In other words, through this framework, consumption dynamics involve pro­ cesses of individuals interacting with an emergent population in a self-­ reinforcing manner.

An evolutionary perspective   47 In this context, the added value of the evolutionary perspective of economic change is emphasising its historically contingent nature (because causation is cumulative) and highlighting the role played by systemic interdependencies (because causation is double and interactive). As illustrated in Veblen ([1915] 2003) with the example of British small wagons, systemic interdependencies imply that technologies are not isolated but rather belong to technological systems. Such systems are defined as “interrelated components connected in a network or infrastructure that includes physical, social and informational elements” (Unruh, 2000, p. 819). Since technologies depend upon and connect with the wider range of cultural, organisational and institutional aspects of their environment enabling them to work together, we end up with what Geels and Kemp (2007) call socio-­technical systems (STSs) or what Unruh (2000) calls techno-­ institutional complexes (TIC).11 This is illustrated by the expansion of the automobile sector which required parallel developments in supporting industries (steel, glass, etc.), infrastructure (service stations, roads, etc.) and academic research and lobbies (Flink, 1970, 1988). This intertwining of different elements that characterises an STS sheds light on the potential inertia of such systems. Indeed, once historical conditions have lead to the emergence of an STS, its multiple components are factors that can contribute to stabilise the system in a self-­reinforcing manner. The nature and type of an STS is thus dependent upon the path followed and is further perpetuated through the interactions of its multiple elements.12 Positive feedback results in the locking-­in of the incumbent STS following a path dependent co-­ evolutionary process. Following the definition given in Puffert (2002, p. 282), a path dependent process is “one in which specific contingent events – and not just fundamental determinative factors like technology preferences, factor endowments and institutions – have a persistent effect on the subsequent course of allocation”. This view is important for energy-­related issues for at least three different reasons. First, as Grübler (1998) as argued, the last two centuries could be viewed as the succession of mainly three STSs, each based on a source of energy. From 1800 to 1870, the dominant STS was composed of steam, iron and canals; then over the 1850–1940 period it was progressively replaced with coal, railways, steel and industrial electrification; and this last cluster has in turn been shifted to an STS made of oil, roads, plastics and mass electrification between 1920 and 2000. Second, as noticed by Shove (2005), given that technologies are embedded in a strongly influential social context of institutions, consumption is shaped by (whilst also shaping) technological constraints. Third, since the emergence of a given STS (such as the current carbon-­based one) is considered to be historically contingent,13 it is no longer viewed as being only governed by optimality. As first claimed in the pioneer work of Paul David (1985) on the QWERTY case, a given STS might be based on an inferior (design of ) technology. There has been an extensive debate on that hypothesis of inferior design among experts mainly because of difficulty of proving counterfactual

48   An evolutionary perspective superiority. However, the empirical evidence suggests that this hypothesis should not be overlooked (see the evidence gathered in Cowan, 1990, on LWRs and in Scott, 2001, on the lock-­in of the British railway system into a small wagon system). Yet, in our case, we are “fortunately” faced with enough scientific evidence that climate change is caused by the accumulation of GHG emissions to find ways to unlock out of the current carbon-­based STS without having to discuss about its potential technological (or else) inferiority.

3.4  An evolutionary view of energy consumption: the importance of “habits” As we showed in more detail in Chapter 2, looking at energy-­related issues through evolutionary lenses sheds a clearly different light and thus calls for a broadening of current policy-­making in the field. For instance, the notion of bounded rationality is important in explaining the energy paradox we mentioned in Section 3.2. In line with authors that see energy consumption as “the routine accomplishment of what people take to be “normal” ways of life” (Shove, 2005, p.  117), a study has shown that consumers’ intrinsic (i.e. not determined by market signals) habits and preferences were important determinants of energy-­ inefficient choices in motor technologies (de Almeida, 1998, p.  650). Accordingly, we assume that consumers are “locked in” to their emotionally based consumption’s routines as illustrated by Simon’s concept of docility as the “human propensity for accepting information and advice that comes through appropriate social channels” (Simon, 2005, p. 95). Starting from the idea that social learning is the most important form of learning of human beings (Tomasello et al., 2005) and that it is impossible to verify every piece of information we consider legitimate since rationality is bounded, there is some form of “path dependence” of the information that we use to make our decisions. Following this line of research, a substantial body of literature has shown that – more often than not – our behaviour is guided by habits (i.e. it takes the form of repetitive actions performed with minimum thinking) and thus without the type of cognitive deliberation assumed in the rational choice model.14 The obvious advantage of these “habits” in decision-­making is to free up resources than can be devoted to solving non routine-­like problems and, as such, it can be said to be a highly rational way of allocating our limited cognitive abilities (Jager, 2003). It liberates the individuals from “the burden of all decisions” (Berger and Luckmann, 1966, quoted in Lindbladh and Lyttkens, 2002). As it has convincingly been shown in Tversky and Kahneman (1974), people use a variety of cognitive and emotional heuristics to deal with the impossibility of amassing all possible information and thus tend to make immediate and sometimes unconscious choices of behaviour. This idea that people are not always fully conscious when they are performing routine-­like behaviours is important not only because it contradicts rational choice theory but also because it suggests that the conspicuous part of consumption might have been overemphasised. As

An evolutionary perspective   49 shown in the work of Elisabeth Shove and other sociologists, a non-­negligible part of our consumption is inconspicuous. Much of our every day consumption is almost invisible to our peers and even to ourselves (Jackson, 2005). And this is especially so when it comes to energy consumption. In such a context, it is difficult to expect consumers to be capable of exercising control over their energy consumption in reaction to given incentives (whether economic or informative). This is exemplified in the current carbon-­ based STS constraints and shapes consumers’ choices through structural, cultural, social and institutional forces such as norms, media, etc. More than “willing” consumers should rather be viewed as partly “locked-­in” (Sanne, 2002). Consumers are thus neither fully rational (in the sense of mainstream economics) nor omnipotent. In addition, as underlined by the notion of “circular causation” highlighted in our perspective, while choices in energy consumption are strongly influenced by the existing STS, they, in turn, reinforce and maintain the incumbent STS. Indeed, if the use of highly automatised behaviours such as habits is undoubtedly “procedurally rational” in stable contexts, it quickly turns into a change-­resisting factor when conditions and circumstances vary such that alternative behaviours would yield better outcomes. In line with Carillo-­Hermosilla and Unruh (2006, p.  708), who resort to “original institutionalism” to explain the “apparent paradox in the increasing returns and lock-­in conceptualisation”, we thus consider habits as an additional explanatory factor of long-­term technological stability. Paul David, who pioneered together with Brian Arthur the research on “lock­in” processes, asserted in the mid-­1980s that path dependencies may arise “in the presence of strong technical interrelatedness, scale economies and irreversibilities due to learning and habituation” (David 1985, p. 336, emphasis added). As mentioned in Barnes et al. (2004, p. 372) only the first two arguments were used in the literature on “technological lock-­in” that has followed from the work of David and Arthur to the detriment of the “behavioural” part of the lock-­in process. In fact, there is a sort of mutual (or circular) form of reinforcement that arises from the influences of the STS in shaping behaviour which makes individual form habits in specific ways that are consistent with the STS operating constraints (Hodgson, 2004, p. 656). As mentioned in Hodgson (2007a, p. 107), “habits are the constitutive material of institutions” while the presence of institutions make that “accordant habits are further developed and reinforced among the population”. This is in line with the view that “consumers can only ask for what is available; they cannot demand what is deemed “technically” impossible to produce. These real constraints eventually feed back on mental habits” (Ramazzotti, 2007, p. 774). It is important to note that such a view contradicts “mechanistic reductionism” since it relies on the idea that individuals and institutions (i.e. here under the form of the STS) “mutually constitute and condition each other” (Hodgson, 1997, p. 404). The idea is that the current carbon-­based STS both constrains and enables habit formation. This corroborates recent empirical analysis of energy

50   An evolutionary perspective consumption in Denmark and which illustrates that there are both “similarity and collectivity” as well as “variety and individuality” in behaviours (Gram-­Hanssen, 2008a, p. 14) as well as with Veblen’s acknowledgement of the “varying degrees of ease with which different habits are formed by different persons, as well as the varying degrees of reluctance with which different habits are given up” (Veblen, 1899 [1994], p. 108). Assessing individual habits is thus relevant in our framework. Behavioural lock-­in under the form of “habits” is important to understand the continued increase of energy consumption in spite of existing environmental awareness and concern among the population. Indeed, even in cases where people intend to perform a given behaviour (e.g. eat more healthily), they sometimes do not implement it because it contradicts existing habits (e.g. stop by the fast-­food restaurant around the corner). Verplanken and Faes (1999) coin the term “counterintentional habits”, which means that the stronger the habits are, the more they affect behaviour relative to intentions. Habits thus “become a better predictor of behaviour than behavioural intentions” as suggested in Triandis (1977, p.  205). The failure of intentions to predict behaviour for people with strong habits has been shown to be the case for car use (Verplanken et al., 1999) as well as for food purchases, watching TV news and riding the bus (Ji Song and Wood, 2007). This may be explained by the automatic nature of habits (i.e. directly cued by environmental stimuli). Given the minimal cognitive effort they require, habits “assume precedence over more thoughtful actions” (Verplanken and Wood, 2006, p. 93). This is important as today’s society is characterised by a feeling of generalised time pressure, so people will tend to use simple heuristics such as habits (Betsch et al. 2004). In fact, the trend towards individualisation and the parallel rapid technological and institutional changes that characterise contemporary society engender a feeling of information overload which renders habits an element enhancing security and comfort (Lindbladh and Lyttkens, 2002). For mainly risk-­adverse people, habits can also be considered less risky as outcomes and probabilities are allegedly known with greater certainty. Another reason for the potential persistence of habits lies in the presence of strong short-­term rewards that override long-­term benefits as illustrated by the case of “bad habits”, such as smoking where people can not give up the pleasure of a cigarette (i.e. short-­term reward) even though they have intentions to quit given the potential health damage it could help avoid (i.e. long-­term benefits). This temporal asymmetry can also illustrate the above-­mentioned influence of STS and institutions on individual decision processes like, for instance, in the case of financial markets that make managers develop habits of focusing “on short-­term profitability rather than long-­term growth and firm survival” (Barnes et al., 2004, p. 373). Finally, the pervasiveness of habits is even enhanced through self-­reinforcing processes acting both on the general propensity to rely on habits and on the existing habits themselves. On the one hand, the above-­mentioned path dependence of information, as well as the tendency to disregard contradictory information,

An evolutionary perspective   51 makes existing habits even more deeply ingrained.15 On the other hand, at a broader level, people relying on habits adjust their cognitive perceptions, matters of appreciation and normative judgements in coherent structures (Lindbladh and Lyttkens, 2002), which strengthens the idea that the reliance on habits is dependent upon past experience and conditions. In addition, Veblen ([1899] 1994, p.  108) asserts that habits are stronger if they are “largely and profoundly concerned in the life process” or “intimately bound up with the life history”. In other words, not only do existing habits get more entrenched through time but so does the general disposition to rely on habits. This is what Jager (2003) calls a “contingent reinforcement”. This also was already acknowledged in Veblen ([1899] 1994, p. 107–108) where it is said that “the longer the habituation (. . .) the more persistently will the given habit assert itself ”. There is thus clearly a form of lock­in process of habits. Thus policies promoting sustainable energy consumption would need to both shift the incumbent STS to shape decisions towards the desired direction and also deconstruct habits that this STS has forged with time (as increased environmental awareness and intentions formulated accordingly are not sufficient in the presence of strong habits).

3.5  Defining “habits” and assessing their influence on behaviour At this stage, it is important to provide a “tentative” definition of the concept of habits. Following Verplanken and Aarts (1999, p.  104), habits are defined as “learned sequences of acts that have become automatic responses to specific cues and are functional in obtaining certain goals or end states”. Note that this definition clearly focuses on habits that intervene at the level of actions and not on the influence of habits on intention themselves. The latter is the focus of interest of “old institutional” economists like Hodgson who sees established habits as “a potential basis for new intention or beliefs” (Hodgson, 2004, p. 656). According to this view, the word “habit” can also include habits of thought and is thus a generative ground of both reflective and non-­reflective behaviour. Hodgson’s view of habits as a propensity is interesting as it is “both interactionist and evolutionary” (Hodgson, 2004, p. 658) since humans are considered as socially constructed beings but with different predisposition and aspirations. Again, this shows the adequacy of those habits with our framework centred on the concept of circularity between individuals and population and with the aforementioned approach adopted in Gram-­Hanssen (2008). This “propensity” concept inspired by Thorstein Veblen is insightful for energy consumption. If every individual has habits, the attitude towards habits as a general strategy of decision-­making can be different from one individual to the next as it is clearly shown in the qualitative analysis performed by Gram-­ Hanssen (2008b). Nonetheless, in the following sections, we will solely deal with “habits” in the sense of Verplanken and Aarts (1999). Accordingly, within the view of

52   An evolutionary perspective habits as expressed in Hodgson (2004), we thus only consider the non-­reflective behaviours that are generated by the concept of “habits of thought” that act as “filters of experience”. In other words, Hodgson’s view of habits refers to learning “sequences of acts” which are performed in a habitual manner. We are thus closer to “habituation” as a “social mechanism” (Hodgson, 2004, p. 652) than to habitual acts. This dichotomy between actions and thought is essential to better understand how the somewhat ambiguous and multi-­dimensional term of “habits” shed an insightful light on energy consumption dynamics. The clarification is not new as Veblen himself clearly distinguished “habits of thought” from “habits of life”. The latter are considered as equivalent to the “habits of actions” defined by C.S. Peirce as “a rule of action” to address “familiar circumstances in an effective way” (Brette, 2004, p.  247–248). As summarised in Waller (1988, p.  114), “Veblen, in contrast to Peirce, focused on the social dimensions of habit, rather than on its individual manifestations”. However, this does not prevent us from integrating habits into a broader evolutionary framework since “[h]abits of thoughts are an outcome of habits of life” which are themselves “the indirect product of the technological scheme” (Veblen quoted in Brette, 2004, p.  253). As mentioned above, social learning is an essential form of learning, so both forms of habits can be handed on and this may explain the fact that people

Cultural complex

Institutions (social habits of thought)

Individual habits of thought

Individual habits of action

Material and technical conditions

Instincts

Figure 3.1 Veblenian process of institutional self-reinforcement (source: adapted from Brette 2003, 2004).

An evolutionary perspective   53 develop habits that are “compatible with a given material and technical environment although they may not be directly confronted with it” (Brette, 2004, p.  259).16 If we add to that picture the notion of circular causality, we end up with a process with positive feedback between habits (i.e. “habits of actions” which will be further explored below), institutions (i.e. “habits of thoughts”) and the broader “cultural complex”, a notion similar to the aforementioned STS or TIC. Highlighting the role that habits play in mediating behaviour means no room is left for controlled or deliberate processes in the causal factors of behaviours. Nor does it imply that there exists a clear division between automatic and controlled processes. Consistent with the work of Damasio (1995, 2000) which shows the presence of cortical interconnectivity in the human brain, it is clear that mental processes generally involve a mix of automatic and controlled attributes (Bargh, 1996; Betsch et al., 2004; Jackson, 2005). In fact consciousness and deliberation accompany the process of automatisation. Besides, since habits are acquired and learnt, they originally require deliberation as free will is essential to memorisation.17 The often quoted “driving metaphor” indeed perfectly illustrates that even though experienced drivers are able to change gears without having to think about it, this cognitive automatism was “acquired through a long learning process in which motivation plays a far from negligible role” (Lazaric, 2007, p.  3). Thus, if “consumer behaviour is often mediated by processes that occur outside of conscious awareness” (Chartrand, 2005, p. 209), it could also sometimes be qualified as unconsciously resorting to previously consciously determined evaluation. Echoing Dopfer (2005, p. 25), we have “intelligent habits”, while the general disposition to rely on habits could be considered as a form of “habitual intelligence”. This corroborates the process of habit formation in three stages as described in Jager (2003) where it is acknowledged that the first performance of a certain behaviour was intended – whether through deliberation, learning or imitation. Then, the first stage is the cognitive processing of the information gathered during the initial performance. During the second stage the processed information is converted in procedural forms by practices (i.e. the required effort is diminished). Finally, the third stage refers to the behaviour acquiring the status of a habit which, as mentioned above, will then be reinforced through time. Nonetheless, on the spectrum from control to automaticity, habits clearly lie closer to automaticity (Jager 2003). Even though we may be aware that we rely on habits and are capable of changing them, we still do it without little cognitive resources involved. This clearly distinguishes habits from purely automatic behaviours that are more emotionally based and reflex-­type behaviours.18 It is thus important to insist that the strength of a habit depends on the “degree to which the behaviour has been automated and is being performed without cognitive elaboration” (Jager, 2003, pp. 2–3). Therefore, habits should not be simply equated with frequency of past behaviour. As claimed in Verplanken (2006, p. 639), “whereas repetition is a necessary condition for a habit to develop [. . .] it is not repetition per se that matters”.

54   An evolutionary perspective Beyond the necessary “history of repetition”, the crucial feature that characterises habits is thus their automaticity or more precisely “the automatic elicitation of behaviour upon encountering specific cues” (Verplanken and Orbell, 2003, p. 1317). In other words, provided that a habit has been formed through the satisfactory repetition of a given behaviour and that the goal associated with that habit is activated,19 the presence of the specific cue automatically triggers the habitual behaviour. Veblen ([1899] 1994, p. 106) also mentions the fact that habits are “a method of responding to given stimuli”. Following the work of John Bargh (1994), automaticity can be considered as displaying four distinct features sometimes referred to as the “four horsemen of automaticity”: lack of control, lack of awareness, efficiency (i.e. saving up cognitive resources than can be used for other purposes) and lack of intention. Verplanken and Orbell (2003) provide evidence that habits tend to display the first three features of automaticity, at least to a certain extent which can serve to distinguish the strength of different habits. For instance, even though habits are controllable in principle, it is often quite difficult to override strong habits such as smoking cigarettes (Verplanken and Faes, 1999). Dijksterhuis et al. (2005) as well as Chartrand (2005) provide ample and well-­documented evidence regarding the minimal awareness that is involved in performing consumer behaviour. Regarding the unintentional feature of habits the picture must be somewhat qualified: if habits can turn to be “counterintentional” (Verplanken and Faes, 1999), the fact that they are functional makes them intentional to some degree (Polites, 2005). All together, this shows that, as mentioned earlier, habits are not purely automatic as reflex-­type behaviours could be deemed to be.

3.6  Conclusion: the need to break unsustainable energy “habits” From our perspective, the important question is thus to assess whether and in what proportion energy consumption is generated by habitual behaviour. This is obviously an empirical question but based on the three conditions identified in Jackson (2005) – degree of involvement, perceived complexity and degree of constraint – we may suspect this latter part to be high as claimed by Shove (2005). Indeed, the decisions taken in everyday energy consumption are likely to be considered as having less important consequences than other decisions. According to Amos Tversky, people are more likely to use simple heuristics (such as habits) in such situations. Needless to say, the low complexity of decision tasks related to everyday energy consumption does not require a lot of cognitive effort either. Finally, as we mentioned above, the constraints of today’s society (i.e. the feeling of time pressure as well as the information overload) tend to favour the use of habits. This suggests that everyday energy-­related behaviours do not require much intentional effort to be set in motion such as it has been shown to be the case in, for example, food consumption by adolescents in Kremers et al., 2007. For Schäfer and Bamberg (2008, p. 213), energy use along with nutrition and mobility are “forms of behaviour that are hardly reflected

An evolutionary perspective   55 upon in everyday life”. This is corroborated by a review of studies on household energy consumption where one of the lessons learnt is the importance of habits that can “prevent that (pro-­environmental) behaviour from happening” and make a person “act opposite to his or her intentions without even realising it” (Martiskaïnen, 2008, p. 87) One other important element that characterises domestic energy consumption is that, as mentioned in Section 3.4, it is not visible (Jackson, 2005; Abrahamse et al., 2005). This implies that people do not consider the remote environmental impacts of their actions when performing energy-­related behaviours. This obviously facilitates having unsustainable habits in this field (Martiskaïnen, 2008, p. 77). The existence of habits in domestic energy consumption will most likely limit the effectiveness of incentives as these traditional measures do not specifically address the performance context and the social and structural influences that shape and maintain these habits. For instance, the efficiency of information campaigns will be reduced by the presence of the above-­mentioned “confirmatory bias” in information search displayed by people with strong habits. Efficient energy policies should thus be designed with the aim of disrupting unsustainable habits. Starting from the very definition of habits, it seems straightforward that breaking existing habits will require change in environmental cues and/or induced deliberation while time and repetition will be needed to promote alternative habitual behaviour. Since habits can be seen as the automatic cuing of behaviour induced by stable features of performance context (Dijksterhuis et al., 2005; Chartrand, 2005; Wood et al., 2005), analysing the habit-­triggering cues in the field of energy consumption is a first step towards disrupting existing habits. Indeed, as noted in Verplanken and Wood (2006, p. 9), “the dependence of habits on environmental cues represents an important point of vulnerability.” Following Ji Song and Wood (2007), the main context cues include physical surroundings, social surroundings, temporal perspective, task definition, and antecedent states. As far as household energy consumption is concerned, physical location is obviously an important environmental cue. Accordingly, economic incentives aimed at improving energy efficiency would probably be more effective if supporting information was specifically targeted towards new residents (whose previously determined habits have been perturbed with the change of physical location) than they would be among the population of incumbent residents. This is supported by the evidence contained in Wood et al. (2005) that shows how a change of location would induce decisions to be more in line with intentions that with habits. Beyond the importance of cues, we also saw that the persistence of habits could be partly explained by the presence of short-­term rewards coupled with what we called the problem of “temporal asymmetry”. Besides disrupting the performance context of habits,20 another policy measure that could also turn out to be effective would be to reduce the direct rewards experienced when performing the habitual behaviour. Jager (2003) provides some interesting examples of

56   An evolutionary perspective such rewards-­reducing strategies like, for instance, applying nasty substances on fingernails to avoid biting them or the use of anti-­alcohol pills. Whereas there does not seem to be any obvious similar strategies in the field of domestic energy consumption, policy-­makers could turn to their counter-­parts which aims at increasing the rewards attached to the alternative behaviour. An example of such a strategy is also provided in Jager (2003) who mentions the Dutch policy of placing waste nets along roads in order to turn correct waste disposal into a rewarding game. Making the alternative behaviour more rewarding seems to provide an interesting point on which to found sustainable energy measures. This is confirmed by the answers provided by respondents that have taken part – on a voluntary basis – in the Brussels Energy Challenge as it is the very notion of “challenge” that is considered to be most “interesting” aspect of the proposed policy.21 The participants also considered the idea of challenge as a facilitating factor in implementing their behavioural change on a daily basis. In fact, as mentioned in Matthies et al. (2006, p. 94), commitments strategies (i.e. as in the Brussels Energy Challenge) enhance “self-­satisfaction as a result of acting in accordance with personal values” and therefore increase “the cost of not acting”. Another strategy that builds on predictions from social identity theory and social comparison theory is the use of comparative feedbacks. These have been shown to increase the performance through raising motivation in a study of two units of a metallurgical company (Siero et al., 1996). In one unit, employees received information about energy conservation, had to set goals and received feedback on their own conservation behaviour. In the second unit the only difference was that they also received information about the performance of the other unit. As expected, employees who received comparative information saved more energy. Interestingly, the authors note that it is “remarkable that behavioural change took place with hardly any changes in attitudes” (Siero et al., 1996, p. 245). Finally, it is important to recall the context within which habits develop. Bearing this is mind, it is obvious that disrupting an unsustainable habit of energy consumption is only a first step as policy-­makers must also ensure the new (more sustainable) behaviour is tested, adopted and maintained. As mentioned in Matthies et al. (2006, p.  104), “a temporary situational change as a defrosting of habits can only lead to a long-­term change to new behaviour if the evaluation of the new behaviour is positive, which require that the internal and external determinants are in favour of the new behaviour”. Within our framework, this clearly means that external aspects (i.e. wider societal, cultural, institutional and technological aspects) must be taken into account. Policies should be aimed at helping consumers “to escape the restrictions imposed on their knowledge by the mental habits they have acquired” (Ramazzotti, 2007, p. 776).

4 Changing habits and routines in energy consumption How to account for both individual and structural influences while integrating the motivational dimension1 4.1  Introduction The nature of the relationships between the many different levels of analysis at which system change can be assessed is a crucial topic that is central to methodological and ontological questions in social sciences. As mentioned in Hodgson (2007a, p. 95), the debate can be subsumed under the heading “rivalry between accounts based on situation or disposition” or, as most commonly framed, the “relationship between social structure and individual agency”. As we have shown in more detail in Chapter 2, mainstream analyses of the economics of energy consumption have been mostly misleading, notably regarding the “efficiency paradox”. Our stance is that this can be explained not only by the mechanistic nature of mainstream economics but also by its inherent reductionism.2 While reductionism in economics led to a theoretical framework building on “methodological individualism” (i.e. magnified with the quest for micro-­ foundations), this should not lead us to resort solely to collectivist accounts as they are just the other side of the reductionist coin of social sciences. Acknowledging both that “only by rescuing the individual from its conflation into the social can the social determination of individuality be fully appreciated” (Hodgson, 2007a, p. 101) and that the empirical evidence has convincingly shown that group-­level analyses where equally important in explaining the existence of socially acquired characteristics of human beings (Henrich, 2004), we thus need to turn to a framework allowing for both sources of explanation to be accounted for. Accordingly, the goal of this chapter is, through using the example of the “efficiency paradox” as an illustration, to show how the concept of habits sheds an insightful light on this dichotomy in providing a locus that accommodates for individual as well as structural and institutional accounts to be integrated into the picture. In line with the idea of “circularity” – which, as will be shown, is central to our framework – the “efficiency paradox” will not only serve to illustrate the idea that the notion of habits can be viewed as a “missing link” between structures and individual agency but will also demonstrate the relevance of resorting to habits in depicting such a complex social and ecological issue. To start with, we must further investigate relational complementarities since it seems scientifically untenable not to account for the basic fact that economic

58   Changing habits and routines agents do interact.3 This amounts to turning away from the sole focus on efficiency (i.e. inspired by the typically Cartesian idea of the domination of mechanical properties) towards efficacy, a “fundamental economic problem – one that cannot be found at all in the neoclassical research agenda” (Dopfer, 2005, p. 25). As explained in Chapters 2 and 3, its shift of focus towards a better understanding of economic dynamics, together with its departure from the perfect rationality hypothesis, renders evolutionary economics an inevitable theoretical ground in setting up policies for sustainable energy consumption. The added value of evolutionary economics in providing support for designing environment­related policies lies in its reliance on Thorstein Veblen’s concept of “cumulative causation” as one of its theoretical hypothesis. Thus, contrarily to the rather deterministic and linear view that prevails in mainstream economics (Dopfer, 2005), economic change is better pictured as a process of cumulative, double (downward and upward) and interactive causation (van den Bergh and Gowdy, 2003; Corning, 1997, Hodgson, 1997). Such an approach is insightful in that it allows for circular and self-­reinforcing interactions between economic agents to be taken into account. In other words, economic dynamics involve processes that see individuals interacting with an emergent population in a self-­reinforcing manner. It thus provides an alternative to the aforementioned reductionism under the form of simple aggregation (i.e. the micro-­foundations of mainstream economics) by building “on the notion of circularity between individual and population” (Dopfer, 2006, p. 18). At this stage it is important to underline that this picture arises from a focus on dynamics occurring at the “meso” level4 allowing for the role played by interdependencies of systems elements and the emergent nature of economic evolution to be accounted for. As explained in Chapter 2, integrating meso dynamics clearly provides an interesting level of analysis in energy-­related studies, so much so that they have been claimed to be the “missing link” of this field by Schenk et al. (2007). This brings us to the idea put forward in Brette and Mehier (2008) according to which habits à la Veblen are consistent with the framework built upon a micro-­meso-macro architecture as developed in Dopfer et al. (2004). In this chapter, we will provide support for this idea in showing how habits and routines could also be viewed as a missing link of energy-­related studies and that it perfectly fits in a framework building on the above-­mentioned notion of circularity. To put it differently, our stance is that habits, through providing stronger foundations to the understanding of interactions between structures and individuals, helps to better depict the essence and process of meso dynamics and their related emergent properties. This chapter is structured as follows. In the following section we will provide a definition of the concept of habits and show how it fits in a broader evolutionary framework. More particularly, we will try to clarify where habits stand with respect to the notion of routines that has been more widely discussed among evolutionary economists. The third section will then deal with the prominent features of habits, focusing on the delicate issue of how to articulate automaticity

Changing habits and routines   59 and limited awareness with free will and motivation. The fourth section will be dedicated to specifying how habits are able to accommodate for both individual and structural/institutional sources of explanation to be integrated into the analysis. This will require going into the distinction (present in Veblen’s work) between habits of action and habits of thought. In the fifth section, we will provide an illustration of how habits and routines as developed in our framework shed a different light in the field of energy consumption, most notably with respect to the “efficiency paradox” issue. Acknowledging that habits and routines may change and that unsustainable habitual and routinised practices in energy consumption are to be broken in order to meet Kyoto objectives, the final section will conclude by providing policy-­ makers with tools and instruments that specifically aim at triggering a change of practices in this field.

4.2  Habits and routines in the evolutionary framework The relation between institutions and individual behaviour has been a widely debated topic in the institutionalist theory.5 Starting with the above-­mentioned idea that what is needed is a framework which would allow for both the evolution of structures and individuals to be understood, turning to the insights from the Veblenian tradition seems very promising. Veblen’s view of behaviours as embedded in a wider social context through corresponding habits is essential here as it is those very habits that enable institutions to be maintained. (See the quote from Veblen given in Section 3.1.) From this perspective, institutions are a breeding ground for thought and so are a dominant cognitive vehicle which has extended into society. Social structure operates a kind of natural selection for “habits” allowing them to be renewed. In this context man is no longer defined as rational and calculating Homo oeconomicus, but as a creature with coherent structure of inclinations and habits which are revealed and expressed depending on the actions mobilising him. In sum, individuals have certain habits and behaviours that are conditioned by experience (Veblen, [1919] 1990, p. 79). As mentioned in Hodgson (2007a, p. 107), “habits are the constitutive material of institutions” while the presence of institutions make that “accordant habits are further developed and reinforced among the population”. There is thus clearly circular causation between individuals and institutions magnified through the existence of habits. In fact, following Veblen, institutions are nothing else than “social habits of thoughts” as shown earlier in Figure 3.1. In the same vein, routines can be viewed as organisational habits. But just as organisations are not reducible to the mere sum of their members, routines must then be considered as being ontologically different from individual habits (Lazaric, 2000). They display emergent properties that can not be fully apprehended through solely looking at the individual habits of their constitutive members. The organisational feature of routine is important but should not been understood as an epistemological obstacle. Indeed, in the notion of habits, social

60   Changing habits and routines learning is also present notably for the diffusion and for the imitation of successful habits of other individuals (i.e. in groups of individuals where social status seems to focus attention). With regard to routines observed in organisations or groups, individuals are present notably for activating them, for interpretating them and for making sense inside the organisational context (Feldman, 2000). The routines observed are also the byproduct of individuals and organisations, whereas habits observed at individuals levels are also expanding at the collective level. As Hodgson (2007a, p.  111) clearly puts it “[r]outines are organizational meta-­habits, existing on a substrate of habituated individuals in a social structure”. In short, both routines and habits emerge in social life but whereas habits may be defined as a disposition to behave or think in a specific situation according to a specific context; routines define a sequence of individual habits with the execution of one habit triggering the next (Knudsen, 2008, p.  131). This means that routines promote coordination because “the need to achieve tight coordination among a group of people adds a further level of error control and reliability to organizational routines compared with habits” (ibid., p. 132). The importance of habits in the Veblenian tradition of institutionalist theory is to be put in parallel with recent works in social psychology where a substantial body of literature has shown that – more often than not – our behaviour is guided by habits (i.e. it takes the form of repetitive actions performed with minimum thinking) and thus without the type of cognitive deliberation and consciousness assumed in the rational choice model (Verplanken et al., 1999; Lindbladh and Lyttkens, 2002; Chartrand, 2005; Dijksterhuis et al., 2005; Verplanken and Wood, 2006; Ji Song and Wood, 2007). The obvious advantage of adopting this kind of habit in decision-­making is that it frees up resources than can be devoted to solving non routine-­like problems6 and, as such, it can be said to be a highly rational7 way of allocating our limited cognitive abilities (Jager, 2003). At this stage it is crucial to provide a tentative definition of the concept of habits in order to see whether the insights from social psychology and institutional theory are compatible. Borrowing directly from the work of Veblen, James and Dewey, Hodgson (2007a, p. 106) sees habits as “submerged repertoires of potential thought or behaviour to be triggered by an appropriate stimulus and context”. This definition is further complemented by two essential elements: habits are often “unconscious” and different from behaviour as they only are an “acquired predisposition” (ibid., p. 106). Within the field of social psychology, an often quoted definition is the one provided in Verplanken and Aarts (1999, p.  104), where habits are viewed as “learned sequences of acts that have become automatic responses to specific cues and are functional in obtaining certain goals or end states”. In a more recent paper, Wood and Neal (2007, p. 843) complement the definition with respect to goals by underlining that “habits are subserved by a form of automaticity that involves the direct association between a context and a response but that interfaces with goals during learning and performance”.

Changing habits and routines   61 Before describing habits in further details in the next section, it is important to note that Hodgson’s definition refers to both “thought” and “behaviour” (i.e. actions) whereas most of the work in social psychology deals with habits that intervene at the level of actions (i.e. habits that moderate the relation between intention and behaviour). Here again, the work of Thorstein Veblen is enlightening as this dichotomy between actions and behaviour was explicitly acknowledged through its clear distinction between “habits of thought” from “habits of life”. Brette (2004, pp. 247–248) convincingly shows how “habits of life” à la Veblen are equivalent to the “habits of actions” defined by Charles Sanders Peirce as “a rule of action” allowing to address “familiar circumstances in an effective way” (see also Waller, 1988, p. 114). As shown earlier in Figure 3.1, Veblen sees habits of thoughts as an outcome of habits of life (Brette 2004, p.  253). This perspective of habits as depicted in Figure 3.1 allows for going beyond mere habits of actions to see habits as “a potential basis for new intention or beliefs” (Hodgson, 2004, p.  656). Habits can also include habits of thoughts and is thus a generative ground of both reflective8 and non-­reflective behaviour. Hodgson’s view of habits as a propensity is interesting as it is “both interactionist and evolutionary” (Hodgson, 2004, p. 658) since humans are considered as socially constructed beings but with different predisposition and aspirations. This shows how habits fit into an evolutionary framework that rests on the concept of circularity between individuals and structures as they provide a locus allowing for the mutual interdependence between both levels to be accounted for. Routines, on the other hand, express a form of coordination driven by individual forms of habituation, and trigger inside an organisational context (Nelson and Winter, 1982; Cohen and Bacdayan, 1994). They are a result of a group of recurrent pattern of interactions between individuals who are in a situation of triggering a disposition in a reciprocal way (Cohen and Bacdayan, 1994).

4.3  The distinctive features of habits and routines It follows from the above-­mentioned two definitions that habits and routines can be characterised as a context-­dependent form of acquired automaticity. However, this automaticity is somewhat limited (i.e. behaviour is only “potential”) by a required functionality or correspondance with objectives. As mentioned in Chapter 3, the crucial feature that characterises a habit is not its repetitive nature but the degree to which it has become automatic. This is in line both with Verplanken (2006, p.  639) who considers that “whereas repetition is a necessary condition for a habit to develop [. . .] it is not repetition per se that matters” and with Hodgson (2007a, p. 106) who claims that “[r]epeated behaviour is important in establishing a habit. But habit and behaviour are not the same”. To put it more precisely, the main feature of habit is “the automatic elicitation of behaviour upon encountering specific cues” (Verplanken and Orbell, 2003, p. 1317). This situation/behaviour association is often referred to as a cognitive script which can thus be viewed as the knowledge structure behind the habits

62   Changing habits and routines (Jager, 2003). In sum, provided that a habit has been formed through the satisfactory repetition of a given behaviour and that the goal associated with that habit is activated,9 the presence of the specific cue automatically triggers the habitual behaviour.10 However, acknowledging the third principle that follows from the aforementioned definition provided by Wood and Neal (2007), this is only valid as long as a conflicting goal–habit interaction does not result in people exerting control over their triggered habits. Although automaticity is regarded as the main feature of habits, it is of crucial important to note that: Habit is not mere automatic behaviour; that mistake reproduces the Cartesian dualism of thought and machine. Even the most ingrained habits are the objects of recurring mental activity and evaluation. [. . .] Consequently, habits have both intentional and causal facets. Furthermore, we do not have to regard the evolutionary selection process as operating simply on the raw material of programmed action. There should be a place in an evolutionary explanation for some freedom of the will, but not in quite the same sense as the fully deliberating and choosing agent found in the rhetoric economic theory. (Hodgson, 1993a, p. 229) Indeed, highlighting the role that habits play in mediating behaviour does not mean that there is no room left for controlled or deliberate processes in the causal factors of behaviours. In fact, since habits are acquired and learnt, they originally require deliberation as free will is essential to memorisation.11 The often quoted “driving metaphor” indeed perfectly illustrates that even though experienced drivers are able to change gears without having to think about it, this cognitive automatism was “acquired through a long learning process in which motivation plays a far from negligible role” (Lazaric, 2007, p. 3). In fact, as noted in Wood and Neal (2007, p.  850), “the habit-­goal interface is constrained by the particular manner in which habits are learned and represented in memory”. It appears that the instigation of the goal to act is necessary to automatically activate the associated actions (Aarts and Dijksterhuis, 2000). Thus, if it can be said that “consumer behaviour is often mediated by processes that occur outside of conscious awareness” (Chartrand, 2005, p.  209), it could also sometimes be qualified as unconsciously resorting to previously consciously determined evaluation. In sum, we have “intelligent habits”12 and thus, the puzzling question of how to account for both the automatic and motivated nature of habits can not be eluded. As will be shown in Section 4.4, accounting for free will and motivation is essential for analysing the important issue of how habits and routines may be changed. As Martha Feldman has highlighted in this regard: Routines are performed by people who think and feel and care. Their reactions are situated in institutional, organisational and personal contexts. Their actions are motivated by will and intention. They create, resist, engage in

Changing habits and routines   63 conflict, and acquiesce to domination. All these forces influence the enactment of organizational routines and create a tremendous potential for change. (Feldman, 2000, p. 614) This idea that knowledge is not inert but may change is induced by the idea that free will is essential and is at the heart of many cognitive automatisms. This idea is central in the work of Bargh (1997), who progressively integrates the principles of motivations such as they are described in the “self-­determination theory”. In this theory, John Bargh observes to what extent the emotional, cognitive and motivational conditions that characterise an environment can serve as the basis for a preconscious psychological state that can generate an automatic response – automatic in that it escapes the individual’s awareness and direct consciousness. The underlying idea – which Bargh borrowed from Whitehead (1911) and Shiffrin and Dumais (1981) – is that the routinisation of certain procedures helps an individual focus his/her attention on essential, new and creative tasks. What is new compared to the traditional theory on cognitive automatisms is the manner in which Bargh analyses motivation. Indeed, nothing happens by accident. Echoing the aforementioned driving metaphor, Bargh (1997, p. 28) underlines not only that before walking may become an automatic process, we have learnt how to walk but also, and not less important, that we intended to walk. He even talks of an “auto-­motive model” to explain to what extent mental representations are essential to the development of cognitive mechanisms. The interactions between cognition and motivation are therefore essential and must be taken into account. Consciousness is essential in that it initiates the process of skill acquisition with possible tensions during this learning stage: But even in the case of these automatic motivations, it is possible for a person to become aware of his or her actions and, as in the case of bad habits, attempt to change those behavior patterns. This question of how automatic and conscious motivations interact when in conflict is one of practical as well theoretical importance, and we are now investigating parameters of this interaction. (Bargh, 1997, p. 52) Recent studies converge on the fact that the consciousness versus automaticity opposition is a dichotomy that is no longer valid because it has now become clear that consciousness accompanies, rather than replaces, the processes of automatisation (Baumeister and Sommer, 1997; Tzelgov, 1997; Bargh and Chartrand, 1999; Gardner and Cacioppo, 1997). The same can be said about the long-­ held idea that there exists a clear division between automatic and controlled processes. In line with the work of Damasio (1995, 2000), which shows the presence of cortical interconnectivity in the human brain, it is now clear that mental processes generally involve a mix of automatic and controlled attributes at the

64   Changing habits and routines same time.13 In sum, both consciousness and deliberation accompany the process of automatisation. Hodgson (2007a, p. 107) goes further in saying that “[h]abit is not the negation of deliberation, but its necessary foundation”. This explains why automatisation should thus not be overlooked as reminded by Camerer et al. (2005, p. 11) who claim that “human behavior requires a fluid interaction between controlled and automatic processes and between cognitive and affective systems [. . .] since we see only the top of the automatic iceberg, we naturally tend to exaggerate the importance of control”. In order to provide an answer to the question of how a decision process that has become automatic may evolve and change, let’s turn again to the work of John Bargh. Following Bargh (1994), automaticity can be considered as displaying four distinct features (the “four horsemen of automaticity”): lack of control, lack of awareness, efficiency (i.e. saving up cognitive resources than can be used for other purposes) and lack of intention.14 Verplanken and Orbell (2003) provide evidence that habits tend to display the first three features of automaticity, at least to a certain extent (which can serve to distinguish the strength of different habits). For instance, even though habits are controllable in principle, it is often quite difficult to override strong habits, such as smoking cigarettes (Verplanken and Faes, 1999). Dijksterhuis et al. (2005), as well as Chartrand (2005), provide ample and well-­documented evidence regarding the minimal awareness that is involved in performing consumer behaviour. As far as efficiency is concerned, Wood et al. (2002) provide evidence that people can think about other things while performing a habit. Regarding the unintentional feature of habits the picture must be somewhat qualified: if habits can turn to be “counterintentional” (Verplanken and Faes, 1999), the fact that they are functional (i.e. goal-­directed) make them intentional (or volitional) to some degree (Polites, 2005). All together, this again shows that, as mentioned earlier, habits and routines are not purely automatic as reflex-­type behaviours could be deemed to be.15 This is what makes them amenable to change. Echoing the question raised in Klöckner et al. (2003, p. 400) who consider it inappropriate “to ask people to report the strength of their habits when an essential feature of habit is its unconscious character”, it is then necessary to explain how people can exert control over a decision process that is considered unconscious. First, it must be recalled that the essential feature of habits is their automatic nature and not their unconscious character. Lack of awareness is only one of the four features of automaticity and is thus sufficient but not necessary for a process to be qualified as automatic. Then, in line with Chartrand (2005), it seems appropriate to start with setting a clear distinction between the different stages at which awareness may operate: the environmental cues, the process by which these cues influence behaviour and the outcome of that process. Dijksterhuis and Smith (2005, p.  226) claimed that while we are usually aware of the outcome and sometimes aware of the cues, we are usually not aware of the process. Following that line of thought, many choices are thus “introspectively almost blank” (Dijksterhuis et al., 2005, p. 193)

Changing habits and routines   65 with respect to behavioural details but, at the same time, consumers are nonetheless aware of their action in a broad sense (Dijksterhuis and Smith, 2005, p. 226). In sum, whereas people certainly do not have access to many automatic and tacit processes, they are still able to report on the occurrence of some of these provided we touch on this “broad sense awareness” (i.e. if they are presented question in a meta-­cognitive fashion that touches on the “learned sequences” part of habits). We are thus aware that we rely on habits16 even though we are not fully conscious of it when performing the habitual behaviour – this broad awareness being a distinguishable feature of habits as compared to fully automatic behaviours such as reflexes. For instance, building on the example of grocery shopping described in Dijksterhuis et al. (2005, p. 193), consumers may have picked most items that end up in their cart with nothing more than “a fleeting moment of awareness” and thus have no memory of making those choices, but they would still be able to realise (and report) afterwards that they were not thinking about those decisions when “making” them. This meta-­awareness may explain the finding of Bartiaux (2008) where it is shown that reporting on personal habits is a first step towards bringing knowledge from practical to discursive consciousness which, in turn, is deemed to be a necessary condition for changing habits. The distinction between practical and discursive consciousness –borrowed from the work of Anthony Giddens – is similar to the difference between “procedural” and “declarative” memory (see Lazaric, 2007).17 This seems intuitive since habits are thought to be “acquired through a process in which repetition incrementally tunes cognitive processors in procedural memory” (Neal et al., 2006, p. 198). As it is known since the work of, among others, Cohen and Bacdayan (1994) and Egidi (1996), procedural memory is the storehouse of our habits and skills. Consequently, bringing information from procedural (or practical) to declarative (or discursive) memory could be conceived as a step backwards (or a return trip to the source) since the declarative stage (i.e. the cognitive processing of information in memory) is the first stage of habit formation which ends up with the procedural stage (Jager, 2003). This would suggest that going back, in some way, to the initial phase of habit formation could provide a starting point for changing habits and routines. This echoes the view suggested in Langer (1989) and in Langer and Moldoveanu (2000) that routines may be activated in a “mindful manner” – which thus acknowledges that declarative and procedural memories co-­evolve and that determination and consciousness also do. Langer defined this process in a similar vein that Giddens (1984) with the notion of “mindfulness” highlighting individuals’ attention inside cognitive automatisms. In this perspective, individuals should make sense of what they do and perceive by increasing their acuity so as to be able to integrate new information and to continuously update and refine their mental categories. Indeed, the notion of “mindfulness” emphasises the necessity of focusing not so much on simple quantitative questions of data storing, but on the quality of the cognitive process.

66   Changing habits and routines

4.4  The formation and persistence of habits and routines Cohen (2006, p. 388) gives the example of Russian soldiers that, although disguised as civilians, formed up in ranks and marched away to illustrate what he calls “the occasional “misfirings” in which routines are executed in inappropriate but compelling circumstances”. This picture is quite similar to the idea put forward by social psychologists that show how habits may often become “counterintentional” (Verplanken and Faes, 1999) as the stronger they are, the more effect they have on behaviour relative to intentions.18 Indeed, in line with the collective example of Russian soldiers, even in cases where a single individual does form intentions to perform a given behaviour (e.g. eat more healthily), he sometimes does not implement it because it contradicts existing habits (e.g. stop by the fast-­food restaurant around the corner).19 Strong habits have also been found to moderate the impact of moral norms and self-­concepts on behaviour (Wood and Neal, 2007, p.  853). As a consequence, beyond explaining how habits and routines form, it is also necessary to explain why they sometimes persist although they conflict with norms, goals or intentions. Knudsen (2008) provides an explanation of this process by showing common characteristics of habits and routines in social populations. First, habits and routines multiply and spread in social contexts. These potential externalities lead us to have a specific glance on the environmental feedback which may be viewed as a force causing the reinforcement as well as the elimination of some forms of behaviours judged un-­adapted. Second, habits and routines contain “ready-­made solutions to common problems in a stable context” because they have been elaborated in a frame of bounded rationality. These two characteristics may explain some potential sub-­optimality of habits and routines, notably why despite these intrinsic features, they may be widely diffused in populations and organisations (Knudsen, 2008, p. 133). With habits and routines able to accommodate both individual and structural/ institutional influences, the reasons for their persistence will thus refer to both levels of explanation in an intertwined and mutually interdependent manner. To do so, it quickly appears that the concepts of “lock-­in” and “path dependence” are very useful. Indeed, Paul David, who pioneered together with Brian Arthur the research on “lock-­in” processes, already asserted in the mid-­1980s that path dependencies may arise “in the presence of strong technical interrelatedness, scale economies and irreversibilities due to learning and habituation” (David, 1985, p. 336, emphasis added). As mentioned in Barnes et al. (2004, p.  372) only the first two arguments were used in the literature on “technological lock-­in” following the work of David and Arthur to the detriment of the “behavioural” part of the lock-­in process. In fact, there is a sort of mutual (or circular) form of reinforcement that arises from the influences of the STS in shaping behaviour which makes individual form habits in specific ways that are consistent with the STS operating constraints (Hodgson, 2004, p. 656). As mentioned in Ramazzotti (2007, p. 774), “consumers can only ask for what is available; they cannot demand what is

Changing habits and routines   67 deemed “technically” impossible to produce. These real constraints eventually feed back on mental habits”. There are thus institutional reasons that make individuals resort to the use of habits as habits allow for collective structures to be sustained through being a vector for the transmission of norms and customs (Waller, 1988). The influence of institutions in forming habits is illustrated in Barnes et al. (2004, p.  373) with the example of the influence of the financial market on the management decisions taken by firm actors. In fact, as claimed in Pierson (1993, p. 603), “policies provide incentives that encourage individuals to act in ways that lock in a particular path of policy development”. However, we can also find explanatory factors at the level of individuals. As mentioned earlier, the primary reason for people to resort on habits is to efficiently allocate their limited cognitive resources. Relying on habits liberates the individuals from “the burden of all decisions” (Berger and Luckmann, 1966, quoted in Lindbladh and Lyttkens, 2002). As it has convincingly been shown in Tversky and Kahneman (1974), people use a variety of cognitive and emotional heuristics to deal with the impossibility of amassing all possible information and thus tend to make immediate and sometimes not even conscious choices of behaviour. This is where people become somewhat “locked in” to their decision routines as illustrated by Simon’s concept of docility – which refers to the “human propensity for accepting information and advice that comes through appropriate social channels” (Simon, 2005, p. 95).20 Starting from the idea that social learning is the most important form of learning of human beings (Tomasello et al., 2005) and that it is impossible to verify every piece of information we consider legitimate (i.e. rationality is bounded), there is some form of “path dependence” of the information that we use to make our decisions. This is confirmed in an empirical study by Hoeffler et al. (2006) that shows how the impossibility to experience all options before making a decision means that initial choices have long-­lasting effects on future preferences. Interestingly, this “path dependence” of preference is stronger when early decisions are deliberate as this reinforces the adoption of a biased search process. Another reason for the potential persistence of habits lies in the presence of strong short-­term rewards that override long-­term benefits as illustrated by the case of “bad habits” such as smoking, where people can not give up the short-­ term reward despite the long-­term benefits. This is what we called the “temporal asymmetry” problem (see Chapter 3). The benefits attached to a habit may be economic/financial, biological or psychological (Verplanken and Wood, 2006, p. 92). Immediacy and recurrence of positive feedback – which are clearly both valid in the cigarette case – are two important factors that contribute to the reinforcement of habits. There can also be what Jager (2003) calls a “contingent reinforcement” which denotes the fact that a deeply ingrained habitual decision strategy is likely to be tested in different but comparable situations. The very nature of habits may also explain their persistence as, due to their automatic nature (i.e. directly cued by environmental stimuli) and the minimal cognitive effort they require, habits “assume precedence over more thoughtful

68   Changing habits and routines actions” (Verplanken and Wood, 2006, p.  93). This is important as in today’s society that can be said to be characterised by a feeling of generalised time pressure, people will tend to use simple heuristics such as habits.21 In fact, the trend towards individualisation and the parallel rapid technological and institutional changes that characterises contemporary society engenders a feeling of information overload which renders habits an element enhancing security and comfort (Lindbladh and Lyttkens, 2002). For mainly risk-­adverse people, habits can also be considered less risky as outcomes and probabilities are allegedly known with greater certainty.22 Routines also play the same role by exhibiting some feeling of comfort and security associated to the notion of truce in organisations. This explains their possible persistence because routines can be seen as truces amongst potentially conflicting interests. Consequently their modification creates the fear of breaking some durable social interactions in which they are embedded (Dosi et al., 2008). Finally, it should be noted that this picture on the pervasiveness of habits is even enhanced through self-­reinforcing processes acting both on the general propensity to rely on habits and on the existing habits themselves. First, as mentioned above, there is a form of path dependence of the information that is used to make our decisions. Second, people with strong habits display what Faiers et al. (2007, p.  4385) call the “confirmatory bias” which refers to the fact that people tend to favour and seek out information that confirms their views, beliefs and behaviours.23 This may be explained by the fact that discarding contradictory information is a way to solve the problem of psychological discomfort known as cognitive dissonance. Those two elements24 contribute to make existing habits even more deeply ingrained over time.25 Furthermore, at a broader level, it has been shown that people relying on habits adjust their cognitive perceptions, matters of appreciation and normative judgements in coherent structures (Lindbladh and Lyttkens, 2002), which strengthens the idea that the reliance on habits is dependent upon past experience and conditions. So not only do existing habits get more entrenched through time but so does the general disposition to rely on habits. This was already acknowledged in Veblen ([1899] 1994, pp. 107–108) where it is said that “the longer the habituation [. . .] the more persistently will the given habit assert itself ”. There is thus clearly a form of lock-­in process of habits. Finally, it must be noted that the interplay of emotions with habits provides another source of reinforcement (Carrus et al., 2008).26 The aforementioned empirical result from the study of Hoeffler et al. (2006) which shows that the long-­lasting effect of initial choices is stronger when the latter are deliberated could be explained by the influence of emotions. In fact, it is known that deliberation is more likely to happen when the degree of involvement is high (Jackson, 2005). We could thus make the assumption that the increased emotional charge of the initial decision makes people more reluctant to contradict it when they are faced with conflicting information. It is likely that the cognitive dissonance is higher in those cases which would reinforce the biased search process highlighted in Hoeffler et al. (2006). The reinforcement role of emotional involvement was

Changing habits and routines   69 also implicitly recognised by Veblen ([1899] 1994, p. 108) where he asserted that habits were stronger if they were “largely and profoundly concerned in the life process” or “intimately bound up with the life history”. More generally emotions play a major role for social groups and organisations. For illustrating the permanent interplay between motivation and cognition, Rouleau (2005) observes the specific role of “middle managers”. These groups may appear to be critical in organisations by encouraging employees to take into account the emotional impact the changes can have on individuals (Floyd and Wooldridge, 1992; Huy, 2002). It is beyond the scope of this chapter to develop these aspects further but they are obviously a line for future research as the role of emotions and affect is clearly not something that can easily be grasped (Loewenstein and Lerner, 2003).

4.5  Habits, routines and energy consumption Behavioural lock-­in under the form of “habits” is important for understanding the continued increase of energy consumption in spite of existing environmental awareness and concern among the population.27 This echoes the potentially “counterintentional” nature of habits (Verplanken and Faes, 1999) or the “occasional misfiring” (Cohen, 2006). As developed in more detail in Chapter 3, the presence of strong habits could also serve to explain the existence of what is known as the “efficiency paradox” in energy consumption (DeCanio, 1998). This paradox refers to the fact there exists a substantial amount of investments in energy efficiency that are not spontaneously undertaken by actors even though they are highly profitable based on traditional financial criteria. Our stance is that the existence of energy-­inefficient habits of life may provide one explanatory factor of this paradox. Indeed, in line with those authors that see energy consumption as “the routine accomplishment of what people take to be “normal” ways of life” (Shove, 2005, p. 117), a study has shown that consumers’ intrinsic habits and preferences were important determinants of energy-­ inefficient choices in motor technologies (de Almeida, 1998, p. 650). Beyond its use for highlighting the inertia of consumption (Duesenberry, 1949), Veblen’s perspective of consumption as incorporating important a potential element of waste (of time, of effort and of goods) is also interesting in that it may explain the unconscious character of some consumption practices. Indeed, Veblen argued that some consumers may not always be aware of wasting in their daily life: For the great body of people in any community, the proximate ground of expanditure in excess of what is required for physical comfort is not a conscious effort to excel in the expensiveness of their visible consumption, so much as it is a desire to live up to the conventional standard decency in the amount of grade of goods consumed. (Veblen, [1899] 1994, p. 103, emphasis added)

70   Changing habits and routines This means that part of the conspicuous consumption is not always known by individuals and groups because it is built-­in to their daily life; it is a way of consuming that is part of their history and of their social way of behaving. Obviously, a lot of everyday energy consumption corresponds to these unconscious forms of built-­in consumption practices. The fact that energy consumption takes the form of habitual behaviour can be explained using the three conditions identified in Jackson (2005): low degree of involvement, low perceived complexity and high degree of constraint – which are all met for energy consumption. Indeed, the decisions taken in everyday energy consumption are likely to be considered as having less important consequences than other decisions. According to the work of Tversky, people are more likely to use simple heuristics (such as habits) in such situations. Needless to say, the low complexity of decision tasks related to everyday energy consumption does not require a lot of cognitive effort either. Finally, as we mentioned above, the constraints of today’s society (i.e. the feeling of time pressure as well as the information overload that characterise it) tend to favour the use of habits and routines. All together, this suggests that everyday energy-­related behaviours do not require much intentional effort to be set in motion such as it has been shown to the case of, for example, food consumption of adolescents in Kremers et al. (2007). For Schäfer and Bamberg (2008, p.  213), energy use, nutrition and mobility are “forms of behaviour that are hardly reflected upon in everyday life”. In such a context, it is difficult to expect consumers to be capable of exercising control over their consumption of energy in reaction to given incentives (whether economic or informative). This may explain why the focus on efficiency and the “incentives obsession” have failed in delivering energy reductions (Wilhite, 2007, p. 23).28 Since the central perspective of this chapter relies on the idea that individuals and institutions (i.e. here under the form of the STS) “mutually constitute and condition each other” (Hodgson, 1997, p. 404), we intend to further explore the concept of habits and routines for explaining the “efficiency paradox” in energy consumption bearing in mind the broader institutional and social context within which those behaviours develop. The view that technologies are embedded in a strongly influential social context of institutions makes that consumption is shaped by (whilst also shaping) technological constraints. In line with Gidden’s Structuration theory, which sees structures as both enabling and constraining, the current carbon-­based STS both constraints and enables the forming of habits. Indeed, the current carbon-­based STS shapes consumers’ choices towards more energy-­consuming ways of life. Cultural and technological changes go hand in hand as illustrated by the rise of average internal temperatures in UK houses from 13.8°C in 1970 to 18.2°C in 200429 while the average number of electric appliances increased from 17 to 47 over the same period of time (Martiskaïnen, 2008). In addition, as revealed by the “circular causation” concept highlighted in our perspective, while choices in energy consumption are being strongly influenced by the existing carbon-­based STS, they, in turn, contribute to reinforce and

Changing habits and routines   71 ­ aintain the incumbent STS. Indeed, if the use of highly automatised behaviours m such as habits is undoubtedly “procedurally rational” in stable contexts, it quickly turns into a change-­resisting factor when conditions and circumstances vary such that alternative behaviours would yield better outcomes. The inertia of habits and routines is not intrinsically negative as it holds entities together (Hannan and Freeman, 1989). In line with Carillo-­Hermosilla and Unruh (2006, p.  708) who resort to “old institutionalism” to explain the “apparent paradox in the increasing returns and lock-­in conceptualisation”, we thus consider habits and routines as an additional explanatory factor of long-­term technological stability. The “predisposition” concept inspired by Veblen is also very insightful for the issue of energy consumption. If it can be convincingly argued that every individual has habits (i.e. routinised forms of actions), the attitude towards habits in general (i.e. the idea of relying on habits as a general strategy of decision-­ making) can be different among individuals as it is clearly shown in the qualitative analysis performed in Gram-­Hanssen (2008b). In fact, as claimed in Brette and Mehier (2008, p. 5), “it is only by defining habits as propensities or predispositions, and not as behaviours as such, that we can understand why the same habit may have several actualisations”. This is in line with recent empirical analysis of energy consumption in Denmark and that display both “similarity and collectivity” and “variety and individuality” in behaviours (Gram-­Hanssen, 2008a, p.  14), as well as with Veblen’s acknowledgement of the “varying degrees of ease with which different habits are formed by different persons, as well as the varying degrees of reluctance with which different habits are given up” (Veblen, 1898, p. 108). Assessing habits at the level of individuals is thus also relevant in our framework although it is recognised that consumers’ choices are strongly influenced by structural, cultural, social and institutional forces such as norms, media, etc. More than “willing” consumers should then rather be viewed as partly “locked­in” (Sanne, 2002). Consumers are thus neither fully rational (in the sense of traditional economics) nor omnipotent. Given this picture, policies aiming at promoting sustainable energy consumption would thus have to both shift the incumbent STS for it to shape decisions towards the desired direction and also deconstruct habits that this same STS has forged with time (as increased environmental awareness and intentions formulated accordingly are not sufficient in the presence of strong habits).

4.6  Changing habits and routines: implications for policy-­making The previous sections described how an evolutionary perspective building on both structural and individual accounts of change through the concepts of habits and routines could prove insighful for depicting the idea that unsustainable energy consumption practices can be viewed as somewhat locked-­in. Accordingly, it appears straightforward to turn to the same framework in trying to find ways of unlocking those same practices.

72   Changing habits and routines Starting from an evolutionary approach to consumption, Cowan et al. (1997, p.  715) explain this process of unconscious consumption inertia with the importance of path dependency and suggest a better look at the consumer’s own past consumption history. They distinguish various groups which may interfere on the creation and formation of consumer’s behaviour: the peer group, the contrast group and the aspirational group (ibid., p. 712). This may explain the evolution of consumption and the interdependencies between various groups of consumers which have (or do not have) an active role in influencing consumption. Consumption here is shaped by the social interactions but also by the importance of the past. In this vein, some recent models try to depict the cultural dimension inside social learning, notably how “green” attitudes towards consumption have to be learnt with diverse incentives systems (for example “eco taxes”) which may play a role in promoting new kinds of consumption patterns (Buenstorf and Cordes, 2008). Buenstorf and Cohen’s model suggests going beyond the assumption of permanent “lock in” by demonstrating possibility of learning and change inside consumption patterns (Buenstorf and Cordes, 2008; Witt 2001). In this context, consumers’ characteristics are essential (Swann, 2001) for the broader diffusion of green products (Janssen and Jager, 2002). So are their number and the connections among them – i.e. local and/or global externalities – for switching in favour of green products (Tomochi et al., 2005). More generally, Munier and Zhaou Wang (2005) coin the concept of routines’ consumption with the aim of depicting social consumption as the product of history and of individual habits. This raises the thorny question of sovereignty in human action – i.e. how routines’ consumption defined as a product of past choices, repetition and prior interactions may require some new opportunitities for incorporating change. This idea is worthy of examination alongside recent findings on the concepts of habits and routines. In line with recent works in evolutionary economics (Dopfer, 2007), it is essential to account for the interplay between the individual and the collective levels of action. Indeed, individuals shape their judgement, beliefs and acts not only by themselves but also in interactions with others. And the nature of these micro interactions can produce “recurrent interacting patterns” that need to be carefully observed (Cohen et al., 1996). Besides, it is also important to recall the aforementioned crucial role of institutions which should be understood as the working rules of collective action that may restrain the individual deliberation and plays a cognitive role by creating “institutionalized minds” and “institutionalized personalities” (Commons, 1934, p. 874). Although deliberation and calculative processes are not always mobilised, in some circumstances the mind may reveal “a creative agency looking towards the future and manipulating the external world and other people in view of expected consequences” (Commons, 1934, p. 7; Hodgson 1988). This leads Loasby (2001) to show the importance of imagination for going beyond past routines on the demand-­side. In consequence, even though the old institutionalist framework is very insightful in highlighting the embeddedness of individual habits and organisational routines as well as the emergence of routinisation processes, it should also

Changing habits and routines   73 analyse change as pictured in the recent approach to organisational routines (Feldman, 2000; Lazaric and Denis, 2005; Becker et al., 2005). Indeed, several studies have shown the importance of stability and change in organisational routines (Feldman, 2000, 2004, Howard-­Grenville, 2005). Thus routines appear to be repertoires of knowledge partly activated by the members of an organisation (Lazaric, 2000, p. 164) as well as generative, dynamic systems, not static objects (Feldman and Pentland, 2003). However, routines also have a projectional role, notably those that individuals pretend to follow – this “ostensive” dimension of routines has been discussed by Feldman (2000). Policy-­makers should bear in mind the potential discrepancy which may exist between “perfomative routines” (those in operation and effectively used) and “ostensive routines”. This gap between intention and action is rather frequent – as illustrated above with “counterintentional habits” – and should not be overlooked when policy-­makers try to promote new types of behaviours. For example, as far as green products are concerned, when consumers are intending to buy a car, they are not always putting into practice their initial intention (for a good illustration, see Van Rijnsoever et al., 2008). As shown in Section 4.4, the motivational dimension should not be neglected for looking beyond the historical contingencies that limit the possibilities of novelty (Castaldi and Dosi, 2006). This prompts us to examine organisations’ capacity of improvisation in order to reveal the “essentially transformational character of all human action, even in its most routinized form” (Giddens, in Orlikowski, 2000, p.  425). Together with the meta-­awareness of people with respect to their habits, it thus seems necessary to build on the mindfulness or goal-­directed dimension of habits in order to trigger a change. As mentioned in Wood and Neal (2007, p.  844), “habits possess conservative features that constraint their relation with goals. Within these constraints goals and habits can direct each other”. It follows that interventions combining elements aiming at interrupting habitual behaviour with others designed towards increasing the motivation to change will be more effective (Eriksson et al., 2008). However, it should be noted that motivation has two dimensions: it can be triggered by individuals – the “intrinsic motivation” – or driven by external regulators – the “extrinsic motivation” (Deci and Ryan, 1985). Accordingly, disrupting habits could be achieved through inducing deliberation and/or modifying the satisfying nature of habitual behaviour. With respect to positive feedback enjoyed when performing a habit, the most effective way to change a habit would be to prohibit it or to, alternatively, to make it impossible. However, as mentioned in Jager (2003), strategies that interfere with individual freedom are likely to be often rejected by the population in many cases, which makes it necessary to turn to alternative ways. External regulators may interfere with the “intrinsic motivation” (Gagné and Deci, 2005). As it has been shown by Frey (1999) about environmental goals, “intrinsic motivation” cannot be easily regulated. In some cases, extrinsic motivation (produced by rewards or other incentive system) may undermine the prior one creating a “crowding-­out effect” as illustrated by the famous example of blood donors in Switzerland.30 Policy-­makers should bear this

74   Changing habits and routines in mind when they implement some external forms of regulation at the individual or collective level. This does not mean that an incentive system should be avoided. However, careful implementation is really significant for individuals to perceive policy-­ making as complementary to their actions. In sum, policy-­makers should acknowledge the link between behaviour, motivation and cognition in order for their action to enable individual goals and not to undermine initial motivation. Indeed, in many cases, extrinsic and intrinsic motivation may appear to be a complement rather than a substitute (Gagné and Deci, 2005). This should lead us towards a better understanding of the context in which habit and routines are created and stabilised, in order to have a better chance to induce the appropriate trigger. Furthermore, taking the motivational dimension into account, changing habits appears even more necessary since, due to the potential rebound effect,31 “an exogenous increase in energy efficiency may not lead to lower energy consumption” (Brännlund et al., 2007, p. 15). In sum, when motivation does exist, external policy-­making should reinforce it and not destroy it; when motivation is lacking, measures should aim at building motivation to increase the effectiveness of policies. As described in Section 4.3, since habits can be seen as the automatic cuing of behaviour induced by stable features of performance context,32 analysing the habit-­triggering cues is a first step towards disrupting existing habits. Indeed, as noted in Verplanken and Wood (2006, p. 9), “the dependence of habits on environmental cues represents an important point of vulnerability”. Here again, it is crucial to underline that habits differ from purely emotional responses since what is effective for controlling those responses might be counterproductive in the case of habits. Indeed, as noted in Wood and Neal (2007, p.  854), “instead as inattention to the cue, high level of vigilance to it appear to be effective”. Following Ji Song and Wood (2007), the main context cues include physical surroundings, social surroundings, temporal perspective, task definition, antecedent states. Physical location is obviously an important environmental cue in the case of energy consumption. Accordingly, economic incentives aimed at improving energy efficiency would probably be more effective if supporting information was specifically targeted towards new residents (whose previously determined habits have been perturbed with the change of physical location) than they would be among the population of incumbent residents. This is supported by the evidence contained in Wood et al. (2005) that shows how a change of location would induce decisions to be more in line with intentions than with habits. All together, this shows the greater efficacy of measures when they are tied with contextual change. Beyond the importance of cues, we also saw that the persistence of habits could be partly explained by the presence of short-­term rewards coupled with what is called the problem of “temporal asymmetry”. Besides disrupting the performance context of habits,33 another policy measure that could also turn be effective would be to reduce the direct rewards experienced when performing the habitual behaviour. Jager (2003) provides some interesting examples of such

Changing habits and routines   75 rewards-­reducing strategies like, for instance, applying nasty substances on fingernails to avoid biting them or the use of anti-­alcohol pills. Whereas there does not seem to be any obvious similar strategies in the field of domestic energy consumption, policy-­makers could instead aim to increase the rewards attached to the alternative behaviour. Making the alternative behaviour more rewarding seems to provide an interesting point on which to base sustainable energy measures. This is confirmed by the answers provided by respondents that have taken part – on a voluntary basis – in the Brussels Energy Challenge as it is the very notion of “challenge” that is considered to be most “interesting” aspect of the proposed policy.34 The participants also considered the idea of challenge as a facilitating factor in implementing their behavioural change on a daily basis (especially with respect to their neighbours and their broader social network). In fact, as mentioned in Matthies et al. (2006, p. 94), commitment strategies (i.e. as the Brussels Energy Challenge) enhance “self-­satisfaction as a result of acting in accordance with personal values” and therefore increase “the cost of not acting”. This obviously reflects the aforementioned importance of the social and collective dimensions of habits and routine, and shows the critical role played by interactions notably for sustaining initial intrinsic motivation and for reinforcing it. Another strategy that builds on predictions from social identity theory and social comparison theory is the use of comparative feedback. This has been shown to increase the performance through raising motivation in a study of two units of a metallurgical company (Siero et al., 1996). In one unit, employees received information about energy conservation, had to set goals and received feedback on their own conservation behaviour. In the second unit, the only difference was that they also received information about the performance of the other unit. As expected, employees who received comparative information saved more energy. The authors note that it is “remarkable that behavioural change took place with hardly any changes in attitudes” (Siero et al., 1996, p. 245). In this case, the “extrinsic motivation” (with external information as a regulator) does not appear to reduce the intrinsic motivation by creating “crowding in” and is thus a good complement to the initial motivation. This again shows the importance of having a deep understanding of the local context (with unplanned social interactions) for implementing any global tool in this field. An additional approach that may prove successful for disrupting habits is to tie them to emerging fashions and trends (Jager, 2003) or to naturally occurring life changes (Verplanken and Wood, 2006). For instance, Schäfer and Bamberg (2008, p.  215) mention empirical evidence about the increased openness of young mothers to receiving information about healthy nutrition practices. Sensitive life events (such as retirement, change of job, moving house, disease, etc.) thus provide window of opportunity for change of behaviour to occur (Schäfer and Bamberg, 2008, p. 215). Echoing the above-­mentioned relevancy of targeting new residents, the idea is to propose policy measures to those individuals that are more likely to be receptive due to their context.

76   Changing habits and routines Bearing in mind the path dependent reinforcement process described in Section 4.4, disrupting habits and routines would also require dealing with the above-­ mentioned “confirmatory bias” displayed by people with strong habits. Drawing from the experience of cigarette packages, the important points to keep in mind in designing information seem to be the immediacy (i.e. at the time of performance) and the indisputableness. Regarding domestic energy consumption, direct feedback in the form of smart meters (displaying instantly consumption or its translation in financial or ecological terms) could be a way forward in this respect. Finally, it is obvious that disrupting unsustainable habits or routines of energy consumption is only a first step as policy-­makers must also ensure the new (more sustainable) behaviour is tested, adopted and maintained. As mentioned by Matthies et al., [. . ] a temporary situational change as a defrosting of habits can only lead to a long-­term change to new behaviour if the evaluation of the new behaviour is positive, which require that the internal and external determinants are in favour of the new behaviour. (Matthies et al., 2006, p. 104) Within our framework, this clearly means that external aspects (i.e. wider societal, cultural, institutional and technological aspects) must be taken into account. According to the typology developed in Verplanken and Wood (2006, p. 96), measures that “focus on the larger structural conditions in which people’s behaviour is embedded” would qualify as “upstream interventions”.35 The case of recycling illustrates how the presence of a structured environment promoting the alternative behaviour may greatly contribute to changing unsustainable habits. Consequently, policies should also be aimed at helping consumers “to escape the restrictions imposed on their knowledge by the mental habits they have acquired” (Ramazzotti, 2007, p. 776). From this perspective, motivation (either intrinsic and/or extrinsic) and creativity are only one part of the puzzle for changing habits and routines. They are necessary for revitalising traditional policy-­making and for creating new recurring interactions and patterns, and for learning to deal with new sustainable consumption (Witt, 2001). Without motivation individuals and collective procedural knowledge may be trapped by prior learning. Contextual factors, mentioned above, may vanish without an enabling environment supporting new types of behaviours. Internal and external sources of change are required to generate new distinctly novel habits and routines. In short, changes in energy consumption require new kinds of procedural knowledge. Individual volition and structural influences are more likely to disrupt existing cognitive automatisms present at the individual and collective levels if values and rewards coming from these two dimensions appear to be self-­reinforcing and complementary. One role of the policy-­maker may be to reduce the gap between what individuals and institutions ought to do and what they really implement in their daily actions.

5 Not irrational but habitual The importance of behavioural lock-­in in energy consumption1

5.1  Introduction “Most of the time what we do is what we do most of the time” (Townsend and Bever, 2001, p.  2). This often quoted sentence within the realm of social psychology is meant to emphasise that much of our behaviour in daily life is characterised by repetition. From the empirical work of Wendy Wood and colleagues (Wood, Quinn and Kashy, 2002; Quinn and Wood, 2005), we know that many activities are not only repetitive in frequency but they also are performed in stable contexts. Such consistency sets a favourable breeding ground for habits (i.e. behavioural predisposition to repeat a well-­practised action given a context) to develop (Ouellette and Wood, 1998). Once formed in those circumstances of both high frequency and stability, habits then become a strong predictor of behaviour “over and above intentions, suggesting that such behaviour is initiated without much deliberation and thought” (Danner et al., 2008, p. 246). As already discussed in Chapter 3, the concept of habits is essential in analysing the determinants of domestic energy consumption as it sheds an insightful light on the puzzling question of why it keeps rising even though there is an evident increase of awareness and concern about energy-­related environmental issues such as climate change. Indeed, if we subscribe to the idea that energy-­ consuming behaviours – such as switching off the lights, turning off appliances, etc. – are often guided by habits and that deeply ingrained habits can become counterintentional (Verplanken and Faes, 1999), it then follows that people may often display “locked-­in” practices in their daily energy consumption behaviour. Accordingly, the objective of this chapter is to provide an illustration of the role played by habits in explaining the reduced effectiveness of traditional instruments such as incentives. More precisely, it will serve to underline the importance – for policy-­makers – of specifically addressing the performance context of habits if they wish to reduce domestic energy consumption. It follows from the analysis performed in this chapter that the features displayed by habits should be fully acknowledged and accounted for prior to designing measures aimed at reducing domestic energy consumption. This chapter builds on an empirical analysis that consists of three sets of data. The first one comes from a questionnaire that was submitted to the visitors of the

78   Not irrational but habitual Brussels Motor Shows in the framework of a larger study on “clean vehicles” (Englert et al., 2009). This set is mainly used to illustrate the implications of the specific features displayed by habits such as their low degree of consciousness. The second set of data comes from a sociological study on energy behaviours in the framework of the Brussels Energy Challenge. The objective is to empirically assess of the importance of habits in domestic energy consumption through including questions on habits within the questionnaire submitted to the participants of the Challenge. This analysis also serves to see which dimensions of the concept of habits are perceived as the most salient in the field of energy consumption. Finally, the third empirical analysis contained in this chapter demonstrates the higher receptivity to a given measure of those people that recently experienced a change of context (i.e. people whose previously acquired habits have been disturbed). To this end, the complete list of energy subsidies granted in the Brussels Region for 2007 is used. This amounts to a sample of 14,348 requests. The rest of the chapter is structured as follows. The next section briefly present an overview of the conceptual framework within which this analysis of habits is performed. Section 5.3 provides a tentative definition of habits building on the insights provided by analyses in social psychology, sociology and evolutionary economics. Based on that definition and the identified characteristics of habits, the fourth section presents empirical results (i.e. the first set of data) with the objective of better understanding the influence of habits on decision-­making choices. Section 5.5 then provides empirical elements (the second set) to assess the importance of habits in the specific area of domestic energy. The sixth section deals with the role played by habits in reducing the effectiveness of traditional measures such as energy subsidies (i.e. through analysing the results from the third set of data). Section 5.7 then concludes with a discussion and some policy recommendations.

5.2  The theoretical framework At this stage, it is important to mention that looking at domestic energy consumption through using the concept of habits does not preclude the integration of wider societal influences in the picture. The stance of this chapter is that habits are all the more useful in that they provide a locus that allows for individual, structural and institutional accounts to be integrated in the analysis. As shown in more detail in Chapters 2 and 3, mainstream analyses of the economics of energy consumption have been partly misleading, notably regarding the “efficiency paradox” (i.e. the existence of unexploited “profitable” investment options in energy-­saving technologies and practices). This can be explained not only by the mechanistic nature of mainstream economics but also by its inherent reductionism. However, this should not lead us to resort solely to collectivist accounts as they are only the other side of the reductionist coin of social sciences. As explained in Section 4.1, we need to turn to a framework allowing for both

Not irrational but habitual   79 sources of explanation (i.e. structural/collective and individual) to be accounted for. This is obviously also needed for energy consumption analyses where a recent empirical study has shown that the behaviours observed display both “similarity and collectivity” as well as “variety and individuality” (Gram-­ Hanssen, 2008a, p. 14). This imperative can be dealt with using habits for as long as the analysis is performed in a framework building on the idea that individuals and institutions “mutually constitute and condition each other” (Hodgson, 1997, p. 404). To put it differently, “habits are the constitutive material of institutions” while the presence of institutions make that “accordant habits are further developed and reinforced among the population” (Hodgson, 2007a, p. 107). In line with the need to complete this view à la Giddens with the importance of physical structures and technologies (Gram-­Hanssen, 2008b, p.  182), the influencing institution to be analysed in the perspective of this chapter is what is termed the socio-­technical system (STS; Geels, 2004). A STS is a clusters of interrelated components connected in a network or infrastructure that includes physical, social and informational elements and that thus involves technology, science, regulation, user practices, markets, cultural meaning, infrastructure, production and supply networks (Unruh, 2000; Shove, 2003; Geels and Kemp, 2007). Given that a “structure is always both enabling and constraining” (Giddens, 1984, p.  169), choices in energy consumption are strongly influenced by the existing carbon-­based STS through structural, cultural, social and institutional forces such as norms, media, technical designs, etc. More than “willing” consumers should rather be viewed as partly “locked-­in” (Sanne, 2002). To be functional, people’s habits have to be accordant with prevailing socio-­technical forces which shape consumers’ choices towards more energy-­consuming ways of life. This can be illustrated by the rise of average internal temperatures in UK houses from 13.8°C in 1970 to 18.2°C in 20042 while the average number of electric appliances increased from 17 to 47 over the same period of time (Martiskaïnen, 2008). Thus the aforementioned mutual constitutiveness of agency and structure means that habits may be seen as an additional factor of technological stability as their change-­resisting nature contributes to the maintenance of the incumbent carbon-­based STS. Such a framework thus highlights the presence of two sources of inertia (i.e. at the levels of individuals and at the level of STSs) that mutually reinforce each other. As shown in Figure 5.1, these two sources of inertia provide part of the explanation for the existence of the efficiency paradox in energy as both cognitive and structural obstacles reduce the effectiveness of incentives and prevent consumers from undertaking profitable energy-­efficient investments. Given this context, policies aiming at reducing energy consumption would thus have to deal with both sources of resistance to change.3 This means not only shifting the incumbent carbon-­based STS in order to shape decisions towards the desired direction (i.e. a low-­carbon economy) but also deconstructing habits that

80   Not irrational but habitual BARRIERS TO ENERGY EFFICIENCY

STRUCTURAL

COGNITIVE/PSYCHOLOGICAL

The current carbon-based STS both shapes and constrains consumers’ choices

Rationality of economic agents is bounded and biased

Consumers are neither perfectly rational nor omnipotent but resort to habits

Behavioural lock-in partly explains the efficiency gap

Figure 5.1 Complementary explanation for the existence of the “efficiency paradox” in energy.

this same STS has forged with time – as increased environmental awareness and intentions formulated accordingly are not sufficient in the presence of strong contradicting habits. This chapter will specifically focus on habits but the analysis will be performed bearing in mind the broader institutional and social context within which those habits develop. This is in line with the approach followed in Gram-­ Hanssen (2008c) that builds on practice theory. Our stance is that habits, through providing stronger foundations to the understanding of interactions between structures and individuals, help to better depict the essence and process of meso dynamics – a level wedged between the traditional micro and macro scales. The meso scale highlights the role played by interdependencies of systems elements and the emergent nature of economic change. It thus provides an alternative to simple aggregation (i.e. the “representative agent” hypothesis on which the traditional framework of “general equilibrium” rests) by building “on the notion of circularity between individual and population” Dopfer (2006, p. 18).4 As shown in Chapter 2, integrating meso dynamics clearly provides an interesting level of analysis in energy-­related studies so much that they are claimed to be the “missing link” of this field by Schenk et al. (2007).

5.3  The role played by the characteristics of habits It follows from the characterisation described in previous chapters that the trickiest feature of habits – both from a research and policy perspective – is undoubtedly the extent of their unconsciousness. Although they do not require much

Not irrational but habitual   81 intentional effort to be set in motion, habits should not be assimilated to pure reflexes as they are “based in part on the ability of the individual to learn or acquire/absorb the particular behaviour into a cognitive schemata or script” (Limayem et al., 2001, p. 277). Still, the low degree of consciousness that characterises many habits must be considered since it may explain why people often underestimate the importance of habits as a potential obstacle to a change of behaviour. This can be illustrated by the preliminary results of the CLEVER project (Englert et al., 2009). This study on “The barriers to the adoption of alternative vehicles” was undertaken in our research centre (CEESE-­ULB) and within which it has been possible to include questions to assess the importance of habits. The first phase of this study consisted in a questionnaire that was submitted to the people visiting the “Brussels Motor Show”. The analysis is based on the responses of 263 people who were asked to grade a set of pre-­established barriers to the adoption of alternative vehicles on a scale ranging from 0 (“not a barrier”) to 10 (“a very important barrier”). As expected, given the aforementioned problem of low consciousness, “the necessity to change existing habits” is not considered as an important obstacle. As shown in Figure 5.2, it only gets half the score of the most important perceived barrier (i.e. lack of infrastructure). 9

Perceived importance

8 7 6 5 4 3 2 1

M

La

ck

of i

nf ra st

ru ct

ur Pr e ai R ice nt an en ge an ce Inf S Ba La ho c o tte o rie L ck o rt s sts s/ ac f d up ta k if pl nk of fu y cu se sio R mb rvic n ef e e ue rs s llin om Im g e C D o m tim iff nf a er id tu Sp e en en re e t r ce te ed e c La L fue reli hno ck ac llin ab of k o g s ility en f s yt vi ta em r. nd co a La r ck S nce d C o en rn on f c sa s fid on tio en vi n ce ctio sa n fe H ty ab Pe De its rs sig on n al ity

0

Barrier

Figure 5.2 Perceived importance of different barriers to the adoption of alternative vehicles (on a scale of 0 to 10, where 10 is the greatest barrier) (source: Englert et al., 2009). Note n = 263

82   Not irrational but habitual The apparently low importance of habits reported by individuals is to put in contrast with two other elements. The first is the fact that, among the 106 people (40 per cent) of the sample who claimed that they would be ready to buy an alternative vehicle, the preferred technology is the hybrid vehicle as shown in Figure 5.3.7 This is somewhat contradictory since these alternative vehicles are both much more expensive (“price” is considered as the second most important barrier) and newer than, for instance, vehicles using Liquefied Petroleum Gas (LPG) which have been available on the market for a quite long time (with at least the possibility to transform conventional vehicles). From the few responses provided when asked for information, it appears that the hybrid technology is preferred over others because it is perceived as not entailing any changes. This is in line with the second element of the study that comes from the “by technology” part of the questionnaire which consisted in a set of open questions. For both LPG and Compressed Natural Gas (CNG) vehicles, psychological barriers (mostly relating to people’s reluctance to change towards a new type of vehicle and its allegedly dangerous nature) are the second most often cited reason for people not adopting those technologies.8 Psychological barriers are also very important for explaining people’s reluctance towards hydrogen vehicles but they are not mentioned for hybrid vehicles or for agro-­fuels vehicles. There is thus a clear “stick with what we’ve got (and know)” tendency. This would suggest that the need to change habits increasingly appears as a problematic issue when people are asked more concretely the reasons why they do not want to adopt a given technology. Still, this is only inferred implicitly from the answers but not recognised directly. This is corroborated by 45 40

Percentage

35 30 25 20 15 10 5 0

Hybrid

Biofuel

Electric

LPG Hydrogen Type of vehicle

CNG

Fuel cell

Biogas

Figure 5.3 Purchase intentions of alternative vehicles (% of respondents ready to buy and able to specify a category) (source: Englert et al., 2009). Note n = 106

Not irrational but habitual   83 the second phase of the study which consisted in a set of 15 thorough qualitative interviews in each of the three following groups: supply stakeholders, experts and fleet managers.9 In almost all interviews, the issue of changing consumers’ habits appears to be an important obstacle impeding the wider diffusion of alternative vehicles. Interestingly, fleet managers seem somewhat locked-­in to their usual practices as they often claimed that they would rather buy smaller cars using existing technologies than turn to alternative vehicles in order to lower their contribution to GHG emissions. Supply-­side actors also claimed that the “near future lies in improving extant technologies rather than in creating new ones”.

5.4  The importance of habits in domestic energy consumption There are reasons to suspect this underestimation of the role that habits play in preventing behavioural change to also be of importance in domestic energy consumption. This can be illustrated through looking at the responses provided by the people that took part in the first two editions of the Brussels Energy Challenge. This is an initiative launched by the regional authorities that invites people to commit themselves – on a voluntary basis – to reduce their energy consumption through implementing at least one of the proposed energy-­efficient measures. Information, feedbacks, group meetings and monitoring are also offered to the participants. What is interesting for the purpose of this chapter is that, in the first two editions of the Brussels Energy Challenge, people reported quite high values – 6.7 out of 10 in 2006 and 6.94 in 2007 – concerning “their ease of adopting new habits” (IBGE, 2007, p. 29).10 Thus, provided that habits do play a role in domestic energy consumption, it may well also be that individuals do not really see it as a problem since it is considered to be easily changed.11 In our perspective, the next step is to assess the role of habits in influencing energy consumption behaviours. To start with, it seems obvious that behaviours such as switching off the lights or turning off appliances (i.e. “curtailment behaviours” in the sense of Gardner and Stern, 2002) meet the three conditions identified in Jackson (2005, p. 64) for the balance of the decision-­making process to swing away from cognitive effort and towards automaticity: low degree of involvement, low perceived complexity and high degree of constraint. Indeed, the decisions taken in everyday energy consumption are likely to be considered as having less important consequences than other decisions. According to the work of Amos Tversky, people are more likely to use simple heuristics (such as habits) in such situations. Needless to say, the low complexity of decision tasks related to everyday energy consumption does not require a lot of cognitive effort either. Finally, the constraints of today’s society and the feeling of time pressure as well as the information overload that characterise it tend to favour the use of habits which provide a feeling of enhanced comfort (Lindbladh and Lyttkens, 2002). One other important element that characterises domestic energy consumption is that it is not visible (Jackson, 2005; Abrahamse et al.,

84   Not irrational but habitual 2005). This implies that people do not consider the remote environmental impacts of their actions when performing energy-­related behaviours. This obviously facilitates having unsustainable habits in this field (Martiskaïnen, 2008, p. 77). All together, this suggests that everyday energy-­related behaviours do not require much intentional effort to be set in motion, unlike in the case of food consumption of adolescents in Kremers et al. (2007). This is corroborated by a review of studies on domestic energy consumption where one of the lessons learnt is that the importance of habits can “prevent that (pro-­environmental) behaviour from happening” and make a person “act opposite to his or her intentions without even realising it” (Martiskaïnen, 2008, p. 87). However, beyond all these elements and the acknowledgement by experts in the field of habits such as Schäfer and Bamberg (2008, p. 213) who consider that energy use along with nutrition and mobility are “highly ritualised forms of behaviour that are hardly reflected upon in everyday life”, we are still left with not much empirical evidence of the importance of habits in domestic energy consumption.12 This is why we took the opportunity of the third edition of the Brussels Energy Challenge to include two broad questions on habits within the questionnaire submitted to participants. This questionnaire is completed by the participant when he registers for the Challenge. The analysis is based on the data provided by 519 respondents (collected in March 2009). The results are summarised in Table 5.1. These first results thus tend to support the idea that energy consumption behaviours in houses are indeed perceived as being guided by habits (i.e. whether good or bad) and not much reflected upon. Based on our experience in this field, it was also expected that people would likely consider heating-­related behaviour (such as setting the level of the thermostat) as less automatised than electricity-­related ones (such as switching off the lights). This seems to be confirmed by our study but only to a moderate level of statistical significance (H1: µelec>µheat; t = 1.615; p < 0.1). However, it is important to note that our sample has not been chosen. Thus, it can not be expected to be representative of the Brussels population. A potential Table 5.1 Perceived importance of habits in domestic energy consumption (n = 519; answers on scale 0 to 10) Questions

Average

Proportion of weak habits (i.e. less than 5) (%)

Do you think that your daily behaviour concerning the use of electricity (lighting, electric appliance, etc.) are guided by habits, automatisms?

7.34

10.98

And what about your daily behaviour concerning the use of heating?

6.82

17.72

Not irrational but habitual   85 bias contained in this study with respect to the perceived importance of habits arises from the fact that the Energy Challenge tends to attract more landlords than tenants. Out of the 109 respondents in the sample that provided an answer to the optional question “Are you a landlord or a tenant?”, only 27 reported being a tenant. This very low proportion (24.8 per cent) is in total contradiction with what prevails in Brussels which, as in many major cities, is characterised by a high proportion of tenants.13 This could be an important factor since, in line with the discussion in Section 5.6, it could be argued that tenants have lower habits than landlords due to their higher mobility. Although the reduced sample (i.e. from the initial 519 households, down to 109) should make us very cautious in interpreting the data, an interesting result from this categorisation is that tenants report having higher habits than landlords for both electricity (H1: µelec”tenants”>µelec”tenants”; t = 1.311; p < 0.1) and heating (H1: µheat”tenants”>µheatc”tenants”; t = 1.406; p < 0.1), as shown in Table 5.2. This is somewhat counterintuitive given that habits are favoured by context stability. Although it can be attributed to the fact that the sample is both unrepresentative and small in size (n is lower than 50 for tenants), this result is nonetheless quite puzzling. One explanation could come from the almost identical “ease to adopt new habits” in both categories,14 whereas this variable would be expected to vary according to the values for habits (i.e. the higher the habits in electricity and heating, the lower the ease to adopt new habits). Beyond showing that the sub-­sample of tenants does differ from the whole sample in an important respect, this similar value may reflect that tenants are more accustomed to changing contexts, which makes them see habits as easily changed. In turn, this could explain why they have less of a problem reporting having strong habits given that they consider them to be easily overridden.15 However, given the aforementioned problem that arises from the unconscious nature of habits that often makes people underestimate their importance as a problem, it may appear questionable to measure the strength of habits by means of self-­report (Danner et al., 2008, p. 263). Accordingly, it is crucial to provide Table 5.2 Differences of perception with respect to habits in domestic energy consumption between landlords and tenants (n = 109; answers on scale 0 to 10) Questions

Average “tenants” Average “landlords” (n = 27) (n = 82)

Do you think that your daily behaviour 7.48 concerning the use of electricity (lighting, electric appliance, etc.) are guided by habits, automatisms?

6.93

And what about your daily behaviour concerning the use of heating?

7.22

6.52

In your household, do you easily adopt new habits

6.56

6.66

86   Not irrational but habitual an answer to this inevitable issue raised by, among others, Klöckner et al. (2003, p.  400) who consider it inappropriate “to ask people to report the strength of their habits when an essential feature of habit is its unconscious character”. There are two elements to bear in mind in order to deal with this important issue. First, it must be noted that the essential feature of habits is their automatic nature and not their unconscious character. Lack of awareness is only one of the four features of automaticity and is thus sufficient but not necessary for a process to be qualified as automatic (see Chapter 3). Second, in line with Chartrand (2005), it seems appropriate to start with setting a clear distinction between the different stages at which awareness may operate: the environmental cues, the process by which these cues influence behaviour, and the outcome of that process. Dijksterhuis and Smith (2005, p. 226) claimed that while we are usually aware of the outcome and sometimes aware of the cues, we are usually not aware of the process. Following that line of thought, many consumption choices are thus “introspectively almost blank” (Dijksterhuis et al., 2005, p.  193) with respect to behavioural details but, at the same time, consumers are nonetheless aware of their action in a broad sense (Dijksterhuis and Smith, 2005, p. 226). In sum, whereas consumers certainly do not have access to many automatic and tacit processes, they are still able to report on the occurrence of some of these provided we touch on this “broad sense awareness” (i.e. if they are presented question in a meta-­cognitive fashion that touches on the “learned sequences” part of habits). We are thus aware that we rely on habits even though we are not fully conscious of it when performing the habitual behaviour – this broad awareness being a distinguishable feature of habits as compared to fully automatic behaviours such as reflexes. For instance, building on the example of grocery shopping described in Dijksterhuis et al. (2005, p. 193), consumers may have picked most items that end up in their cart with nothing more than “a fleeting moment of awareness” and thus have no memory of making those choices, but they would still be able to realise (and report) afterwards that they have not been thinking about those decisions when “making” it. This ability is even facilitated when “the concept of habits is broken into components that seem easy to reflect on” (Verplanken and Orbell, 2003, p. 1325). Furthermore, making individuals report on their personal habits might be a first step towards bringing knowledge from practical to discursive consciousness16 – which has been shown to be a necessary condition for changing habits (Bartiaux, 2008). This seems intuitive since habits are thought to be “acquired through a process in which repetition incrementally tunes cognitive processors in procedural memory” (Neal et al., 2006, p.  198). In fact, bringing information from procedural (or practical) to declarative (or discursive) memory could be conceived as a step backwards (or as going back to the source) since the declarative stage (i.e. the cognitive processing of information in memory) is the first stage of habit formation which ends with the procedural stage (Jager, 2003). This idea that we are not fully aware of the process fits with the aforementioned problem of underestimation which also suggest that making people realise and express that they do something by the force of habits is a necessary first step.

Not irrational but habitual   87 Accordingly, other questions were included in the empirical analysis with the aim of touching on this meta-­awareness through asking more concrete questions and breaking down the concept of habits into components that appear easy to report on. To get to more concrete responses, we chose to go from the level of broad consumption down to common actions which mirror the two aforementioned categories of electricity and heating. These two energy-­consuming actions are “switching off the television with the remote control only” and “turning up the heating when you’re cold (rather than putting on a jumper)”. The choice of these two actions (as well as the formulation in French of the items) is the result of the discussions with the other analysts since it had to be compatible with the rest of the broader sociological study.17 As far as the breaking down of the concept of habits is concerned, we adapted the Self-­Report Habit Index (SRHI), which was described in Verplanken and Orbell (2003) and shown to be relevant and consistent in depicting habit strength in various fields such as buying on impulse, fish consumption, adolescent nutrition, etc. (Kremers et al., 2007; Verplanken, 2006). Since it was only possible to include four items, it was decided to select them in order to reflect three of the “four horsemen of automaticity” coined in Bargh (1994) in addition to the repetitive nature of habits. The four items, which are shown in Table 5.3, are thus intended to reflect repetition, efficiency (i.e. economising cognitive resources for other purposes), lack of awareness and lack of control. The lack of intention (i.e. the fourth horseman) has thus been left aside as it is considered to be an outcome of habit strength (as embraced by the term “counterintentional habits” developed in Verplanken and Faes, 1999). However, it is essential to recall that for a habit to develop it needs to be functional as, for instance, you do not take your car to work on Sundays. It is thus intentional in its origin. This is why the lack of intention has not been included in our questionnaire.18 Table 5.3 Average perceived importance of the different dimensions of habits in concrete energy consumption behaviours (n = 519; answers on scale 0 to 10) Questions Behaviour X is something that . . .

Switching off the television only with the remote control (n = 253)

Turning up the heating when you’re cold (n = 243)

1 is anchored in your practices (through its repetition). 2 you do while being able to think about something else. 3 you perform without being fully aware of it. 4 would be difficult to change (as it would require a lot of effort).

7.58

6.45

7.14

5.41

6.45

4.44

4.46

4.15

88   Not irrational but habitual Although the SRHI – which is made of 12 items – has been validated in numerous studies, a recent paper from Gardner and Abraham (2009) show that a reduced form of that index composed of four automaticity-­only items performs at least equally in terms of predictive and convergent validity. This thus tends to support our measure also based on four items. However, it is important to note that our empirical study of habits does not aim at assessing the role of habits per se since we do not possess a variable against which to assess it. Indeed, the actual consumption behaviours of the individuals that have registered will only be reported (and thus not measured) after a year and only with respect to the energy-­efficient action that participating households agreed to implement in practice. Still, given the proven validity of the SRHI, a positive measure of habit strength with respect to the chosen unsustainable actions would provide a basis for claiming that habits are most likely at play in influencing energy consumption behaviours in an unsustainable way. The precise role of habits is more specifically dealt with in Section 5.6 where it is shown how habits reduce the effectiveness of financial incentives. Given that it was irrelevant to submit the four items to individuals that do not consider that they possess the targeted unsustainable habit, it was decided to first ask the question about repetition and only select those households for which the respondent provided an answer superior or equal to 4.19 This resulted in the reduced samples of 253 and 243 people for the television and heating questions respectively. An interesting result from this breaking down of the concept into four items is that it tends to corroborate the idea that heating-­related behaviours are, on average, perceived as being guided by habits to a lower extent than electricity consumption behaviours.20 It is likely that this difference partly arises because of the specific actions that have been chosen. Leaving a television on “stand-­by” mode is probably more easily assimilated to a sort of reflex that is not much thought about than the fact of turning up the heat.21 This is supported by the fact that, although a difference of frequency already exists between the two actions, the difference of average values reported for items 2 and 3 are quite pronounced as shown in Table 5.3. Beyond the difference that emerges between the two spheres of energy consumption, one other important result is that the orders of importance regarding the four items are, as to them, symmetric. More specifically, it appears that the difficulty to change a habit is not considered to be as important as the other three dimensions (even in the case of “stand-­by” consumption where the other values are quite high). To verify this hypothesis, we first proceeded to a principal component analysis, the results of which indeed suggest grouping the first three dimensions in one index (see the results in Annex 1). As expected, this grouped index is significantly higher than the value reported for the fourth dimension in both cases of television (t = 4.907; p < 0.0001) and heating (t = 2.719; p < 0.01). This obviously echoes the problem discussed above with respect to alternative vehicles where it is shown that the presence of habits is not considered as an obstacle since it is perceived as easy to change (see also the discussion on

Not irrational but habitual   89 tenants). This underlines a potential limit of the analyses that are based on self-­ reporting. As it is well known among interview experts, such analyses might be strongly biased when there is an issue of social desirability about the answers.22 This can also be the case here, as it may appear difficult for an individual to admit that he finds it difficult to change his habits (especially those seen as badly connoted).23 As in any empirical study, it is important to assess the importance of the socio-­economic profiles of the participating households on the results. The problem is that most of the participants were reluctant to display their income (or their level of education). In consequence, the analysis of the budget variable can only be performed based on 57 households – which, again, is probably an important bias (as in the case of tenants). Fortunately, these households are well spread over the budget categories so that there are 29 households with low income (less or equal to €3,000 net per month) and 28 households with high income (more than €3,000 net per month). Still the size of this sample remains too low – which materialises in the fact that none of the differences between groups discussed in the rest of this section reach an acceptable level of statistical significance. They should thus rather be seen as indicative and not as robust results. It appears from the budget categorisation that households with high income reports higher habits for both energy and heating-­related consumption than low income ones, together with a lower ease to adopt new habits. However, one interesting result is that this difference is also valid for the multi-­items measure of habits for the two concrete actions, except for the fourth item relative to the effort required to change habits. Echoing the above-­mentioned importance of education raised in Bartiaux (2007, p. 95) with respect to sorting, it may well be that households with higher income have a tendency to overestimate their capa­ city to change habits by themselves without being forced to it. Given that, on the one hand, this may be an important result for policy-­makers but that, on the other hand, there probably is a sample bias, we decided to “approach” the level of income through the type of dwelling participants report to live in and for which there are more answers (i.e. 109 households) – assuming that people living in houses potentially have a larger budget than those living in apartments or flats. Although this can only be considered as an approximation, the results from this categorisation are strikingly symmetric to those relative to the budget categories. Indeed, people living houses only report lower values for the fourth item whereas they are higher for the other three. However, as mentioned above, these results suffer from a lack of statistical significance. Finally, the other socio-­economic data that is available for use is the presence of children in the households. Our sample consists of 218 households with children and 301 households without children. In this categorisation, households without children report higher habits for general electricity and heating-­related consumption.24 This is accompanied by the expected lower value with respect to the “ease of adopting new habits” for households without children.

90   Not irrational but habitual

5.5  Disturbing the context: a first step in changing energy consumption habits? Even though deeply ingrained habits can be strong enough to counter intentions in determining behaviours, their context-­dependent automaticity offers a way forward for changing them. Indeed, while their automaticity partly explain this predominance of habits over more deliberate thoughts, their dependence on contextual cues also provide an important point of vulnerability (Verplanken and Wood, 2006, p. 91). Along with repetition, context stability is a necessary condition for habit to develop (Danner et al., 2008). This led many habits experts to suggest that changing the circumstances tied to the formation of a habit would make that same habit more open to change (Wood et al., 2005; Verplanken and Wood, 2006). Based on this idea, several studies have shown that the sensitivity towards making changes of daily habits increases during the phases of changing circumstances such as relocation, retirement or the birth of a child (Schäfer and Bamberg, 2008). Such naturally occurring changes of context do not make habits change neither automatically nor directly but they are better viewed as “windows of opportunity”. That is the reason why they have been studied from the perspective of their interaction with a complementary measure. This is what Verplanken and Wood (2006, p. 96) call the “downstream-­plus-context-­change interventions”. The effectiveness of linking sustainable measures to sensitive life events or changes of context (e.g. the temporary closure of a freeway) has been tested empirically in several studies (Satoshi and Gärling, 2003; Verplanken et al., 2008; Bamberg, 2006, 2007). However, most of these studies deal with car use habits and not specifically with energy consumption. Moreover, they only provide strong empirical evidence that, among two groups of recent movers, those that are targeted with the information campaign or the incentive (i.e. a free bus pass) do reduce their car use habit to a greater extent. Those studies thus highlight an “amplifying effect” of the campaign with respect to the behavioural change triggered by the new context (Bamberg, 2007, p. 368). As far as domestic energy consumption is concerned, physical location is obviously an important environmental cue in generating habits (see also Chapter 3). Based on the aforementioned evidence and given the role played by strong habits in biasing information search (Verplanken and Wood, 2006), incentives aimed at improving energy efficiency would probably be more effective if supporting information was specifically targeted towards new residents (whose previously determined habits have been perturbed with the change of physical location) than they would be among the population of incumbent residents. This is supported by the evidence contained in Wood et al. (2005) that shows how a change of location would induce decisions to be more in line with intentions than with habits. The idea would thus be to explore the effectiveness of a given energy efficiency measure among two groups: the recently moved and the not recently moved. Accordingly, we formulated the hypothesis that the energy subsidies offered by the Brussels Region (i.e. for insulation investments, the purchase of energy-­

Not irrational but habitual   91 efficient appliances, etc.) would be more successful among people that recently moved than among the incumbent residents even though recent movers are not more specifically targeted by the measure. Such a difference of receptivity would suggest an increased openness to new information coming from a disturbance of existing habits triggered by the change of physical context. To do so, the complete database for the year 2007 was collected from the institution in charge of the management of that measure (SIBELGA). It contains all the subsidies that were granted in 2007 (the most recent compiled data available), i.e. a sample of 14,348 requests with the name and address of the applicants and the type of energy-­efficient measures for which the subsidy was requested. Sub-­ samples could then be created for each of the 19 municipal districts of the Brussels Region. This step was needed because these sub-­samples were then sent to the corresponding municipal population departments which are responsible for statistics on registration dates. These departments were thus asked to provide us with the dates at which the applicants for energy subsidies registered at the address mentioned in the database. Given that this time-­demanding task was to be performed on a voluntary basis by municipal civil servants, we expected only a few responses but we received completed files from 11 districts for a total of 8,279 granted subsidies (57.7 per cent of all subsidies granted). Given the time that is needed for a subsidy request file to be completed and for the whole administrative process to be fulfilled, it was decided to consider people registered in 2004 or later as the recently moved.25 The next step was thus to compare, for each of the 11 municipal sub-­samples, the proportion of “newcomers” (i.e. recent movers) with the same proportion in the total population of the corresponding municipal district for the year 2007 – in order to compare with the reality of each municipal district. Municipal proportions could not be provided by the districts themselves as this data does not exist as such but must be calculated. Fortunately, this work was being done by a consortium of demographers (Sanderson, 2008) that was able to provide us with that proportion but only for 2006 (i.e. people arrived in 2003 or later and still living in the given district in proportion of the total population in 2006). As shown in Table 5.4, for each municipal district, the proportion of newcomers in the energy subsidies sub-­samples (i.e. Newcomers-­sub) is higher than the corresponding proportion (i.e. Newcomers-­tot) in the total population. The variation ranges from 5 to more than 50 per cent while the weighted proportion of “Newcomers-­sub” for the whole sample is 36.19 per cent, that is a variation of +28 per cent with respect to the weighted proportion of “newcomers-­tot” (i.e. 28.14 per cent).26 This would suggest that a change of physical location (and the change of social surroundings that goes along with it) does indeed make people more sensitive to the information related to a given measure up to the point that they use it more. However, at this stage, this can only be a conjecture since, except the aforementioned proven biased information search process displayed by people with strong habits (i.e. they search less and their search is biased toward confirming habitual options), there are no elements that allow for a causal explanation to be

92   Not irrational but habitual Table 5.4 Proportion of “newcomers” in the sub-samples and in their corresponding ­districts District INS code Population Newcomers-sub (%) Newcomers-tot (%) Variation (%) 21002 21005 21008 21012 21013 21014 21015 21016 21017 21018 21019

29,552 41,740 20,970 79,877 44,265 23,557 111,946 75,954 24,056 47,952 38,232

28.73 44.41 29.29 39.43 51.34 47.15 41.16 33.30 29.53 35.47 34.32

26.8 35.7 27.7 29.2 33.8 33.1 28.6 26.0 21.8 28.9 27.9

+7.20 +24.40 +5.74 +35.03 +51.89 +42.45 +43.92 +28.08 +35.46 +22.73 +23.01

Sources: Belgian National Institute of Statistics (INS); Sanderson (2008); author’s own calculations.

determined. For instance, it could also be that the higher proportion of new­ comers in the subsidies samples is explained by the owner–occupier issue. Indeed, as mentioned above, the Brussels Region is characterised by a high proportion of tenants who can not decide to better insulate their dwelling without the authorisation of their landlords. Thus, it is only when you become a new landlord that you can start applying for such subsidies. Furthermore, it seems easier to undertake such insulation works while you are in the process of moving (and often renovating) than once you have been settled in your house for a long time. However, this “opportunity” effect could be viewed as a habit-­based issue as profitable energy-­efficient investments are not less efficient because you have been living in the same house for a long time. Still, these two elements could also provide a sound explanation for the results displayed in Table 5.4. To verify this hypothesis, we proceeded to a different categorisation of the complete database using the type of subsidies requested. Unfortunately, only nine sub-­samples could be used since the data related to the type of subsidies were missing for two districts. This led to a “by-­category” database consisting of 6,051 requests. This change only slightly affected the proportion of newcomers from the original 36.12 per cent up to 37.47 per cent. Based on statistical considerations for sample size and on objective criteria (i.e. such as time of duration, need for maintenance or investment costs), the 18 types of subsidies were grouped into three categories: “shell/insulation”, “heat production” and “appliances”. If the above-­mentioned “opportunity” issue was important, the proportion of new­ comers would be overly represented in the “shell/insulation” category. However, as shown in Table 5.5, the difference between categories is significant and the proportion of newcomers is overly represented in the “appliance” category (χ2 = 73.42; df = 2; p < 0.001). This means that our main result (i.e. the higher proportion of newcomers among the subsidy applicants than in the corresponding population) is driven by

Not irrational but habitual   93 Table 5.5  Proportion of “newcomers” and incumbent by type of subsidies Type of subsidies

Newcomers

Incumbent

Total

Heat production Appliances Shell/insulation Total

  544 (24%) 1,110 (49%)   611 (27%) 2,265 (100%)

1,174 (31%) 1,437 (38%) 1,175 (31%) 3,786 (100%)

1,718 (28.4%) 2,547 (42.1%) 1,786 (29.5%) 6,051 (100%)

the “appliance” category (which, in addition, is both the most numerous and the category in which the proportion of newcomers is the highest). This would suggest that the “habits-­disturbed-due-­to-context-­change” explanation is more important than the “opportunity” effect which is less salient for the purchase of electric appliances. However, the owner–occupier issue is also of less importance for the purchase of electric appliances such as refrigerators. Therefore, it can not be ruled out that the overrepresentation of newcomers in the “appliance” category is due to a higher proportion of tenants in our sample as compared to the actual proportion of tenants in the nine districts covered in the analysis. If it is assumed that tenants are more mobile and if the energy subsidies attract more tenants than landlords, it then follows that our sample will inevitably contain more newcomers than there are in reality. Even though this explanation can not be excluded, it still constitutes an interesting result for policy-­making since it would mean that such instruments as incentives would only be efficient for tenants given their supposed higher receptivity to new information. Moreover, it must be noted that although the intensity of our main result is clearly driven by the “appliance” category, it remains valid (albeit to a lower degree) for the other two categories.27 This tends to suggest that the “habits-­ disturbed-due-­to-context-­change” explanation does play an important role.

5.6  General discussion and policy recommendations As expected, the empirical results discussed above support the idea that habits do mediate the intention–behaviour relationship in the field of domestic energy consumption. More specifically, it tends to confirm that the presence of strong habits can explain the low effectiveness of traditional measures such as incentives (see Chapter 3). It then seems straightforward that policy-­makers should specifically address the performance context of habits in order to increase the effectiveness of measures aimed at reducing of domestic energy consumption. As mentioned in the Introduction to this chapter, it is acknowledged that technical and wider societal influences do clearly matter. Indeed, a large part of the increase of energy consumption is due both to the fact that many people can be considered as locked-­in to poorly built and inefficient houses and to general cultural and technical developments (Martiskaïnen, 2007, p. 27). Still, the interplay of the larger carbon-­based STS with habits is essential to grasp both because habits

94   Not irrational but habitual enable it to hold together but also because different habits may explain the divergence of consumption patterns observed between households living in similar conditions (Gram-­Hanssen, 2008a). Stand-­by consumption is a good illustration of the interaction between TC and habits. Designing measures to change energy-­ consuming habits appears inevitable. Micro-­level interventions are thus needed as much as macro-­level ones since, due to the potential rebound effect arising from unchanged energy-­consuming habits, “an exogenous increase in energy efficiency may not lead to lower energy consumption” (Brännlund et al., 2007, p. 15). The role of habits may explain why some measures have proven more successful than others. From the more detailed discussion on the process of habits reinforcement provided in Chapter 3, the joint use of feedback and social commitment measures appears as promising. This is confirmed by three review studies that assess the effectiveness of measures aimed at reducing energy consumption (Abrahamse et al., 2005; Darby, 2006; Martiskaïnen, 2007). From the habits perspective, the potentially greater effectiveness of combining “consequence measures” such as feedback with social influences stems from the fact that they address two prominent aspects of habits reinforcement: biased information and remote long-­term benefits attached to the alternative behaviour as compared to habits. Indeed, feedbacks are intended to inform and motivate through increasing visibility (Fischer, 2007, p.  503) while commitment strategies (such as the Brussels Energy Challenge) enhance “self-­satisfaction as a result of acting in accordance with personal values” and therefore increase “the cost of not acting” (Matthies et al., 2006, p. 94). Adding social or comparative components to such commitment measures seems to further increase their effectiveness as illustrated by the comparative feedback case in Siero et al. (1996) and the social commitment case of the Dutch “Ecoteam Programme” mentioned in Martiskaïnen (2007, p. 44). Summing up the elements arising from a review study, Martiskaïnen (2007, p.47) concludes that effective measures to reduce energy consumption should ideally be clear and simple, relevant to the consumer, involve some type of commitment or goal and be visible, consistent and frequent. This is in line with most of the policy recommendations mentioned in Chapter 3 and which are based on a detailed analysis of the characteristics of habits. Focusing specifically on feedback, Fischer (2007, pp.  513–514) arrives at mostly the same conclusions but adds that feedback also should involve interaction and choice for households and be appliance-­specific. However, one sound conclusion is made right after, underlining that “[t]here is probably not “the” perfect feedback for everybody”. While this is certainly true when it comes to the specific designs of feedback (i.e. table versus charts), it is also the case that feedback can be counterproductive for households with low consumption. More generally, there is no “one size fits all” measure and effective interventions should thus be tailored to the characteristics of the targeted group (e.g. norms and motives, consumption profiles, etc.). This argument is also essential to bear in mind for deconstructing habits. In accordance with our empirical results relative to the importance of context change (see Tables 5.4 and 5.5), McMakin et al. (2002, p.  851) claimed that “highly mobile populations (military, students) may adopt different energy use

Not irrational but habitual   95 habits than those who stay in their residences for years. Thus, effective intervention efforts should explicitly include the characteristics of the targeted living situation and its residents”. This was already acknowledged in Veblen ([1899] 1994, p. 108) where it is mentioned the “varying degrees of ease with which different habits are formed by different persons, as well as the varying degrees of reluctance with which different habits are given up”. This variability of habits within a similar carbon-­based STS shaping individuals towards energy-­ consuming behaviours is probably one reason why “many studies have shown that a combination of strategies is generally more effective than applying one single strategy” (Abrahamse et al., 2005, p. 282).

Annex 1: Results of the principal component analysis with respect to the four different dimensions of habits in concrete energy consumption behaviours 1.0

0.5

Factor 2

B C

A

0

�0.5

D

�1.0 �1.0

�0.5

0 Factor 1

0.5

Figure 5.A1  Graphical results for the action “switching off the television”. Notes Cumulated percentage of variance explained by the two factors = 75.57%. A: the 1st dimension of habits “anchored in your practices”. B: the 2nd dimension of habits “being able to think about something else”. C: the 3rd dimension of habits “without being fully aware of it”. D: the 4th dimension of habits “difficult to change”.

1.0

96   Not irrational but habitual 1.0

0.5

Factor 2

B C

A

0

�0.5

D

�1.0 �1.0

�0.5

0 Factor 1

0.5

Figure 5.A2  Graphical results for the action “turning up the heating”. Notes Cumulated percentage of variance explained by the two factors = 75.73%. A: the 1st dimension of habits “anchored in your practices”. B: the 2nd dimension of habits “being able to think about something else”. C: the 3rd dimension of habits “without being fully aware of it”. D: the 4th dimension of habits “difficult to change”.

1.0

6 Overcoming inertia Insights from evolutionary economics into improved energy and climate policies1

6.1  Introduction Climate change is today often seen as one of the most challenging issue that our civilisation will have to face during the twenty-­first century. This is especially so now that the most recent scientific data have led to the conclusion that “the globally averaged net effect of human activities since 1750 has been one of warming” (IPCC, 2007a, p. 5) and “that continued greenhouse gas emissions at or above current rates would cause further warming” (IPCC, 2007a, p. 13). This unequivocal link between climate change and anthropogenic activities requires an urgent, world-­wide shift towards a low-­carbon economy (Stern, 2006, p. iv) and coordinated policies and measures to manage this transition. The climate issue is undoubtedly a typical policy question and as such, is considered amenable to economic scrutiny. Indeed, from the very beginning of international talks on climate change, up until the most recent discussions on a post-­Kyoto international framework, economic arguments have turned out to be crucial elements of the analysis that shapes policy responses to the climate threat. This can be illustrated by the prominent role that economics has played in the different analyses produced by the IPCC to assess the impact of climate change on society (Toman, 2006). As mentioned in Gowdy (2004), the mainstream paradigm is the dominant standard among economists and their audience. It thus provides the theoretical background on which policy-­making is based. And here also, climate policy is surely no exception as the mainstream view in economics has been a key factor in designing climate policies (Toman, 2006). This is illustrated by the fact that strict Walrasian CGE models – the primary tool of mainstream economics – clearly dominated most of climate-­related economic analysis (Laitner et al., 2000; Löschel, 2002).2 However, the use of such models is being questioned. As mentioned in Nannen and van den Bergh (2008, p. 1), “[a]lthough these models have generated many clear insights, they do not represent the full range of model approaches and questions that can be addressed”. For instance, the fact that the mainstream approach is qualified as being a-­historical (Foster, 1997, p.  432) means that crucial elements such as the path dependence of TC cannot be grasped.

98   Overcoming inertia Accordingly, the purpose of this chapter is to investigate how the analytical framework of evolutionary economics could provide an insight into dealing with the climate issue. The choice of an evolutionary line of thought is quite straightforward: given its focus on innovation and system change it provides a useful approach to start with for assessing and managing the needed transition towards a low-­carbon economy. This chapter brings together and develops further the insights relating to the notion of “lock-­in” that arise from the evolutionary perspective. These insights were exposed separately in Chapters 2 and 3, which are more focused on energy issues. Building on the view that individuals and institutions mutually constitute each other, the aim of this chapter is to provide a framework that allows for both the socio-­technical and the behavioural sides of the lock-­in process to be depicted and accounted for in the analysis. Beyond relating this analytical perspective to ongoing theoretical and policy debates on climate change, this chapter also provides novel insights in terms of policy recommendations that target both sources of inertia as well as their interplay in order to find ways to overcome what has been termed the “carbon lock-­in” (Unruh, 2000). The chapter is structured as follows. In the following section, we first present a brief overview of the main assumptions endorsed in traditional economic analyses of environmental issues. The rest of Section 6.2 is devoted to showing the implications of resorting to the framework of mainstream economics for dealing with climate change by looking more closely at the debate on the “efficiency paradox”. Section 6.3 then discusses the complementary insights that arise from adopting an evolutionary approach, highlighting the path dependence and lock­in of both consumption behaviours and TC. In Section 6.4, we deal with the implications of our approach for policy-­making in the field of energy and climate change. Section 6.5 then concludes.

6.2  Climate policy analyses and their limits 6.2.1  Core economic assumptions and the climate change context The way economists usually frame the decision-­making process is to assume that agents are perfectly rational (or behave as if they were so). It thus follows that the policy recommendations of most economists are “conforming to the axioms of consumer choice embodied in Homo economicus” (Gowdy, 2007, p.  650). Echoing the work of Herbert Simon on “bounded rationality”,3 this is sometimes viewed as “the ‘unbounded rationality’ assumption of mainstream economics” (Venkatchalam, 2008, p.  640). Beyond the obvious limited availability of information (and time to process it), what is crucially missing in the rational actor framework with respect to knowledge is its ambiguity, as well as its interpretative and potentially tacit nature.4 All these aspects are essential for understanding the determinants of consumer behaviour and, most specifically, the role played by habits. As shown in Section 6.3, this dimension is of importance for energy and climate-­related analyses.

Overcoming inertia   99 Although the underlying assumptions of the rational model have been called into question for quite a long time (Allais, 1953; Tversky and Kahneman, 1974), it is only with the recent developments of cognitive sciences and the related works in behavioural economics and neuroeconomics (see, for instance, Camerer et al., 2005), that the criticisms began to have an impact. This is largely due to the experimental nature of these recent developments which made them replicable and thus amenable to testability (Gintis, 2007). What is also important in this respect is that the abundant empirical evidence gathered leads to the identification of some regularities of behaviour that allow for an alternative model to be envisaged (Gowdy, 2008). These regularities change the way usual notions – such as self-­interest and preferences – are to be understood since they now have to account for crucial elements such as strong reciprocity, loss aversion, hyperbolic discounting, habituation, etc. (Gowdy, 2007, 2008). Still, the traditional paradigm remains the dominant standard among economists. Policy advice is thus “based on these outdated representations of human behaviour and commodity production” (Gowdy and Erickson, 2005b, p.  208). This is also the case of all the different streams of normative environmental economics such as the Pigouvian approach of negative externality, the Coasian property rights approach or the commonly used cost–benefit analysis (Venkatchalam, 2008, p. 640). But, as acknowledged in Dasgupta (2008, p. 46) “property rights to natural capital are often either vaguely defined or weakly enforced, meaning that nature’s services are underpriced in the market”. Economists working on climate change should thus broaden what they consider to be the task at hand. This means going beyond the idea of simply assigning property rights and adjust relative prices in order to avoid negative externalities induced by economic growth. Although it may be deemed to be a departure from the traditional treatment of climate change by economists (Barker, 2008, p. 175), the Stern Review (Stern, 2006) is still based on rational choice theory (i.e. under the form of the related “expected utility theory”5). It has also been designed in the spirit of making predictions about the negative effects of economic growth and the measuring of them. However, beyond the debate around the Stern Review, a growing part of the scientific community is now becoming more inclined to frame the problem differently (Dasgupta, 2007). Indeed, the way of framing climate change with only quantitative and formal economic analysis led economists to press for what Dasgupta (2007, p.  23) qualify as a “misplaced concreteness”.6 This is largely due to the particular characteristics of the climate threats which cannot be easily dealt with using usual economic tools. For instance, since the view that “economic processes tend towards timeless equilibrium states remains the foundation upon which mainstream economic analysis is built” (Foster, 1997, p. 429), it leaves room for analyses to be performed considering economic evolution as a reversible process. This obviously contradicts the potential irreversibility of some predicted impacts of climate change. The issue at stake is thus one of adequately dealing with events characterised by low probability of occurrence and high potential impact. This problem that arises from “the incredible magnitude of the deep structural

100   Overcoming inertia uncertainties that are involved in climate-­change analysis” is acknowledged in Weitzman (2009a, p. 35), where it is claimed to make conventional CBA “especially and unusually misleading”. The “efficiency paradox” provides an insightful illustration of the need for economists to enlarge their usual approach which, as will be shown, can also be considered to have been partly misleading. This view was well summarised over 20 years ago in the following quote from Robert Ayres: Why does even private capital in our supposedly competitive free-­market economy flow into projects yielding consistently low rate of return, while not flowing into projects with very high returns? Whatever the explanation, it is not an equilibrium phenomenon in any relevant sense of the word. Either the real economy is much slower to respond to price signals than economist have ever been willing to assume, or the Walrasian paradigm is altogether inappropriate. I suspect the latter. With respect to energy conservation (and probably other cases) the consistent neglect of economically attractive opportunities seems to me to be a case of hyperselection (‘lock in’) of a non–optimal trajectory. (Ayres, 1991, p. 270) 6.2.2  The “efficiency paradox” A great deal of research in climate-­related literature has been devoted to analysing what has been termed the “no regret” emission reduction potential, which triggered an extensive debate among economists.7 An emission reduction potential is said to be “no regret” when the costs of implementing a measure are more than offset by the benefits it generates such as reduced energy bills. Even though they are highly profitable, most energy-­efficient investments are not implemented spontaneously by economic agents which leads to what has been termed the “efficiency gap” (see Jaffe and Stavins, 1994; Krause, 1996) or the “efficiency paradox” (DeCanio, 1998). As shown in more detail in Chapter 3, the use of the mainstream framework of analysis has clearly been misleading with respect to this important debate.8 To begin with, it is important to recall that the “efficiency paradox” was first highlighted by bottom-­up engineering approaches (which do not rely on the standard framework of Homo oeconomicus). As mentioned in DeCanio (1998), it is the incompatibility of this “efficiency paradox” with mainstream theory that explains the initial scepticism of economists regarding the existence of such untapped profitable opportunities. Indeed, according to the mainstream paradigm, if such a profitable potential did exist, “unboundedly rational” economic agents would eventually undertake the necessary investments to capture it (Sutherland, 2000). After having argued against the existence of a “no regret” potential at the beginning, mainstream economists, faced with overwhelming evidence on the “efficiency gap”, resorted to the traditional view of “market failures” that lead to erroneous market signals to rescue the Homo oeconomicus paradigm.9 Based on

Overcoming inertia   101 this kind of framework, the goal is then to provide economic agents with the correct information to persuade them to invest in energy-­efficient measures. But again, empirical studies have shown that the picture is not as simple. First, bottom-­up studies have shown that transactions costs, although they exist, do not quite offset the benefits from identified profitable energy-­efficient investments (see Brown, 2001, for a survey of such studies). Second and more fundamentally, empirical studies show there are other obstacles to profitable energy-­efficient investments that are of a different nature from economic market failures.10 Non-­ economic obstacles – which have mostly been neglected by energy economists – are thus an important part of the explanation that requires to be appropriately understood. They are often referred to as “barriers” and partly relate to the aforementioned “bounded rationality” of an economic agent.11 As shown in the following section, the stance of this chapter is that the framework of evolutionary economics is very useful in that it is able to provide a two-­fold account (i.e. relying on both individual and socio-­technical sources of inertia) of this limited rationality that prevent individual to act as purely optimising agents.

6.3  An evolutionary approach to climate policy: the importance of path dependence More than a century ago, Thorstein Veblen wondered “why economics is not an evolutionary science” (Veblen, 1898). His work is still very insightful for those currently involved in climate policy as he can be viewed as the precursor of both the notions of path dependence and habits. In turn, those two notions provide a response to the drawbacks raised in Section 6.3. On the one hand, the evolutionary approach of habits can serve to explain the efficiency paradox. On the other hand, the notion of path dependence provides an interesting starting point on which to build alternative policies and measures aimed at inducing the needed TCs towards a low-­carbon economy. 6.3.1  The evolutionary framework and environmental issues Veblen’s legacy is significant when it comes to thinking about institution, evolution and change. Not only did Veblen depict the institutional context on which capitalism lays but he also suggested a way for better grasping the interactions between individuals and social forces – especially with the notion of habits for both firms and consumers. It is to be noted that Veblen’s main concerns were not about environmental issues per se but rather about the concept of evolution and the way economists misused analogy for observing economic change. It was not until several decades later, with the pioneer work of Boulding (1981) and Georgescu-­Roegen (1971) that a formal connection between the environmental and evolutionary agendas was eventually made (see Van den Bergh, 2007; Witt, 2008). However, despite their great insights, these works remained largely ignored within the field of evolutionary economics until recently (Dosi and Grazzi, 2006; Witt, 2008).

102   Overcoming inertia The more accomplished work within the field of evolutionary economics is most certainly the seminal book of Nelson and Winter (1982) which explicitly frames a theoretical project for thinking about evolution and change (Arena and Lazaric, 2003b). Their source of inspiration comes from Joseph Schumpeter and Herbert Simon from whom they inherited this vision of dynamic and innovation for thinking about changes. Their main achievement is to provide a more realistic vision of the firm. Relying strongly on the aforementioned idea of bounded rationality, the firm is no longer seen as driven only by the primary goal of profit maximisation but also by its survival given the environment where it operates. In such a framework, innovation matters for firm’s growth and development but “satisfying” (i.e. not necessarily optimising) strategies such as organisational routines also play a significant role (Becker et al., 2005). Routines are not only the knowledge base of the firm but also its organisational memory, that is to say the locus where knowledge is selected, stored and activated (Lazaric and Denis, 2005). Skills used by employees, organisational routines and innovations are the necessary triptych for ensuring firm’s viability in a long-­term perspective. It follows that what is important here is not so much to have “good” innovations but to rely on satisfactory routines for fully benefiting from innovative activity. Organisational inertia then becomes a major concern since it is seen as a way to protect firms from turbulences. Learning and adaptation are certainly the most satisfactory strategies for running a business in contexts fraught with uncertainty and unpredictability (Nelson 2008). Putting the emphasis on bounded rationality is not only valid for groups such as organisations or firms but also for individuals. Whereas firms have organisational routines, the satisfactory strategies of individuals are commonly named habits.12 This may explain why dynamics of energy efficiency for firms (as studied in de Groot et al., 2001; Kounetas and Tsekouras, 2008; Schleich and Gruber, 2008) are somewhat different than those for individuals analysed in this chapter through the notion of habits.13 Recently, some evolutionary models started to deal more explicitly with environmental issues through a reconciliation of Veblen’s insights with the framework developed by Nelson and Winter (1982; for a survey of such models, see Faber and Frenken, 2008). The added value of the evolutionary framework in economics with respect to environmental policy is that it highlights the role played by inertia and path dependence at the level of firms, consumers and technologies.14 All together, this tends to favour the “lock-­in” of STSs, as shown in the rest of this section. As paradoxical as it may seem, it is essential to have a good understanding of the underlying causes of that inertia prior to devising on how to enforce a change. Given that routines and habits “are performed by people who think and feel and care”, they also offer “a tremendous potential for change” (Feldman, 2000, p. 614). 6.3.2  Path dependence of economic change: the problem of technological lock-­in Given the need to shift to a low-­carbon economy as well as the unsatisfactory treatment of TC in mainstream modelling (Nannen and van den Bergh, 2008),

Overcoming inertia   103 turning to the framework of evolutionary economics appears promising considering its core characteristics. As explained in Chapter 2, defining what can be considered an evolutionary view of TC may be done starting from two elements. The first is the lack of formal historical connection that is identified as a major drawback of many ­analyses (Foster, 1997, p.  433). This inevitably leads towards what could be called the “David and Arthur theory” of path dependence and lock-­in and which stresses the historically contingent nature of economic change (see David, 1985, and Arthur, 1989). The second element is that the added value of an evolutionary approach of TC, even compared to the most recent analyses based on endogenous modelling of TC, is that TC is “contextualised” (Mulder et al., 1999). To be more precise, this means that the circumstances of its emergence are explained – which is highlighted through a systemic vision of technologies as “interrelated” (see Veblen, [1915] 2003, p. 130). It is important to note that modelling has gone through major improvements recently especially in the field of climate policy where models with ETC were developed (see Edenhofer et al., 2006). However, even though these models incorporate a form of learning processes with increasing returns, they still fail to integrate the main features of an evolutionary-­inspired approach of TC, namely systemic interdependencies, heterogeneity of agents and historical contingencies (see Chapter 2). We thus agree with Nemet (2006, p. 2) who claims that “the representation of technological change in large energy-­economic model remains highly stylised relative to the state-­of-the-­art of understanding about the economics of innovations”. Modelling TC differently obviously has an impact on the crucial question of when to act “since early action may then appear to be a more attractive strategy than ‘delayed response’ ”, as shown in van Vuuren and de Vries (2001, p. 205).15 To briefly illustrate what results from taking into account both the contextualisation and the historical contingencies, it is again insightful to turn to Thorstein Veblen. Using the example of British small wagons, Veblen ([1915] 2003) shows that systemic interdependencies imply that technologies can no longer be seen as isolated but rather as belonging to technological systems. Those systems can be defined as “interrelated components connected in a network or infrastructure that includes physical, social and informational elements” (Unruh, 2000, p.  819). Adding the fact that technologies are also dependent upon and connected with the wider range of cultural, organisational and institutional aspects of their environment that enable them to work together, we end up with what Geels and Kemp (2007) call STSs16 or what Unruh (2000) calls TIC. This intertwining of different elements that characterises a STS sheds light on the potential inertia of such systems. Indeed, once historical conditions have lead to the emergence of a STS, their multiple components contribute to stabilise the system in a self-­reinforcing manner. The nature and type of a STS is thus dependent upon the path followed17 and is further perpetuated through the interactions of its multiple elements. Positive feedback (i.e. increasing returns to

104   Overcoming inertia adoption) results in the locking-­in of the incumbent STS following a path dependent process. 6.3.3  Contribution of the evolutionary view As mentioned in Chapter 2, this evolutionary perspective of economics view is of great importance for energy and climate-­related issues in at least three different ways. First, it has been shown in Grübler (1998) that the last two centuries could be viewed as the succession of mainly three STSs, all three being based on a source of energy. In line with this approach some analysts argue that we are currently locked-­in a carbon-­based STS as our economies strongly rely on the use of exhaustible fossil fuels (Unruh, 2000; Arentsen et al., 2002). Second, since the emergence of a given STS is historically contingent and thus not only governed by optimality, it may be that it is based on an inferior design of technology (David, 1985). Third, as noticed by Shove (2005), the view that technologies are embedded in a strongly influential social context of institutions makes that consumption is shaped by (whilst also shaping) technological constraints. Given that a “structure is always both enabling and constraining” (Giddens, 1984, p.  169), choices in energy consumption are strongly influenced by the existing carbon-­based STS through wider forces such as norms, media, technical designs, etc. To be functional, people’s habits have to be “accordant” with prevailing socio-­technical forces which shape consumers’ choices towards more energy-­consuming ways of life. This can be illustrated by the rise of average internal temperatures in UK houses from 13.8°C in 1970 to 18.2°C in 2004 while the average number of electric appliances increased from 17 to 47 over the same period of time (Martiskaïnen, 2008). In addition, while choices in energy consumption are being strongly influenced by the existing STS, they, in turn, contribute to reinforce and maintain the incumbent STS. The evolutionary framework adopted in this chapter is thus crucial because it builds on the idea that individuals and institutions “mutually constitute and condition each other” (Hodgson, 1997, p. 404).20 This mutual constitutiveness means that habits may be seen as an additional factor of technological stability. In turn, this provides a two-­fold complementary explanation for the existence of the “efficiency paradox” beyond common economic ones.

6.4  Implications for policy-­making in the field of climate change Even though the added value of complementing economic analyses of climate change with an evolutionary perspective has been clearly shown in previous sections, Nelson and Winter (1982) remind us that the “ability of a theory to illuminate policy issues ought to be a principal criterion by which to judge its merit”. This is why, in this section, we provide some insights on the implications for policy-­making that arise from adopting an evolutionary approach.

Overcoming inertia   105 We can summarise the contributions of evolutionary economics to the issue of climate change by pointing to both its departure from the perfect rationality hypothesis and its shift of focus towards a better understanding of economic dynamics. Such a framework allows us to depict the presence of two sources of inertia (i.e. at the levels of individuals and at the level of STSs) that mutually reinforce each other. This is in line with a recent empirical analysis in the field of energy consumption in Denmark and which shows that there is both “similarity and collectivity” as well as “variety and individuality” in behaviours (Gram-­ Hanssen, 2008a, p. 14). Given this context, policies aiming at reducing energy consumption and GHG emissions would thus have to deal with both sources of resistance to change. This means not only to shift the incumbent carbon-­based STS for it to shape decisions towards the desired direction (i.e. a low-­carbon economy) but also to deconstruct habits that this same STS has forged with time. Recommendation 1: The maintenance of solution diversity is significant for allowing climate-­friendly technologies to emerge Unlocking from a trajectory that is no longer desirable is not a task that can easily be undertaken since it is difficult to identify the solution that would yield the best outcome. In this respect, Turvey (2006, p. 107) indicates that a government should be very cautious in their judgements when they try to make “objective” comparisons between various technological systems. In addition, Schnellenbach (2005, p. 115) reminds us that collective learning in the field of policy-­making is largely indeterminate and that policy-­makers may be tempted to skip the learning phase if this leads to policies that meet their aspiration “even if the policy would be inferior from the point of view of an omniscient observer”. Wisdom would thus require governments to delay their commitment to an inextricable future and keep a diverse range of technological options open (Berkhout, 2002, p. 3).21 It is argued that policy-­makers should enlarge their vision if they wish to break free from historical contingencies. There is no such thing as an “a priori optimal policy” as already suggested by Turvey (1963, p. 116) who claimed that “[e]ach case has to be considered on its own and there is no a priori reason to suppose that the imposition of a tax is better than alternative measures”. If their ability to foresee the future is obviously limited, policy-­makers should then learn about the evolutionary processes at play. In their thorough review of the Dutch environmental policy, van den Bergh et al. (2007) provide a good illustration of the inherent difficulty of applying evolutionary principles. For instance, the option of maintaining some degree of technological diversity is explicitly acknowledged (through the so-­called “main routes for a sustainable energy system”) in an official document where it is mentioned that “the transition approach has taught us that it is better not to choose one of these options in advance, but to keep different lines of development open” (EZ, 2004 quoted in van den Bergh et al., 2007, p. 86).

106   Overcoming inertia Nevertheless, the authors note that “diversity is acknowledged in policy documents, but in practice this applies mainly to diversity in technologies and much less to diversity in companies, products and strategies” (ibid., p.  87). Even though the often raised problem of “waste and errors” was accepted in order to get on a sustainable trajectory, a major problem for creating green niche markets in the field of energy is that it contradicts the increased competitiveness in the sector after the liberalisation imposed at the EU level. In fact, most of the evolutionary insights that appear as conflicting with the general focus on efficiency (which, as noted above, follows from the Cartesian legacy of mainstream economics) are often neglected by policy-­makers. Accordingly, it seems necessary for policy-­makers to also break free from their habitual way of thinking as they “often display a surprising sense of routine in their strategies and behaviour” (ibid., p. 94). In the case of climate policy, a technological succession is needed (Windrum and Birchenhall, 2005), which is considered as a necessary condition for attaining a low-­carbon society (Koehler et al., 2006, p.  18). In other words, there needs to be a transition from the incumbent STS to a more climate-­friendly configuration. Bearing in mind the aforementioned interrelations between demand, technology and society, “long-­term technology policy should take account of the socio-­cultural contexts in which technologies fit” as claimed in Wilhite (2007, p. 29). Policy-­makers should thus learn about those interactions and promote the type of measures that have been proven successful in overcoming lock-­in situations.22 One inevitable consequence of looking at technical change through an evolutionary framework is that transitions will typically involve a multi-­level dynamic of complex interactions and feedback in a path dependent manner. This clearly means that the outcome will be of an emergent (i.e. rather than planned and structured) uncertain and complex nature (Raven, 2007). Accordingly, policy-­ makers should refrain from “picking winners” and rather create conditions under which the evolutionary process of economic change would lead to the desired outcome (climate protection in this case). There are two broad strategies that are commonly identified in the literature as capable of triggering transitions: niche23 accumulation and hybridisation (Raven, 2007, p.  2392), with the former starting from a radically distinct field while the latter building on the existing regime.24 Accordingly, both strategies display advantages and pitfalls that are related to their respective closeness to the incumbent regime. This may explain why, in practice, it seems that successful transitions often involve a mix of both strategies as illustrated with the example of the gas turbine which shows that both strategies were required to overcome the lock-­in of the incumbent steam power plant (Islas, 1997). This view is confirmed in an analysis of distributed generation of electricity where it is noted that “some elements of the old regime were vigorously rejected, while others were carried along into the new regime” (van der Vleuten and Raven, 2006, p. 3747).

Overcoming inertia   107 Recommendation 2: Motivate consumers with other measures than usual incentives to shift from the existing carbon-­based STS In line with the aforementioned insight of the evolutionary perspective that highlights the presence of habits in energy consumption, a necessary change would be for decision-­makers in the energy and climate field to stop focusing only on technology and innovation and take into account the interrelations with the demand-­side and society. The incremental improvements brought to a nascent technological option do not only come from “producers of new knowledge but also from users” (Schot and Geels, 2007, p. 607). Acknowledging the role of habits, an innovative policy instrument is the Brussels Energy Challenge, which sees citizens committing themselves to implement at least one of the 15 energy-­saving actions proposed by the regional authorities. As developed in more detail in Chapter 3, there are various strategies that can contribute to changing unsustainable habits in the field of energy consumption. Among those different options, making the alternative behaviour more rewarding seems to provide an interesting point on which to found sustainable energy measures. This is confirmed by the answers provided by participants in the Brussels Energy Challenge as it is the very notion of “challenge” that is considered to be the most “interesting” aspect of the proposed policy.25 In fact, as mentioned in Matthies et al. (2006, p. 94), commitment strategies enhance “self-­ satisfaction as a result of acting in accordance with personal values” and therefore increase “the cost of not acting”. The rational choice model has paved the way for the current state of policy-­ making where decision-­makers “obsessively invoke “incentives” as the panacea for any given social problem” (Hayes, 2007). But the aforementioned locked-­in practices in energy consumption under the form of individual habits or organisational routines tend to reduce the effectiveness of such “antecedent measures” (Martiskaïnen, 2007; Verplanken and Wood, 2006; Abrahamse et al., 2005). When habits are deeply ingrained, they often impede individuals to perform a new behaviour even they formulate firm intentions to do so. This can also be the case of collective routines.26 Besides, routines have a narrative role which is especially pronounced with those routines people pretend to follow. This essential element is referred to as the “ostensive” dimension of routines and has been discussed in Feldman (2000). Policy-­makers should bear in mind the potential discrepancy which may exist between those “ostensive routines” and the “performative routines” (i.e. those actually used). This rather frequent gap between intention and action should not be neglected when policy-­makers try to promote new types of behaviours.27 Such psychologically rooted non-­economic barriers are thus an important part of the explanation. They would require a wider range of policies to be implemented if decision-­makers wish to reverse the trend of consumers not always adopting profitable energy-­saving regardless of their strong intentions to do so.28 In short, even though economic incentives may have some influence, they are far from being the unique relevant factor. Strategies that interfere with the “intrinsic

108   Overcoming inertia motivation” of individuals may sometimes be rejected by the population, which makes necessary to turn to alternatives ways (Gagné and Deci, 2005). As it has been shown by Frey (1999) about environmental goals, “intrinsic motivation” cannot be easily regulated. In some cases, extrinsic motivation (e.g. incentives) may undermine the existing motivation and create a “crowding-­out effect”, as illustrated by the example of blood donors in Switzerland (see Mellström and Johnnesson, 2008; see also Gowdy, 2008). This does not mean that policy-­makers should totally abandon usual tools such as economic incentives but they should learn in which context they may be counterproductive by reducing existing motivation. Furthermore, the aforementioned role played by habits and routines may also need to complement traditional measures in order to enhance their effectiveness. In accordance with empirical studies highlighting the importance of context stability for habit formation (Wood et al., 2005; Danner et al., 2008), McMakin et al. (2002, p. 851) claim that “intervention efforts should explicitly include the characteristics of the targeted living situation and its residents”. This is the essence of the “downstream-­plus-context-­change interventions” proposed in Verplanken and Wood (2006, p.  96). The increased effectiveness of linking traditional measures to sensitive life events or changes of context has been validated empirically in several studies (Satoshi and Gärling, 2003; Verplanken et al., 2008; Bamberg, 2006, 2007). More generally, there is no “one size fits all” measure and effective interventions should thus be tailored to the characteristics of the targeted group (e.g. norms and motives, consumption profiles, etc.). The variability of habits within a similar carbon-­based STS shaping individuals towards energy-­consuming behaviours is probably one reason why “many studies have shown that a combination of strategies is generally more effective than applying one single strategy” (Abrahamse et al., 2005, p. 282). Recommendation 3: Target ‘lead users’ and pave the way for a transition towards a low-­carbon STS If different people tend to display different habits (and different propensities to rely on habits) and the interplay with users is essential for a nascent technology to mature, it is then straightforward to look for those individuals called “lead users” who are prone to use new technologies (i.e. those that have the habit of looking for novelty). The idea is thus to build on the same interplay between individuals and socio-­technical influences described in previous section in order to trigger a positive feedback process towards a low-­carbon STS. As shown in Buenstorf and Cordes (2008), social groups play an important role in introducing change given the tendency to imitate prestigious individuals. For example, Hollywood’s stars have contributed to promote new behaviours in favour of small “green cars”, which has had a huge impact on those incumbent automobile firms that were unable to adapt to the new consumption patterns. However, although the importance of social learning may temporarily overcome the strong “hedonistic” biases that favour unsustainable behaviours, the permanent trade-­off

Overcoming inertia   109 between these two contradicting forces makes that recently induced “green behaviours” can possibly not be sustained in the face of new knowledge (Buenstorf and Cordes, 2008). The interplay between habits and socio-­technical accounts is thus essential to grasp because of the risk to see climate-­friendly behaviours newly adopted by individuals being quickly “crowded out” by wider forces. Still, policy-­makers should seriously consider the role of these groups which create favourable conditions for the emergence of new niches and may prepare the transition between different STSs. In this context, policy-­makers should create conditions that favour the emergence of those “lead users”. Indeed, these highly intrinsically motivated individuals may play a decisive role in technological development as it has been exposed during the creation of open source software (von Krogh and von Hippel, 2006). Additionally, public authorities can also play their part in modifying intrinsic and extrinsic motivations through the development of large and visible public investments that may instil new values inside social groups. The example of the city of Perpignan is illustrative of the importance of creating significant “small events”. By massively investing in solar energy for the St Charles fruit and vegetable market, a highly visible and well-­known institution, municipal authorities have played a critical role in promoting “green” technology (Cros, 2008). This small decision was decisive as it triggered an increased adoption by households through generating a kind of “bandwagon effect” for the diffusion of solar technology in the city.

6.5  Conclusions Our analysis has shown that adopting an evolutionary perspective could provide decision-­makers with crucial complementary insights for dealing with energy and climate-­related issues. For instance, the lock-­in process makes it unlikely that traditional cost-­efficient measures aimed at internalising external costs will be sufficient to bring about the required radical change in the field of energy, because they fail to address structural barriers (del Rio and Unruh, 2007, p.  1511). Furthermore, one consequence of the existence of habits (which are clearly at play in energy consumption) is that pricing instruments alone will be not sufficient for triggering change at the level of agents (van den Bergh et al., 2006). Micro-­level interventions are thus needed as much as macro-­level ones since, due to the potential rebound effect arising from unchanged energy-­ consuming habits, “an exogenous increase in energy efficiency may not lead to lower energy consumption” (Brännlund et al., 2007, p. 15). Accordingly, climate policies should instead create conditions enabling the use of the cumulative and self-­reinforcing character of economic change highlighted by evolutionary analyses (Mulder et al., 1999) and take into account the current lock-­in of our economies in a carbon-­based STS. Similarly to the idea that disturbing the contextual forces which contribute to maintaining “counterintentional habits” seems an inevitable strategy for changing them, destabilising the currently prevailing carbon-­based STS is a necessary first step in initiating the transition towards a low-­carbon economy.

110   Overcoming inertia Acknowledging this and building on the insights from the evolutionary approach, policy-­makers should go beyond their traditional role of simply financing technology and support both social and physical technologies. As confirmed in an analysis of the German electricity sector, circularity and cumulative causation (i.e. the building blocks of the evolutionary framework) are essential features in such transition processes (Jacobsson and Lauber, 2006, p.  272). In line with the claim that we “should not confuse ‘optimal’ with ‘what survives’ ” (Schot and Geels, 2007, p. 607), policies could thus aim at influencing the selection environment such that “only the greenest technologies will survive” (van den Bergh et al., 2006, p. 70). Most certainly, this calls for a better understanding of the key factors that explain how and in what context TC arises in order to adequately design climate policies aimed at promoting climate-­friendly technologies. As argued in van den Bergh (2007), “major transitions in human-­economic history can only be fully understood if the coevolutionary role of environmental resources is sufficiently recognized”. While we agree with this statement, the goal of this chapter was to show that a climate-­friendly transition can only be fully implemented if policy-­ makers sufficiently understand the co-­evolutionary processes at play.

7 The sustainability of EU agricultural systems Insights from evolutionary economics1

7.1  Introduction The need to make agricultural systems more sustainable is recognised as an urgent issue by most decision-­makers (Gafsi et al., 2006). At the European Commission level, the threats that can arise from agricultural practice are taken seriously, whether regarding environmental issues (European Commission, EC, 2003) or employment loss due to further modernisation of EU’s agriculture (EC, 2006). Accordingly, the EU has been trying to address those challenges by reshaping its Common Agricultural Policy (CAP) in various ways. Typically, one of the responses offered by the EU to the lack of sustainability of agricultural systems in Europe is the concept of a “multifunctional agriculture” which, as will be discussed later, leaves room for different interpretations in terms of sustainability of agricultural systems (Renting et al., 2009). However, sustainability issues do not seem to be given the same level of priority as economic issues in the EU agricultural policy. Indeed, in a study based on critical discourse analysis, it is shown that the European Commissioner responsible for Agriculture and Rural Development consistently puts more emphasis on economic considerations than on multifunctionality issues (Erjavec and Erjavec, 2008). Therefore, it is essential for the crucial influence of economic discourse to be clearly understood prior to reflecting on ways to bring agricultural systems more in line with sustainability requirements. Indeed, as noted in a study on “the rural economy”, the development of economics “has favoured a Cartesian-­Newtonian world view of a mechanical system operating according to strictly defined laws” (Allanson et al., 1994, p. 3). However, as argued in this chapter, economics was also profoundly influenced by this same Cartesian-­Newtonian paradigm when it originally began to develop as a science. It is the resulting economic rationale that has then influenced the development path of agricultural systems. More precisely, the underlying driving forces of mainstream economics mean that the same logic that prevailed in industry was applied in order to modernise and rationalise agriculture (Smith et al., 2005, p. 1493). This led to the propagation of a productivist agricultural system (Lowe et al., 1993, p. 221) centred on the “modernisation triptych” suggested by the economic logic: specialisation, inten-

112   Sustainability of EU agricultural systems sification and concentration. It is undisputable that the logic of the European productivist agricultural model greatly contributed to solving most of the issues that arose after the Second World War, and notably those related to food shortage. However, this model hit its limits in the end of the 1970s when “it became politically and economically untenable to continue subsidising an industry whose output was simply adding to existing stockpiles of surplus production” (Walford, 2003, p. 492). In addition, the spread of modern agricultural techniques (and the related increased use of energy input and chemicals) that resulted from the industrialisation of agricultural practice consequently created the aforementioned environmental and social problems. Accordingly, the objective of this chapter is to provide a clear picture of the socio-­economic processes at play in shaping agricultural systems. This diagnosis is a necessary first step in order to usefully complement policy-­making in this field. It is essential to note that the limits of the productivist model of agriculture have clearly been acknowledged by EU decision-­makers. This can be illustrated by the policies that, since the 1980s, have been intended to bend this trajectory.2 However, given the limited success of these attempts (see, for instance, Marsden and Sonnino, 2008; Walford, 2003), it seems useful to complement the prevailing economics approach with insights from other streams of economics. The stance of this chapter is that, together with the perspective of ecological economics, the framework of evolutionary economics provides an insightful complement for dealing with the issue of sustainable agricultural systems. The choice of an evolutionary line of thought initially stems from its core characteristic: given its focus on innovation and system change it provides a useful approach to start with for assessing and managing the needed transition towards a more sustainable agricultural system. Besides, as extensively shown in Chapters 2 and 3, its shift of focus towards a better understanding of economic dynamics, together with its departure from the perfect rationality hypothesis, renders evolutionary economics a suitable theoretical complement for designing environmental policies. This chapter is structured as follows. The next section briefly describes the characteristics of traditional economics through underlining the major influence of the Cartesian-­Newtonian paradigm and its broad implications. Section 7.3 then uses this perspective on the economic rationale to analyse its role on the transformation of the French agricultural system. In Section 7.4, this transformation is more formally analysed through the prism of the “modernisation tryptich”. Section 7.5 is dedicated to showing the insights that arise from the evolutionary approach. More precisely, the evolutionary framework underlines the historically contingent nature of economic change and the role played by systemic interdependencies thereby providing a theoretical support to the idea that current agricultural systems are locked-­in to many extents. Section 7.6 deals with the implications in terms of policy-­making in agriculture and Section 7.7 then concludes.

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7.2  The prevailing economic rationale and its implications The profound influence of Descartes and Newton on the development of economics has been already attested (Dopfer, 2005). A major consequence of this influence on mainstream economic theories is the hypothesis of perfect rationality, as well as the reduction of individuals to their mechanical properties (Prigogine, 2005). Indeed the “maximisation” hypothesis can be considered as the Newtonian invariant law of economics. This orientation of economics is obviously not without consequences. For instance, it can be argued that the idea of endless growth derives from theoretical requirements related to this orientation (see Gowdy, 2005). Indeed, in the mainstream framework, consumer preferences must exhibit non-­satiation – together with other properties such as reflexivity, transitivity and continuity – given that they must possess the required mathematical characteristics for the economic model to display its properties (i.e. maximisation in a general equilibrium framework). One of the most obvious concepts derived from Descartes’ work is probably the notion of “dualism”. Indeed, the distinction Descartes established between the physical and the spiritual world has led to the idea that only physical phenomena are worthy of scientific enquiry and theoretical construction because, unlike the “soft” side of reality, they are visible, comprehensible and measurable (Dopfer, 2005). Another crucial influence of Descartes is his mechanical conception of the functioning of nature which Newton later expanded to the whole universe and completed with mathematical laws. The Cartesian “logical rigor” became associated with the Newtonian “atomistic mechanistic” approach to build the “methodology upon which the sciences, including the life and most social sciences, effectively have been based ever since” (Lawn, 2001, p. 143). In sum, in copying Newtonian physics, economics became “progressively more reductionist and formalistic” (Hodgson, 1993a, p. 251). As far as methodology is concerned, the Cartesian-­Newtonian influence meant a shift “from the concern with the empirically observable to developing formal rules of analysis” (Perlman 1996a, quoted in Alcouffe and Kuhn, 2004, p. 224). Indeed, deductive methods and mathematical rules of analysis became the corner stones of mainstream economics. The Cartesian-­Newtonian legacy also reinforced the micro-­ foundation approach since “the reductionist idea of explaining whole in terms of individual parts became the sine qua non of economic science” (Hodgson, 1997, p. 402). This trend has undoubtedly contributed to enthroning economics as an unavoidable discipline in the field of policy-­making. This is largely due to the fact that mainstream economics (through its mechanical reductionism) is able to offer a theoretical framework that allows for a policy assessment based on metric values, which is highly appreciated by decision-­makers. Even though it is undisputable that mainstream economic models have generated a lot of useful insights, “they do not represent the full range of model approaches and questions that can be addressed” (Nannen and van den Bergh, 2008, p.  1). For instance, the fact that the mainstream approach is qualified as being ahistorical3 (Foster, 1997, p. 432) means that crucial elements such as the

114   Sustainability of EU agricultural systems path dependence of TC cannot be grasped. This may well be a critical shortcoming since, as mentioned in Section 7.1, these elements have been shown to be of importance for many issues including those related to agriculture. Before turning to the illustrative example of the importance of historicity, it is necessary to note that the mainstream approach has also been strongly questioned with respect to the way it usually deals with environmental issues. What has changed recently, though, is that its limits are explicitly recognised even by former staunch supporters of the mainstream framework (Dasgupta, 2007; Weitzman, 2009a). It must be noted that those authors mostly work on climate-­ related issues. However, even though the “misplaced concreteness” and the “misleading” nature of traditional CBA that is raised in their respective paper can thus be largely explained by the specific characteristics of the climate issue,4 these authors also note, more generally, that “nature’s services are underpriced in the market” (Dasgupta, 2008, p. 2). The shortcomings of the traditional framework when it comes to dealing with environmental issues thus seem to increasingly be acknowledged. Considering the above-­mentioned Cartesian-­Newtonian legacy, it is not surprising that the prevailing economic framework may sometimes be inappropriate for dealing with environment-­related issues (including the aforementioned impacts of current agricultural systems). Indeed, it is with an inherently reductionist, linear and deterministic model favouring short-­term efficiency that mainstream economics tries to approach long-­term environmental phenomena that often display systemic and emergent properties while also being better explained through circular causation. It could also be added that quantitative analyses are highly delicate when they are applied to potentially irreversible issues that are fraught with deep uncertainty (see also Weitzman, 2009a).

7.3  Post-­war agriculture in France: a revolution under influence This section is intended to portray how the transformation of post-­war French agriculture unfolded in history with a particular attention to the underlying influence of the Cartesian-­Newtonian legacy, and the related rationale of mainstream economics. Indeed, until the Second World War, and despite the rural migration caused by the development of industry, French rural communities had maintained a conservatist status quo in their social organisation (Muller, 1984). French peasants had also kept a diversified production, mostly directed at their own supply. This autarkical attitude offered them a relative autonomy towards the growing power of the cities (Mendras, 1967): their production was primarily dictated by the fulfilling of their own basic needs, and only the surpluses were offered for sale. After 1945, the whole social organisation of French agriculture was shaken by a new driving force which, as will be shown, can be related to the dominance of the Cartesian-­Newtonian world view. Later and in retrospect, this new driving force has been called “productivism” (Lowe et al., 1993, p.  221) while the

Sustainability of EU agricultural systems   115 French farmers who adhered to it were sometimes referred to as “entrepreneurial farmers”5 (Muller, 1984, p.  63). Those entrepreneurial farmers turned the old ways of French agriculture upside down: from conservatism it became a matter of anxiety to turn to progress; autarky was to be abandoned for integration in the economical process; and the previous emphasis on land and people management was replaced by the urge to boost production. Structural pressures such as, among others, food shortage after the Second World War, mandatory schooling and the growing demands from the cities certainly played an important part in the profound transformation of French agriculture that took place at that time. The role of public policies should also not be underestimated, and especially the political urge to remedy what was perceived at the time as the “backwardness of French agriculture”.6 The development of scientific research in the field of agronomy was also a powerful incentive for change. However, those forces might not have proved sufficient, if the aforementioned entrepreneurial farmers had not articulated them in a new vision for the future of French agriculture. This vision of a modernised French agriculture relied on an ideology of progress with productivity increase as its end, and science and technology as its means. This is quite well illustrated by Prével (2007) in his socio-­anthropological study on the evolution of French agriculture. Prével’s analysis was built on a series of qualitative interviews with farmers who took part in the post-­war transformation of French agriculture. It appears from those interviews that the maximum yield became indeed the ultimate standard against which a farmer would judge his work. For those who succeeded in their shift to a more entrepreneurial attitude in the management of their farms, there was also the promise of a better standard of living and even, as explained in Muller (1984), the possibility to gain a new social status. It is of importance to note that, for the next three decades at least, farmers were indeed to experiment substantial productivity gains, a phenomenon that could but reinforce them to embrace the ideology of progress, and even give them the illusion of endless production growth. These productivity gains were mainly due to both the development of scientific research in the field of agronomy and the rapid evolution of technologies used in the farm. Beyond the development of scientific research, one can also witness the multiplication of the actors devoted to its propagation (Aggeri and Hatchuel, 2003).7 In short, productivity through scientific and technical advance became the core focus of the agricultural system. The new vision of the entrepreneurial farmers also diverged profoundly from the previous organisation of rural society on, at least, two other points. First, the emerging entrepreneurial layer of French farmers advocated a greater integration in the economic process, thereby renouncing to the autarkical attitude French farmers had traditionally adopted. Second, entrepreneurial farmers pleaded in favour of conciliation with the ways of industrialisation (Muller, 1984), which meant a loss of autonomy and often implied a “dramatic devaluation” of traditional insights (Jenkins, 2000, p. 302). Furthermore, it is important to note that applying the logic of industrialisation to agricultural practice required denying

116   Sustainability of EU agricultural systems the necessity of a different treatment for natural ecosystems and their living resources compared to traditional industrial resources. This can be seen as reflecting the mainstream economics conception of natural capital and human-­ made capital as substitutes (Midmore and Whittaker, 2000). The influence of that new vision and of those who advocated it rapidly became “hegemonic” (Muller, 1984, p. 84) and shaped the evolution of French agriculture for the next decades. French farmers, once convinced that progress was synonymous with production growth, were ready for the industrialisation of their agricultural practice, thereby fulfilling the Cartesian aspiration for mankind to “master and possess nature”,8 as exposed by Descartes in his famous “Discourse on the Method” (Part 6) to an extend that had never been witnessed before in the history of French agriculture.

7.4  The Cartesian-­Newtonian legacy and the rise of productivism in EU agriculture France was, of course, neither the first, nor the last European country to experiment such a radical transformation of its agricultural system towards a productivist model. Such a model has been described in Lowe et al. (1993, p. 221) as “a commitment to an intensive, industrially driven and expansionist agriculture with state support based primarily on output and increased productivity”. The role of public policies in this process should thus not be underestimated. Most notably the European CAP largely contributed to this shift of member states’ agricultural systems. In the following paragraphs, the main dimensions of productivism are first studied from the paradigmatic point of view highlighted in this chapter. Then, it is shown how the interaction and the synergies between those dimensions and the socio-­technical context have led to the emergence of the productivist agricultural systems that still prevail in European countries today. Regarding agricultural systems, productivism is generally associated with three main dimensions: specialisation, intensification and concentration (Walford, 2003, p. 493). The first dimension of productivism is specialisation. It can be argued that the trend to specialisation reflects the reductionist side of the Cartesian-­Newtonian paradigm, and its efforts to fragment complex interactions in order to isolate replicable processes. Indeed, as the logic of specialisation of agricultural systems was further extended, processes became more systematically organised, leading to norms, standardisation and replicable farming practice. This led, in turn, to a “disconnection between farming practice and locality” (Jenkins, 2000, p.  306). Such a quest for replicable farming practice that would only need little adaptation to local conditions can also be seen as reflecting the aspiration for invariant laws derived from the Cartesian-­Newtonian legacy. A second dimension of productivism is intensification. As illustrated in the case of the transformation of French agriculture, intensification is mostly related to “[t]he ideology that associates best with more and progress with growth”9 and

Sustainability of EU agricultural systems   117 the Cartesian aspiration to “master and possess nature”.10 Regarding agricultural practice, intensification materialised as increased mechanisation, massive use of agricultural inputs and new production techniques. Indeed, as it had previously happened in industry, increased mechanisation became a substitute for animal power and human labour in agricultural practice.11 Meanwhile, scientific research provided new insights that materialised in a massive use of fertilisers and pesticides provided by the agrochemical industry. Changes also took the form of new production techniques, such as artificial insemination. Intensification of agricultural practice thus mostly took place through capital intensive technological innovations, with an increasing use of both circulating capital (pesticides, fertilisers, water, animal feed) and fixed capital (equipment, machinery). The third main dimension, concentration, can be seen as a corollary of specialisation and capital intensification. Once a farmer had invested in equipment and machinery, it allowed him to perform the same task in a drastically reduced time. It then became highly rational for this farmer to seek to extend his arable land and use this newly available time to increase the profitability of its investments through capturing economies of scale. These additional acreages could often be bought – or rented – from those farmers who did not follow the productivist trend, endured income decline and had to cease their activity. This led to massive loss of employment and increased concentration in the European agricultural sector. However, this trend to concentration was, at least at the beginning of the productivist transformation of agricultural systems, seen as ineluctable and even beneficial for the modernisation and rationalisation of agriculture (see, for example, the case of France in Muller, 1984). At this stage, it is necessary to take a closer look at the interactions and synergies both between the three dimensions and with the broader socio-­technical context in order to fully grasp how a productivist agricultural system emerged. Along with the demand of the industry for large homogeneous quantities of single products, increased capital use encouraged mass production and therefore specialisation through economies of scale. In turn specialisation provided higher incomes that could be invested into physical capital and into buying extra land from farmers who could not keep up with the system. Specialisation, intensification and concentration are thus correlated and mutually supportive. As mentioned above with the case of French agriculture, the reliance of farmers on science and technology for the management of their farms rose progressively. Farmers also became increasingly dependent in economic and financial terms, with state support policies, solvability concerns and agro-­ business interests interfering with their usual concerns for land, livestock and production. It is likely that the prevailing economic rationale and its concept of the Homo oeconomicus have played a role in maintaining farmers on the capital intensive technological path, which has led to productivism and its related impacts. The concept of man as a rationalising machine with profitability as a unique bottom line might indeed have induced farmers to accept some technological innovations, new agricultural practice or a higher dependency on state support.

118   Sustainability of EU agricultural systems This happened although some of those changes were threatening to farmers’ health (such as the use of pesticides for instance), in total departure from their previous conception of the relation with their animals or potentially jeopardising their chances of economic survival in case of a change of policy. It is worth noting that farmers had, in earlier times, resisted similar innovations proposed by scientific experts. Indeed Bourdon (2003, p. 230) provides an example of how farmers opposed new livestock practice in 1848, based mostly on considerations for the well-­being of animals. This increased economic dependence was further reinforced by a general deterioration of the terms of trade for the agricultural sector (Midmore and Whittaker, 2000, p. 175). Income decline caused by such a deterioration of the terms of trade could only be counteracted by productivity gains offered by new technologies. In order to finance those new technologies, farmers had often to resort to more credit, being thereby trapped in a technology-­investment-credit spiral. Farmers were thus “caught in the system”: if they decided to stop following the trend, they were exposed to bankruptcy; and if, on the contrary, they kept following the trend, they ran the risk of being more and more entangled in the system. Besides, in the light of several decades of productivism, the trends to specialisation and intensification can also be connected with some of the most salient environmental pressures in the agriculture sector (Stoate et al., 2001). For instance, the increased use of heavy machinery has an impact on soil degradation while the utilisation of nitrogen (N) fertilisers causes the emissions of N2O and thus contributes to climate change (Wood and Cowie, 2004; Bellarby et al., 2008). Beyond the now well-­documented contribution of agriculture to GHG emissions (Steinfeld et al., 2006), it can thus also be argued that “the industrialization of agriculture was related to a range of environmental pressures including large-­scale soil degradation, groundwater pollution or habitat destruction” (Krausmann et al., 2008, p.  197). It is also important to note that the trend towards concentration tends to reinforce the intensity of those many environmental pressures that display threshold effects. The socio-­anthropological study performed by Prével (2007) shows that productivist French farmers are still submitted to the economical, technical and scientific forces described above, with an increasing role played by multinationals. But what is more striking in his conclusions is that “this servitude is partly borne voluntarily in the sense that it is resting on the adhesion to the ideology of progress”12 (Prével, 2007, p. 17). This means that, despite the above-­mentioned shortcomings and negative side-­effects of productivism, there is still a strong adhesion of farmers to the broad ideology of progress aimed at increasing productivity resorting mainly to science and technology. This also means that, as long as this ideology of progress is still validated by farmers, negative impacts for themselves, the environment, and society at large may only be sufficient to induce some fine-­tuning to the current agricultural systems (e.g. limiting the use of pesticide to its optimum in terms of efficiency) but not for more radical changes.

Sustainability of EU agricultural systems   119

7.5  Towards a paradigm shift: an evolutionary and ecological perspective The previous sections described the process that led to the emergence of the productivist model in agriculture, highlighting the underlying role of the Cartesian-­ Newtonian economic rationale. Having acknowledged this and bearing in mind how inherently difficult it is for this prevailing economic logic to be used for dealing with environmental issues, it seems that turning to an alternative economic framework could prove insightful in searching for solutions. In that respect, the approach of this section can be viewed as building on the insights from the framework of evolutionary economics but in an ecological perspective. Such a coupled approach is not new, as illustrated by the pioneering work of Kenneth Boulding, who linked both concepts of evolution and ecology (Boulding, 1978, 1981). Besides, as claimed in van den Bergh (2007, p.  522), ecological economics and evolutionary economics are “indeed very close in spirit” which renders the coupling approach both legitimate and promising. Ecological economics is a theoretical guiding post for the purpose of this chapter. This is mainly because it offers crucial insights for shifting the focus from a technological and input-­based endless production growth scenario to an “analysis based on the concept of carrying capacity [that] emphasizes environmental limits to system growth” (Harris, 1996, p. 95). Ecological economics also raises the question of the need for ethical choices in defining and prioritising societal goals in order to use resources accordingly (Lawn, 2001). In doing so, ecological economics departs from the mainstream economics view relying mostly on market-­based mechanisms in dealing with such matters. This ethical concern is particularly relevant for issues concerning food, and therefore agriculture, since it directly involves fulfilling one of human beings’ most basic needs. Beyond the closeness of spirit mentioned above, the choice of an evolutionary-­inspired line of thought is rather straightforward, for at least two reasons. On the one hand, this is due to the fact that evolutionary economics can be said to have developed partly with the aim of correcting the “scientific failure” of traditional theory in explaining why economic agents do not always act as optimising machines. This can be illustrated by the seminal book of Richard Nelson and Sidney Winter13 where profit-­maximising behaviour of firms is replaced by a view largely inspired by Herbert Simon’s “bounded rationality”. On the other hand, it is also important to note that the other cornerstone of the evolutionary framework in economics lies in its different interpretation of economic change. In fact, as claimed in Dopfer (2004, p. 178), what is exogenous in traditional economics “comprises the endogenous core of evolutionary economics”. Given that it focuses on economic dynamics resulting from innovation, selection and accumulation, evolutionary economics may offer new insights in the framing of environmental policies (van den Bergh et al., 2006). Those two reasons render evolutionary economics a suitable theoretical ground in setting up environmental policies. The added value of evolutionary

120   Sustainability of EU agricultural systems economics in providing support for designing environment-­related policies lies in its reliance on Thorstein Veblen’s concept of “cumulative causation” as one of its theoretical hypotheses. Thus, contrarily to the rather deterministic and linear view that prevails in mainstream economics, economic change is better pictured as a process of cumulative and interactive (i.e. downward and upward) causation (van den Bergh and Gowdy, 2003; Corning, 1997, Hodgson, 1997). As has extensively been shown to be the case with some socially acquired characteristics of human beings (Henrich, 2004), group-­level analysis (as opposed to analysis focusing on individual units) is very insightful in that it allows for circular and self-­reinforcing interactions between economic agents – which are clearly at play in agriculture as shown in Sections 7.3 and 7.4 – to be taken into account. In other words, through such a framework, economic dynamics involve processes that see individuals interacting with an emergent population in a self-­reinforcing manner.14 In this context, what makes the evolutionary perspective of economic change well-­suited for analysing the above-­mentioned issues in agriculture is that it stresses their historically contingent nature (because causation is cumulative) and highlights the role played by systemic interdependencies (because causation is interactive). Allanson et al. (1994, p. 35) go further into the appropriateness of the evolutionary framework for analysing agricultural systems by claiming that “it focuses on the need for a holistic understanding of the complex of interrelated processes which constitute the rural economy in order to inform and manage a range of possible policy directions”. As illustrated in Veblen ([1915] 2003) through the example of British small wagons, systemic interdependencies imply that technologies can no longer be seen as isolated but rather as belonging to technological systems. Those systems can be defined as “interrelated components connected in a network or infrastructure that includes physical, social and informational elements” (Unruh, 2000, p.  819). Adding the fact that technologies are also dependent upon and connected with the wider range of cultural, organisational and institutional aspects of their environment that enable them to work together, we end up with what Geels and Kemp (2007) call “socio-­technical systems” (STSs). This intertwining of different elements that characterises STSs sheds light on the potential inertia of such systems as, once historical conditions have lead to the emergence of a STS, their multiple components contribute to stabilise the system in a self-­reinforcing manner. More particularly, drawing on the David and Arthur theory of “path dependence and lock-­in”,15 the nature and type of a STS must be viewed as dependent upon the path followed16 and is further perpetuated through the interactions of its multiple elements. Positive feedback results in the “locking-­in” of the incumbent STS following a “path dependent” co-­evolutionary process.17 This perspective is very useful for analysing agricultural systems which are also better pictured as STSs – the development of which is marked with path dependence as suggested by many empirical studies that tend to show how current agricultural systems in Western Europe may be locked-­in to many

Sustainability of EU agricultural systems   121 extents (Cowan and Gunby, 1996; Wilson and Tisdell, 2001; Tisdell, 2003; Ajayi and Waibel 2003; Allison and Hobbs, 2004; Vanloqueren and Baret, 2008, 2009). As convincingly argued in Hogg (2000), there has been a path dependent lock-­in to genetic uniformity in agriculture through a process that he calls the “breeding-­chemical-mechanization (BMC) treadmill”. In the same vein, Ajayi and Waibel (2003) present an empirical case study where they show how the interplay of institutional arrangements and wider agroeconomic influences led to the adoption of a chemical based pesticide technology and thus to the locking-­out of the “integrated pest management” alternative irrespective of its more ecologically friendly character. In line with what has been shown to be the case of the current carbon-­based STS (see Chapter 2), the existing technological regime in agriculture tends to lock-­in a certain development trajectory to the detriment of others that could also contribute to making the agricultural system more sustainable (Vanloqueren and Baret, 2009). Among the elements that are shown to be contributing to this current lock-­in process, there is, for instance, the “reductionist and positivist” scientific paradigm together with the related quest for modernisation and focus of science towards growth and competitiveness (Vanloqueren and Baret, 2009). All together this shows that, even in searching for ways to lock out of an un­desirable trajectory (such as an unsustainable agricultural system), it is not easy to avoid choosing the solution that best fits with the existing constraints of the prevailing paradigm.

7.6  Implications of the evolutionary perspective for policy-­making in agriculture This should be fully acknowledged by decision-­makers if they wish to design appropriate policies aiming at making agricultural STSs more sustainable. Indeed, since the 1980s, policies have been intended to bend the productivist trajectory followed by European agricultural systems. Still, despite the reforms that followed, it seems very difficult for policies to unlock agricultural systems out of the productivist era as suggested by a recent empirical analysis that shows it is “premature to conclude that large-­scale commercial farmers can be regarded as having altered their agricultural systems to the extent that they be considered as wholly ‘post-­productivist’ or ‘multifunctional’ ” (Walford, 2003, p. 501). This should be somewhat qualified since, bearing in mind the problem related to the lack of a clear definition of the term, some authors consider the empirical evidence as sufficient to assert that post-­productivism is occurring to some extent (Mather et al., 2006). Nevertheless, if changes towards a “de-­emphasing of material production relative to other objectives” (ibid., p. 454) certainly are happening, there is still a long way to go before achieving a sustainable agricultural system. This echoes the work of Pierson (2000) where political processes are themselves viewed as highly path dependent. A recent study confirms this view concerning multifunctional agriculture in the UK by underlying the fact that “policy development is still ‘locked in’ to placating agri-­industrial interests, on

122   Sustainability of EU agricultural systems the one hand, and the continued vibrancy of post-­productivist (environmental and amenity) interests on the other” (Marsden and Sonnino, 2008, p. 8). Accordingly, there needs to be policies that specifically target those factors that contribute to maintaining the incumbent agricultural STS (i.e. relying on the triptych of specialisation, intensification and concentration).18 These policies would be more appropriate if they were designed using a theoretical framework that is able to accommodate for the inherent inertia of incumbent agricultural practice. In trying to surmount a case of lock-­in, “it is important to focus policy interventions in order to concentrate resources in such a way that they are sufficient to overcome inertia at least in that part of the system”, as claimed in Cowan and Gunby (1996, p. 539). What is needed is thus what Windrum and Birchenhall (2005) called a “technological succession” or, to put it differently, a transition from the incumbent agricultural STS to a more sustainable configuration. However, it is essential to recall that looking at systemic change through an evolutionary-­ inspired framework implies that transitions will typically involve a multi-­level dynamic of complex interactions and feedbacks in a path dependent manner. This clearly means that the outcome will be of an emergent (i.e. rather than planned and structured) uncertain and complex nature (Raven, 2007). Acknowledging this, decision-­makers should avoid simply promoting one identified solution and rather creating conditions under which the evolutionary process would lead to the desired outcome (i.e. a more sustainable agricultural system in our case). There are two broad strategies that are commonly identified in the literature as capable of triggering transitions: niche19 accumulation and hybridisation (Raven, 2007, p.  2392), with the former starting from a radically distinct field while the latter building on the existing regime.20 On a general level, both strategies display advantages and pitfalls that are related to their respective closeness to the incumbent system. This may explain why, in practice, it seems that successful transitions often involve a mix of both strategies, as in the case of the “lock-­out” story of the gas turbine described in Islas (1997). Even though the literature on transition focuses more on TC than on system change, it is nonetheless very insightful for the purpose of this chapter. Indeed, with respect to agricultural practice, organic farming could be considered as the niche whereas multifunctional agriculture could be seen as a form of hybridisation. Considering that agricultural systems clearly are “distributed systems where multiple components act together”, a field study of the Dutch sector of horticulture (Berkers and Geels, 2012) suggests that transition in this sector will not only come from discontinuous breakthrough innovations but also from what is called a “stepwise reconfiguration”. This is a form of hybridisation where multiple innovations are incorporated into the existing system and where incumbent actors carry the transition. It follows that multifunctional agriculture is likely to play a major role in the transition towards more sustainable agricultural systems. Multifunctional agriculture is based on the recognition of the fact that, beyond food and fibre production, farming has other functions in relation to

Sustainability of EU agricultural systems   123 the environment, the socio-­economical development of rural areas, the management of natural resources, and the quality and safety of food. This recognition can be conceived as an attempt to hybridise the productivist system based on specialisation and intensification (as described in Section 7.4), which ultimately promoted a monofunctional agriculture. However, such attempts to hybridise the productivist model remain rather limited when they do not take into account the full range of aspects of multifunctionality. In a study on multifunctional agriculture in the UK, Marsden and Sonnino (2008) argue that this process has been limited to introducing post-­productivist concerns, mostly under the form of a land-­based approach (i.e. environmental and amenity interests). Rather than triggering a change towards a more sustainable configuration for agricultural systems in the UK, this form of hybridisation through a narrow interpretation of multifunctionality seems to have just allowed for the continued intensification of agricultural practice. This problem of getting stuck into the existing system without the needed radical transformation is ­recognised as the most important pitfall of hybrid strategies (Raven, 2007). This is obviously due to the symbiotic nature of the relationship with the  incumbent system that characterises hybridisation such as in the case of multifunctionality. One way to explain the limited success of multifunctional agriculture in terms of sustainability is to consider the approaches that have been used. The conclusions that are drawn from a thorough literature review of existing approaches to multifunctional agriculture (Renting et al., 2009) is that no disciplinary background on its own has the potential to deal with the complexity of the concept. Besides, they argue that it is crucial to consider both the transition process in itself and the synergies between the micro and macro levels. Again, this shows the interest of the evolutionary framework which is well equipped to study transition processes. Furthermore, it may well be that, such as it is case of energy analyses (Schenk et al., 2007), the meso level (i.e. a level which is wedged between the traditional micro and macro scales) is also the “missing link” of agricultural studies – especially with respect to the notion of multifunctionality. This meso level – which is “the conceptual heart of evolutionary economics” (Dopfer et al., 2004, p. 269) – highlights the presence of systemic interdependencies, the heterogeneity of agents, and the interaction between individuals and a population in a self-­reinforcing manner. Although the multiplicity of actors – together with other characteristics of agricultural systems – pleads for hybridisation strategies, the role of organic farming as a niche capable of favouring the transition to a more sustainable agricultural STS should not be underestimated. Indeed, studies have repeatedly attested the benefits of organic agriculture practice on several environmental problems, even if some of those benefits may be hindered to a certain extend by inadequate farming practice (Brandt, 2007; Niggli et al., 2007; Hole et al., 2005; Macilwain, 2004; Hansen et al., 2001; Cobb et al., 1999). Besides the confirmed benefits regarding soil and biodiversity, other positive effects of organic agriculture compared to conventional agriculture were underlined at the 2007 Food and

124   Sustainability of EU agricultural systems Agricultural Organization of the United Nations (FAO) conference on organic agriculture and food security.21 Despite its multiple potential benefits, organic agriculture has to face various obstacles to its development. A first set of obstacles is related to farmers’ attitudes towards the conversion to organic production systems. In a study conducted in England, Midmore et al. (2001, p.  ix) identified concerns directly related to farming practice such as the ability to cope with pests and diseases, and the consistency of organic standards. Other types of worries include economic issues such as the financial viability of organic farming or the access to markets. Farmers also expressed doubts about the quality of the information and the advice they could obtain on organic farming. On this last point, a 2008 survey conducted with “agricultural professionals (extension officers, scientists, academics and researchers)”22 show that they have generally a negative perception of organic farming (Wheeler, 2008, pp.  145–146). Considering the influence of those agricultural professionals on farmers, this can indeed be considered as a serious barrier to the development of organic farming. On the consumers’ side, the expectations of different categories of consumers towards organic food reveal contradictory trends. Indeed, core organic consumers are mostly concerned by quality, safety, and environmental protection; while newcomers are more “price- and convenience-­ sensitive”, which could lead to conflicting objectives in the future development of organic food markets (Midmore et al., 2005, p. 41). Those obstacles suggest that, in order for its potentials in terms of agricultural sustainability to be fully revealed, and in line with evolutionary economics, a “strategic niche management” could be advantageously applied to the development of organic farming. Indeed, “strategic niche management” involves acknowledging that social and institutional factors contribute to reinforce the locking-­in of the incumbent technological system. Although, in the case of agriculture, the locking-­in is not only of a technological nature, an adaptation of this principle of “strategic niche management” to systems could prove insightful for agriculture. Given the type of barriers mentioned above, it seems that the role of niches as “incubators” could provide a way for organic farming to “mature” with respect to its perception by farmers and its connections with society at large. Indeed, as described as Wheeler (2008), for agricultural professionals, increased knowledge and experience with organic farming does lead to a more favourable opinion towards it. Providing an appropriate environment for organic farming to develop could also meet the demand expressed by Marsden and Sonnino regarding the fact that: the profound critical political economy that emerged in the 1980s and the 1990s concerning the analysis of the agricultural modernisation process of the late 20th century has not been matched by a parallel project on how alternative rural development model could establish itself in a more harmonious way with both the rural and urban realm. (Marsden and Sonnino, 2008, p. 9)

Sustainability of EU agricultural systems   125

7.7  Conclusions The Cartesian-­Newtonian paradigm and the idea of progress that goes along with it have thus played a major role in shaping agricultural systems towards productivism. This has, in turn, opened up agricultural systems to the logics of science and the rationale of mainstream economics that are both strongly impregnated with the Cartesian-­Newtonian paradigm. Building on the notion of “scientific paradigm” developed in Dosi (1982), it appears that this Cartesian-­Newtonian paradigm has been of a critical influence in shaping the economic (as well as social and institutional) forces that operate as a “selective device” through rendering a trajectory more feasible and attractive than alternative ones. It may then appear difficult to escape from the productivist logic as there is also evidence that the current agricultural STS might be locked-­in to many extents. This view is supported by a recent study that shows how this lock-­in is still at play and biasing the current nascent transition of agricultural systems towards “genetic engineering” and away from “agroecological engineering” (Vanloqueren and Baret, 2009). A path dependent process that creates an imbalance between two different future trajectories for agricultural systems is induced by the determinants of innovations. These include agricultural science policies, research orientation and organisations (in both private and public sectors), as well as cultural and cognitive routines of scientists. Beyond those factors contributing to the lock-­in process in agricultural science and technology, its concrete materialisation in agricultural practices can not be fully understood without taking into account the role of farmers themselves. It stems from this that, if change is really bound to happen, not only will it be necessary to unlock out of the prevailing technological paradigm and maintain diverse options open (i.e. both genetic and agroecological engineering, for instance23) but it will also require change in the current practices and habits of farmers.24 All together, this shows that, given the importance of economics in this field, policy-­makers aiming to make agricultural systems more sustainable probably have to broaden their perspective to include the insights coming from other stream of economics (and not rely on the same Cartesian-­Newtonian paradigm). This could offer a better understanding of agricultural systems for decision-­ makers and even act as a catalyst to impulse the necessary changes to redirect agricultural systems towards more sustainable paths. Besides, as mentioned in an analysis of distributed generation of electricity where it is noted that “some elements of the old regime were vigorously rejected, while others were carried along into the new regime” (van der Vleuten and Raven, 2006, p. 3747), putting agricultural systems on a more sustainable path will inevitably require bringing along not only incumbent actors of the field (although, probably with a changed role) but also new actors. In fact, as noted in Geels and Kemp (2007), the ability of regime actors to respond adequately to pressures and/or shocks from the external landscape and the degree of change in social networks appear to be major factors for the success of transitions (i.e. with

126   Sustainability of EU agricultural systems respect to mere transformations). In addition, it should also be noted that such a transition will involve a structural change. In other words, there will need to be interactions between dynamics at landscape (i.e. wider external forces such as globalisation, urbanisation, demographic pressures, etc.), regime and niche level (Geels and Kemp 2007). Bearing in mind the interplay of demand, technology and society, a “long-­term technology policy should take account of the socio-­ cultural contexts in which technologies fit” (Wilhite, 2007, p. 29). As this analysis built on the framework of evolutionary economics in an ecological perspective suggests, further research would be necessary to ascertain how the concepts of path dependence, lock-­in and transition (including strategic niche management and hybridisation) could successfully be applied to the development of sustainable agricultural systems.

8 Conclusions

As suggested by the title, the primary objective of this book was to assess the implications that arise from analysing the issue of climate change using the framework of evolutionary economics. In that respect, the main conclusion is that the framework of Veblenian evolutionary economics does provide an insightful complement for analysing the economics of climate change insofar as its application leads to a different framing of the issues at stake. Most notably, the efficiency of climate and energy policies could be substantially enhanced by accounting for the most important implications that follow from our analysis. However, it is also interesting, within this broad perspective, to analyse what conceptual and theoretical insights result from evolutionary economics’ concrete application to a specific issue such as climate change. This concluding chapter thus intends to discuss both downward (i.e. from the framework to the policy issue) and upward (i.e. from the policy issue to the framework) implications.

8.1  Downward implications: managing the transition towards a low-­carbon STS When analysed through the prism of evolutionary economics the consensus regarding the need to turn to a low-­carbon economy becomes a matter of surmounting the current inertia and escaping from the incumbent carbon-­based STS. Indeed, in the 1990s, there was scientific evidence showing that major improvements in the field of climate change could be achieved through the diffusion of energy-­efficient technologies that already existed (Lovins, 1991; Krause, 1996; Bernow et al., 1998). As discussed throughout the book, the framework of evolutionary economics is well equipped to depict the processes that contribute to this state of being, most notably through its emphasis on historicity and the related issue of path dependence. A first important element that comes out of our perspective is that the needed transition will involve a society-­wide change. The importance of systemic interrelatedness as underlined in our work makes that such a transition will inevitably necessitate going beyond the simple development of isolated technologies or sectors. As mentioned in van den Bergh and Kemp (2006, p. 5), it will involve “fundamental and interrelated changes in technology, organisation, institutions

128   Conclusions and culture”. More specifically, we have shown that a transition process (such as the one toward a low-­carbon economy) would necessarily require dealing with the problems of path dependence and lock-­in, and the related inertia of the STS and its accordant habits. 8.1.1  Unlocking from the carbon-­based STS: the crucial role of niches According to the framework discussed throughout the book, a transition from the current carbon-­based STS to a more climate–friendly configuration can be conceptualised as a multi-­dimensional and non-­linear process. The fact that a transition is conceived as involving a path dependent dynamic of complex interactions and feedbacks between the different constitutive elements of an STS means that it is difficult to steer from a policy-­maker’s perspective. The outcome is typically of an emergent (i.e. rather than planned and structured) uncertain and complex nature. Nevertheless, policy-­makers still have a major role to play in trying to influence the selection process for it to trigger and support the desired transition. As discussed in Chapter 7 with respect to the transition of agricultural systems, the selection environment is obviously a crucial element in determining the orientation taken by a transition. Most notably, it appears that, in trying to escape from an undesirable trajectory, it is difficult to prevent the evolutionary process of economic change to be strongly influenced by the existing constraints of the prevailing paradigm. Given that political processes are themselves viewed as highly path dependent (Pierson, 2000), it is not an easy task to reduce the imbalance between trajectories that is induced by the existing selection forces such as science policies, research orientation and organisations (in both private and public sectors) as well as cultural and cognitive routines of scientists.1 As exposed in Chapters 2 and 7, there are two broad strategies that can be distinguished within the literature on transition. The first strategy is to build up momentum through a cumulative process of niche development. The second strategy is to transform the system from within through a hybridisation process. To that respect, it is important to note that the issue of path dependence does lead to the stability of a dominant STS (e.g. such as the carbon-­based one) but it is equally important to recall that this stability is dynamic (Raven, 2007, p.  2391). This means that the evolutionary process of variation-­selectionretention does also result in innovation but the stability of STS means that this innovation is incremental and based on the reinforcement of existing designs, processes and practices. This problem of getting stuck within a pre-­existing trajectory without triggering the necessary changes is obviously the primary pitfall of hybrid strategies built on a symbiotic relationship with the incumbent system. The closeness to the incumbent system is certainly also an advantage as it generates a lesser resistance to change. However, the problem often is that a given impetus for change (e.g. a climate threat) materialises into a moderate acceleration of

Conclusions   129 business-­as-usual evolution without the profound transformation that characterises a system transition. For instance, it can be argued that the electricity-­ generating STS (i.e. a subsystem of the wider carbon-­based STS2) has developed along such a dynamic stability toward ever-­larger centralised power plants using fossil fuels and resorting to high voltage alternative current grid infrastructures. Given the strength of the electricity STS, it is not unlikely that favouring hybridisation will result in a moderate transformation of the system such as it would be the case with the sole promotion of carbon capture and storage (CCS). Accordingly, it is essential for decision-­makers in charge of climate policy to support the development of niches, although this alternative to the hybridisation strategy does display some drawbacks. A niche is a protected space where a novelty can mature and develop as it is shielded from regular market forces. Following Schot and Geels (2007), the idea of a niche is that the change does not have to be bigger than the small mutation in the biological case since the presence of distinct selection environment will trigger a divergent development path.3 In the language of evolution, a niche where a novelty can be tested and developed thus provides a bridge between the variation and the selection environment. The main problem with respect to niches is also related to relationships with the incumbent system. In contrast with hybridisation, this relationship is no longer characterised by symbiosis but by competition. Thus, in the case of niches, the main danger is to become too strongly shaped by the distinctive selection environment so that the new technology is ill-­suited to compete with the incumbent design and remains stuck in its niche. To illustrate the potential pitfalls of both strategies, let us take the example of the use of electricity to power cars. The successful development of the electric milk cart (or the golf cart) with its distinctive requirements (in terms of speed, capacity, autonomy) did not allow for its transposition to the regular car market. It remains stuck in its niche. Alternatively, hybridisation in this field led to the development of electric batteries being conceived as an auxiliary input to the ICE. This surely contributed to the development of the latter but to the detriment of the electric car itself, as the main barriers to its development were all related to the low storage capacity of batteries (Cowan and Hulten, 1996). It follows from this brief account that, to be successful, a niche must be managed, for at least two reasons. On the one hand, it is necessary to take a user’s interests and acceptance into consideration as it has been demonstrated in the comparative analysis on the diffusion of chlorine-­free pulp bleaching technologies in Sweden and in the US (Reinstaller, 2005). Echoing some elements that were discussed in Chapter 1, this case study tends to demonstrate the critical role played by contingencies and systemic forces while also underlining the importance of the parallel endogenous formation of preferences (Reinstaller, 2005, p. 1382). On the other hand, it is also essential to account for the fact that a transition process is not necessarily a linear and gradual process. Rather, according to

130   Conclusions Rotmans et al. (2001), a transition consists of four different stages: predevelopment, take-­off, breakthrough and stabilisation. To be effective, a policy should thus be differentiated and adapted to the specific requirements of these different phases of development. Regarding niches, this clearly means that the protection should be released step by step. This amounts to making the selection pressures evolve with time as illustrated by a comparative case study on wind energy development in Denmark and the US (Kemp and Reinstaller, 1999). Indeed, the more successful diffusion of wind energy in Denmark is attributed to a policy that was more orientated at learning and more prone to correcting an undesired outcome. To put it differently, the Danish policy was more adaptive in the sense that it was more in line with the ongoing dynamics of socio-­technical change (Kemp and Reinstaller, 1999). These two elements constitute the rationale behind the concept of strategic niche management (SNM) pioneered in Kemp (1994) and Schot et al. (1994) where niches are seen as incubator for new technologies (which help to build a supportive network in a virtuous circle) but where protection is gradually removed or change to avoid the danger of getting stuck in the niche market. But again, it is essential to take into account that there are no clear-­cut recipes for policy-­makers as the many documented cases on successful transitions often involve highly context-­dependent aspects and unpredictable co-­dynamics. Still, it seems that an appropriate SNM policy should first identify technological opportunities and then manage the protected space with the view of shaping interactions and creating momentum in promising directions. The idea is to stimulate learning and adaptation rather than simply pick the winners in order to both gain experience in many respects (such as technological performance, social acceptance and economic profitability) and design policies in accordance with the information gained throughout the process. However, it should be acknowledged that a good SNM might not prove sufficient for overthrowing a well-­established STS (such as the carbon-­based one). More specifically, each STS is characterised by different adaptive capacities4 which will have an impact on both the type of transformation that is likely to take place and the associated mode of governance that is required to steer it (Smith et al., 2005). For instance, given the adaptive capacities of the electricity-­generating STS (high coordination and internal resources), the transition type that is likely to occur according to the typology described in Smith et al. (2005, p. 1499) is that of an “endogenous renewal”.5 This means that, although niches are obviously essential in triggering novelty and radical improvement, hybrid strategies will most likely be necessary in this case. This is in line with the finding of Islas (1997) where it is shown that the successful overthrowing of the steam turbine involved a mix of both hybridisation and niche-­related strategies. This view is confirmed in an analysis relative to the development of decentralised electricity generation where it is noted that “some elements of the old regime were vigorously rejected, while others were carried along into the new regime” (van der Vleuten and Raven, 2006, p. 3747).

Conclusions   131 8.1.2  Habits: the missing link A major insight from our perspective is that the solution will not be of a technological nature only. Despite all the above-­discussed elements on technological transitions, the co-­evolution with people’s habits is a fundamental aspect that must be taken into account while it is also essential to grasp the interplay between these habits and the wider STS. The danger is the well-­known rebound effect that can undermine the benefits from an increase in efficiency if it is not accompanied by a parallel change of habitual practices. More precisely, the well-­documented counter-­intentionality of deeply anchored habits underlined in many case studies covering a large spectrum of consumption choices (i.e. transportation, TV programs, nutrition, etc.) could explain the continued increase in energy consumption despite the observed increase of environmental awareness and concern. At this stage of our reflections, it thus seemed essential to further investigate the notion of habits. This appeared all the more interesting that the behavioural part of the lock-­in process had been overlooked in the many analyses that have followed the pioneer work of Paul David and Brian Arthur on path dependence. As shown in our analysis, this is an important missing aspect as the presence of habits is essential in explaining the persistence and stability of a given STS. For instance, the stability of the above-­mentioned electricity-­generating STS has been reinforced by the consumption patterns and institutional arrangements that have been built around it for at least eight decades (see also Unruh, 2000, and Smith et al., 2005).6 8.1.2.1  Overview of the analytical framework Based on those observations, the starting point of our analysis of the notion of habits was that their presence could provide a complementary explanation for the existence of the efficiency gap in the field of energy consumption. However, in contrast to most studies on the efficiency gap which only investigate barriers at the level of individuals, it is important to recall that our perspective clearly acknowledges the influence of the wider context (as illustrated by Figure 5.1 relative to the barriers to energy efficiency as well as Figure 3.1 describing the Veblenian process of institutional self-­reinforcement). Despite the fact that our analysis draws on the vast work on habits performed within the realm of social psychology, our posture nonetheless constitutes a crucial departure from this line of research. Resonant with the idea that there are both upward and downward causation, our analysis of habits in the field of energy consumption is built on Gidden’s view that individuals and institutions mutually constitute and condition each other. This means that an STS and its accordant habits should not be studied without accounting for the influence they have on each other. Although the idea of mutual constitution has guided our analysis, our work on habits could rightly be deemed as involving some degree of reduction. This is

132   Conclusions inevitable for undertaking any analysis, especially when concepts have to put into replicable and testable hypotheses for empirical purposes, as is done in Chapter 5. However, our general perspective clearly can not be assimilated to a reductionist stance such as methodological individualism. In addition, one essential aspect to be highlighted is that the results of our empirical analysis in the field of energy consumption provide support to the idea that both agency and structure do matter (i.e. in explaining why energy case studies show the presence of both variety and similarity in behaviours). More precisely, the main outcome of our empirical analysis relative to the Brussels Energy Subsidies tends to provide support to the “downstream-­plus-context-­ change” approach, the effectiveness of which has been documented in various studies. This can be viewed as constituting an ex post validation of the framework adopted in our perspective on habits which is built on the interplay between the carbon-­based STS and its accordant habits. Indeed, the contextual change (such as a change of location) can be viewed as generating an increased openness to new information at the level of individuals (whose prior habits are perturbed) while the downstream measure (such as an energy subsidy) provides a socio-­technical impetus or facilitating factor (i.e. a wider influence) for improving energy efficiency. Even though downstream measures may be deemed to trigger an economic type of impetus, they nonetheless also contribute to improve the supply of energy-­efficient technologies (such as energy-­efficient boilers), techniques (different ways as envisaging insulation), products and labour forces.7 Ideally though, the effectiveness of the “downstream-­plus-context-­change” approach could still be improved if it was completed by a technologically oriented policy specifically aimed at overcoming the current lock-­in of the carbon-­ intensive STS (as discussed in more detail in Chapters 2 and 6, and in Chapter 7 with respect to agriculture). Nevertheless, the greater success of the “downstream-­plus-context-­change” approach does provide support to our perspective centred on the interplay between a STS and its accordant habits (i.e. between structure and agency). 8.1.2.2  Key features of habits After the overview of the framework used throughout this research, it is important to also depict the path followed in going from theoretical and conceptual considerations down to the application to the energy issue. This step will allow us to present the key aspects of our analysis. In turn, this will underline the most important results from our empirical analysis. Given that the word “habit” is a commonly used term, it presents the risk of encompassing slightly different meanings and connotations among different individuals. Besides, it is also a notion that has been studied in different academic disciplines such as economics, psychology, sociology and medicine. Accordingly, a first essential step was to define the boundaries of the concept and provide a more precise definition of its content with, ultimately, the aim of

Conclusions   133 undertaking an empirical analysis. This step required to explore the different streams of literature that develop a comprehensive analysis of habits. This bridging exercise was insightful in that it allowed us to assess what could be considered as the essence of habits and their key features. However, this exercise was, such as habits are themselves, guided by a necessary functionality. As extensively discussed in the different chapters, the primary objective was to shed a new light on the debate regarding the efficiency paradox in energy. Our perspective reveals that habits are a context-­dependent form of acquired automaticity. However, habits must imperatively be distinguished from purely automatic forms of behaviours, such as reflexes, as they are only a propensity to behave in a certain way (i.e. this behaviour thus constitutes the phenotypic manifestation, in a favourable context, of the genotypic predisposition that is the habit). The automaticity of habits is restrained by a necessary correspondence with goals and aspirations. They can be reflected upon and thus changed. Still, their high degree of automaticity (i.e. up to a point where they can contradict formulated intentions to act otherwise) is the key feature of habits in our perspective. As explained in our analysis, this automaticity translates into habits being performed without full awareness, difficult to control and mentally efficient.8 Accordingly, it is crucial to insist on the fact that the importance of habits lies outside its repetitive nature since repetition is a necessary but not a sufficient condition for a habit to develop. As argued in Verplanken (2006), this means that students of habits should depart from the behaviourist tradition of simply equating habits with frequency of behaviour. This misleading view of habits is also present in the work of Gary Becker – one of the few mainstream economists who has worked on the notion of habits – where habits are defined as being the result of current consumption being positively affected by past consumption (Becker, 1992, pp. 327–328). This sequential correlation – which “conflates propensity with actuality” (Hodgson and Knudsen, 2004, p.  35) – means that the formation of habits is viewed as a process that is past-­dependent but not path dependent. As opposed to a past-­dependent one, a path dependent outcome can not be defined a priori as it results from endogenous evolution within the process under the form of self-­reinforcing and circular interactions between the different elements from the system in consideration. This path dependence of habits is essential to grasp as it provides one explanation for the persistence of habits through time even when those habits contradict intentions to act otherwise. Two important elements in this respect are the path dependence of information (that arises from the propensity of human beings to mostly rely on information and advice that come to well-­known social channels that are considered legitimate) as well as the tendency to disregard contradictory information (to avoid emotional discomfort). Both these factors contribute to making existing habits even more deeply ingrained as time passes. As discussed in more detail in Chapter 3, other explanatory factors for the persistence of counterintentional habits are the problem of temporal asymmetry

134   Conclusions (i.e. known short-­term rewards of habits as compared to intangible long-­term benefits of the alternative behaviour) and the fact that habits provide a satisfying answer to time pressure and risk since “most people get mental comfort and reassurance in continuing to do what they did in the past” (Becker, 1992, p. 331). 8.1.2.3  Crucial insights from the empirical analysis It is based on such a perspective on habits that our empirical analysis has been performed. A first result of importance is that people do indeed perceive habits as being important determinants of their behaviours in energy consumption. The influence of habits is perceived as being slightly heavier for electricity consumption than for heating-­related consumption. These two results are valid for both broad questions with a general view of the concept of habits as well as for concrete actions with the concept of habits broken down into four components. It thus appears that the issue of awareness does not prevent individuals from recognising the importance of habits as an influential determinant of their behaviours in the field of energy consumption. However, this issue most likely plays a part in explaining the most important result of our empirical analysis. This result is that the reported importance of habits is accompanied by a high value reported with respect to the ease to change habits. The presence of habits is thus, at the same time, recognised as an important determinant of energy consumption behaviours but not considered as an obstacle to change. This insight is essential as, to our knowledge, it has not yet been emphasised in any other study on habits. In addition, a symmetric result is found when the habits concept is broken down into different components (with the aim of increasing the scientific validity of the measurement) since the values reported for the fourth dimension relative to the effort required to change a habit are significantly lower than for the other three dimensions. This crucial result is valid for both electricity and heating. Not considering habits as a barrier to change is also present in the first empirical study with respect to the purchase of alternative vehicles. All together, it suggests that this result is quite robust and that it should thus be adequately taken into account when designing measures that aim at changing unsustainable practices. The above-­mentioned path dependence of habits is essential to bear in mind as it can put this important result of our empirical study into a broader perspective. Although efficiency certainly provides the core reason behind the existence of habits (as mentioned in Chapter 3, this can be considered as the “procedural rationality”9 of habits), their path dependence (or contingent reinforcement) tends to influence other crucial factors such as people’s cognitive perceptions, matters of appreciation and normative judgements leading to globally coherent structures. There is thus more to habits than their efficiency.10 As claimed by Hodgson and Knudsen (2004, p. 36), “the crucial role played by habits is to build up and

Conclusions   135 reinforce an enduring disposition” as much as anchored habits provide “the basis of firmly held beliefs”. In turn, the fact that people tend to adjust their values and beliefs according to their habits may explain why it is difficult for individuals to admit that an unsustainable habit is difficult to change. Provided that one is aware and concerned by energy-­related environmental problems, this would amount to explicitly admitting a conflict of values which is known to create an emotional discomfort entailed by cognitive dissonance. Having habits that conflict with reported values11 on environmental concern is solved by considering habits as being easily changed and thus by denying their negative impact on actual behaviour. The main limitation of our analysis is that it does not allow for an assessment of the actual impact of the presence of habits. More precisely, we do not possess an element against which to measure the influence of the strength of habits on a given objective. For instance, among the participants of the Brussels Energy Challenge, it would be interesting, in future research, to see whether the individuals with strong habits fail to implement the chosen energy-­efficient action to a greater extent than those with lower reported habits.12 Still, given that the presence of strong habits has been shown in many empirical analyses to mediate the intention–behaviour relation, our results support the idea that the presence of energy-­consuming habits constitutes an important explanatory factor for the existence of an efficiency gap in energy. The last empirical study described in Chapter 5 (of the Brussels Energy Challenge) is specifically aimed at reducing this weakness through assessing the precise role that habits play with respect to the efficiency of a given instrument. Based on the documented facts that people with strong habits tend to display a biased information search process and that contextual change provides a “window of opportunity” for change, the tested hypothesis of our last empirical analysis is that recent movers would be more receptive to a given incentive (i.e. subsidies for energy-­efficient investments) than incumbent residents. For the 11 districts analysed, there was a greater proportion of recent movers within the sample of applicants than in the respective district population. Even though some other potential explanations were discussed, the results tend to support the idea that the presence of strong habits reduces the effectiveness of incentives which work better for those individuals whose prior habits have been perturbed by a change of context (i.e. here a change of location). The main interest of this analysis is that it shows something more than the “amplification effect” described in prior analyses. This “amplification effect” refers to the better results (e.g. more sustainable transportation choices) of a group of recent movers that has been targeted by a measure (e.g. a free bus pass for a month) as compared to a group of recent movers that has not been targeted. In our case, the demonstrated difference of receptivity was between incumbent residents and recent movers. This obviously leads to recognising the importance of tailoring measures to the characteristics (e.g. norms and motives, consumption profiles, etc.) of the targeted group as it has been shown that, for instance,

136   Conclusions efficiency measures alone do not allow people to surmount the important barrier constituted by the presence of strong habits. .

8.2  Upward implications: insights for theoretical debates in evolutionary economics Although the objective of this research is primarily to inform climate policy with complementary economic insights, the application of the evolutionary framework to a concrete issue can also be used to shed an interesting light on issues that are of a more theoretical nature. Most notably, the above-­mentioned inputs from our analysis in the field of energy – which emphasise the crucial role of habits – inevitably call for an alternative view of their interplay with rationality. 8.2.1  A meta-­theoretical framework In order to frame this account of the upward implications of our analysis, it is useful to start from one of the most important debates within the realm of evolutionary economics: the usefulness of what has been termed “Generalized Darwinism”.13 The starting point of this debate, which was really pregnant in the early stages of this research, is the claim formulated in Hodgson (2002, p. 270) that “there is a core set of general Darwinian principles that, along with auxiliary explanations specific to each scientific domain, may apply to a wide range of phenomena”. The essence of Generalized Darwinism is that, at a sufficiently abstract level, all phenomena relative to “complex population systems” can be usefully depicted through resorting on the Darwin’s scheme of variation, selection, retention (Hodgson, 2007b).14 The critics of “Generalized Darwinism” question its merits based on the fact that, for it to be valid, it requires to “strip off all concrete contents [. . .] and stick to a very abstract notion of it” (Cordes, 2007, p. 277). In this case, the validity of this framework is viewed as relying mainly on the auxiliary explanations. The meta-­theoretical framework is considered empty without the particular explanations that must be placed in it and is thus no longer seen as useful for analysing economic and cultural phenomena. Rather, economic and cultural phenomena are conceived “as emerging from, and being embedded in, the constraints shaped by evolution in nature” (Witt, 2004, p. 131), but also as now resorting on totally different mechanisms than those involved in natural selection. For some authors such as Cordes (2006, p. 532), this “continuity hypothesis” implies a rejection of Generalized Darwinism as it is “ill-­suited to grasp the dynamics of cultural evolution”, whereas for others such as Hodgson (2007b, p. 273) it is “neither inconsistent with, nor an alternative to, the idea of a Generalized Darwinism”. It is beyond the scope of this book to take a stance in this passionate debate but it is nonetheless interesting to see whether our application of the evolutionary framework to a concrete issue such as climate change does provide insightful elements in this respect.

Conclusions   137 Following Hodgson’s idea that Generalized Darwinism is a meta-­theoretical framework, the first element to assess is whether it has been useful as a guiding post throughout our analysis. The answer is clearly that it has not been directly helpful as such. However, as mentioned in Chapter 1, the whole perspective of this research subscribes to the underlying framework of Ecological Economics. As argued in Hodgson (2010), Generalized Darwinism “is consistent with the idea that human society is embedded in the natural world and depends on it for its survival”. It thus follows that Generalized Darwinism is compatible with the broad perspective of our work. What is raised as the potentially most dangerous problem of Generalized Darwinism is that it can become misleading when applied to economic and cultural phenomena. This is mostly due to the sources of variation (or novelty) being different since, in cultural evolution, conscious deliberation and design make that variation is no longer generated randomly but intentionally (Buenstorf, 2006; Cordes, 2006).15 Such a fear that Generalized Darwinism could be misguiding in restricting our thinking is also raised in Schot and Geels (2007, p. 614) but it is rather formulated as a plea for a cautious application of Darwinian analogies than as a pure rejection. Indeed, throughout Schot and Geels (2007), the contribution of biology to the development of their theory of niches and STSs is acknowledged. But again, the undisputable fact that variation and selection are not independent (since variation does not need to be blind) is raised as a limit for the use of a Darwinian approach. However, Schot and Geels’ conclusion is very interesting with regards to the debate on Generalized Darwinism as it states that “evolutionary theory is very helpful as long as it is enriched with sociological theory that provides insight into how actors create, nurture and sustain niches” (Schot and Geels, 2007, p. 620). What comes first to mind when reading this statement is that it perfectly fits with our work which can be viewed as a sociological “enrichment” of the lock­in literature with insights into how actors create, nurture and sustain habits. A second element is that such a claim appears quite compatible with the view of a meta-­theoretical framework with domain-­specific auxiliary explanations. This is all the more so since generalization should not be confused with the simple use of analogies (Hodgson, 2007b, p. 269). 8.2.2  A different account of rationality and of its interplay with habits Regarding the most salient critique relative to the problem of purposeful (or intentional) variation, we turned to what has clearly been helpful for our work and, more specifically, for our analysis of habits: the Veblenian view of rationality. To start with, it is important to note that, although Generalized Darwinism did not directly guide our work, the implications of Darwinian ideas for social sciences clearly imprinted our analysis. More precisely, the consequences of

138   Conclusions generalising Darwinism are that “assumptions concerning human agents must be consistent with our understanding of human evolution” and that it “constantly raises questions of causality and origin “(Hodgson, 2010, p.  105). This means that intentionality (or deliberation) is not precluded but its emergence must also be explained. As explained in Chapter 1, reconciling the characterisation of economic agents with the empirical literature has clearly motivated this research which, as extensively discussed, did lead to important implications for the issue under investigation (i.e. climate change). This would thus tend to support the idea that generalising Darwinism is useful in that its ensuing requirements lead to novel insights. Besides, generalising Darwinism has important consequences for the analysis of the notion of rationality.16 This is confirmed in Aldrich et al. (2008, p. 589) where Charles Darwin is quoted as seeing men as creatures of habits rather than as creatures of reason. Echoing the discussion on strong reciprocity mentioned in Chapter 1, generalising Darwinian ideas thus makes that the drivers and motivations of the behaviour of individuals can not simply be assumed as exogenously given but must be explained. As discussed throughout this book, this has clearly been a foundational hypothesis of our work. This is one reason that makes that our perspective can be deemed to have been indirectly impacted by the meta-­ theoretical framework of Generalized Darwinism. The second reason is that the work of Thorstein Veblen, which has been crucial in developing our perspective, is considered to have been inspired by the views of Charles Darwin (Hodgson, 2008). Coupled with another major influence on his work, pragmatist philosophy (the work of, among others, John Dewey and Charles Sanders Peirce), the resulting approach to human behaviour and rationality developed by Veblen is original and illuminates our perspective with new elements. This is because of three aspects: continuity, propensity and rationality. Following the analysis of Gronow (2008, p.  361), one essential aspect of Veblen’s view of human behaviour is that, in sharp contrast to the utilitarian approach, it consists of a succession of actions where the “motives do not precede action because they enter the scene in the middle of ongoing action processes”. This continuity of action, which contradicts the idea that any economic decision can be analysed as a discrete situation, inevitably leads to a view of causality as being cumulative, hence the presence of path dependency and, potentially, of habits. In this sense, generalising Darwinism, as Veblen is argued to have done (Hodgson, 2008), is thus a source of crucial inputs for the analysis of climate and energy-­related issues. As explained in more detail in Chapter 3, this is partly due to the fact that, for Veblen, habits are the central element of social evolution which is viewed as “a cumulative growth of customs and habits of thoughts” (Veblen, [1899] 1994, p. 208). One other important aspect of the pragmatist’s view of habits which underlies the work of Veblen is that habits are seen as a propensity. According to Dewey (1922, p.  42), a habit is an “acquired predisposition to ways or modes of responses”. In line with the argument developed in our analysis, a habit is thus

Conclusions   139 something more that the behaviour itself. It consists of the underlying structure which, in the presence of the associated environmental cue, triggers the corresponding behaviour. The last (and most original) aspect of the pragmatists’ view of habits is that they consider habits as “positively correlated” or “even fused” with rationality (Kilpinen, 2005, p. 1). Habits are thus more than dead routines (Gronow, 2008, p.  362) in that they contain, in their encoding of the corresponding behaviour, the material that allows for an individual to make judgements about the habits on which he acts.17 The reason is that habitual and intelligent aspects interact during the performance of action (Kilpinen, 2000). Habit is not the negation of rationality but its necessary foundation as “rational choices themselves are always and necessarily reliant on prior habits” (Hodgson, 2004, p.  653). As mentioned in Kilpinen (2005, p.  2), the view of rationality is reversed in pragmatist philosophy since “[i]ts role is to hinder rather than further our action process”. At this stage, turning to our empirical study on habits in domestic energy consumption is useful in that it provides some support to the view of the relation between habits and rationality as developed by authors inspired by the pragmatists’ tradition. For instance, it has been mentioned that the most important methodological difficulty lies in the low degree of consciousness of habits.18 More precisely, it appears contestable to measure the importance of habits by means of self-­report since it is considered contradictory to ask individuals to report on something that they are not fully aware of. In Chapter 5, we provided a detailed answer to this problem, arguing that people display a “meta-­awareness” that can be better touched upon if the concept of habits is broken down to mirror the four dimensions of automaticity and if questions refers to concrete actions. As already mentioned, it follows that habits cannot be fully assimilated to pure reflexes in so far as this meta-­awareness means that people can reflect on their habits and change them. This is fully in line with the pragmatists’ view on the relation between habits and rationality as described above – Kilpinen (2000) even uses the term “reflexive habituality”. Furthermore, the “cyclical” view of habits and rationality also is very useful as it renders less important the need to differentiate one-­shot decisions and repetitive behaviour given the rejection of the idea that human action is a succession of independent discrete events. Again, this view is supported by our empirical results regarding the importance of destabilising habits prior to provide individuals with an incentive to make one-­shot decisions to implement a subsidised energy-­efficient investment. It is essential to note that the above discussion on the pragmatist view of habits and rationality does not amount to considering habits as irrational. As already mentioned, resorting to habits is undoubtedly a quite rational way to proceed given the constraints of daily life and the obvious limitedness of cognitive resources. As claimed in Becker (1992, p. 331) with respect to habits, “it is not obvious to me that they are less rational than other preferences”. However, the crucial difference of the pragmatists’ perspective is that habits are not derived from rationality (as in the work of Becker) but they are “the grounding

140   Conclusions of both reflective and non-­reflective behaviour” (Hodgson, 2004, p.  653). By reversing this foundational postulate present in many disciplines of social sciences, “[i]t is no more action that needs to be explained, it rather is a change in action that demands an explanation” (Kilpinen, 2005, p. 4). Thus individuals do not necessarily need incentives or motives to start acting but they require them to change their habitual way of acting. Needless to say, this resonates with aspects of our own analysis. According to the pragmatist perspective, a change of context puts the individual into a situation where his day-­to-day concrete actions are inevitably changed so that they no longer drive the consciousness of those individuals to the same extent as before the change. “Rationality” becomes open to new information and thus the incentive provided by the energy subsidy is processed differently than in a case without a perturbation of habits. The higher receptivity of recent movers to an economic incentive, as demonstrated in our analysis, thus also confirms the usefulness of the pragmatists’ view of habits. As suggested above, it is important to note that the pragmatist perspective is in complete departure from what prevails in mainstream economics and even from the approaches that try to enrich the rational choice model with normative contents and/or non-­economic arguments. For instance, in an enlightening paper, Herbert Gintis proposes to unify the models of human behaviour across all social sciences with the objective of achieving “a common underlying model enriched in different ways to meet the particular needs of each discipline” (Gintis, 2007, p.  1). The work of Herbert Gintis and colleagues made a major contribution to economics, most notably to the literature on reciprocity through their argument that preferences are not only self-­regarding and outcome-­orientated but also other-­regarding and process-­ orientated. Still, Gintis’ proposed unified framework is centred on a rational actor model (albeit in a different manner than in the Homo oeconomicus paradigm19), which is called the Beliefs-­Preferences-Constraints (BPC) model (Gintis, 2007, pp. 2–3). This BPC model, which is claimed to be supported by neuroscientific evidence (Gintis, 2007, p.  5), rests on expected utility and the hypothesis of “choice consistency” (which is similar to the more commonly used notion of transitivity20). In such a view, rationality is thus still enthroned as the ultimate principle. There is no doubt that this behaviourist perspective is insightful both theoretically as well as on a more applied basis. For instance, such a perspective can usefully inform climate policies since, as claimed in Gowdy (2008, p. 642), it is “a more far-­reaching and realistic approach to designing policies that might get us through this impending crisis”. However, beyond its different account of rationality, our approach (centred on the importance of path dependence and lock-­in) goes further in that it provides a broader picture of the elements at stake for understanding climate policy. Indeed, the view of Veblen’s legacy for understanding human behaviour and rationality would not be complete without invoking his other major departure from his contemporary economists: the idea that people always behave under the influence of institutions. Given that institutions

Conclusions   141 are themselves made of habits, this paves the way for a circular and cumulative causation of socio-­economic phenomena.21 In sum, Veblen’s legacy is thus that socio-­economic evolution is a cumulative process of self-­reinforcing interactions between broad institutions and their accordant and supportive habits. Our analysis has clearly shown how such a perspective proves very valuable with respect to climate policy. To conclude our argument concerning the compatibility of Generalized Darwinism with our framework and the indirect influence it exerted on our perspective through the use of Veblenian insights, it is useful to turn to a recent plea titled “In defence of Generalized Darwinism” written collectively by half a dozen of scientists. There, it is claimed that, when Generalized Darwinism is applied rigorously, [i]t also forces analysts to be historical, because no matter what the exact set-­up or units of analyses are, such an evolutionary analysis forces attention on processes going back into the past, their built-­in tendencies to persist (through replication) and how the present is created as variation of the past. (Aldrich et al., 2008, p. 591) This seems to us to be the essence of the work we tried to perform for this book. All together, the elements raised in this section show how its application to the issue of energy and climate policy highlights the interest and relevance of the Veblenian perspective.

8.3  Distributed generation: a potential way forward? The importance of taking history into account provides a good transition for introducing the debate on distributed generation (DG) which could be seen as a potential part of the solution to the core problem depicted throughout this research: the lock-­in of the carbon-­based STS and of its accordant energy-­ consuming habits. The rationale behind viewing DG as a potential solution is that DG is not only a different technical perspective on electricity generation (which is commonly associated with renewable sources of energy and co-­ generation22) but it also constitutes a potential way to change habits in the field of energy consumption. In line with our analysis of habits, micro-­generation technologies can contribute to “rais[ing] people’s use of energy in the home from the subconscious to the conscious, and enable them to feel part of the solution” (Hub Research Consultants, 2005, p. 2). Although decentralised micro-­generation might be considered very innovative in many respects compared to the conventional centralised power plant working with fossil fuels, a brief look at the historical circumstances of the development of the electricity-­generating system leads to a somewhat different recasting of the recent interest for DG. An evolutionary perspective on this issue, and most notably the ensuing requirement to go back into the past, would rather qualify this as a renewed interest for an old locked-­out strategy. Following the

142   Conclusions analysis of Hughes (1983) and David and Bunn (1988) of what has been called the “battle of the currents”, there was indeed an intense competition in the late nineteenth century between Edison’s direct current (DC) technology and Westinghouse’s alternating current (AC) technology. As can be easily observed today, the success of the AC technology led to the emergence of the current systems based on large-­scale centralised units and massive distribution grids. However, both strategies had their respective drawbacks and benefits, and the technological superiority of the AC technology is a matter of discussion. Under this light, the promotion of DG thus appears as a process of unlocking from the current electricity-­generating STS and its myriad of supportive elements. The problem is thus not only one of promoting small-­ scale renewable energy sources or micro-­co-generation but also one of dealing with all the constituting and supportive elements of the electricity-­generating STS, most notably its grid-­related requirements. The fact that current grids are not suited for large electricity production from decentralised units constitutes a major obstacle to the promotion of DG, which will thus continue to be locked out unless a favourable regulation is introduced with respect to network infrastructures (Woodman and Barker, 2008). This may explain the current trend towards promoting CCS and large-­scale centralised wind farms instead of the more habit-­disturbing DG (EC, 2009).23 However, there also are successful stories with respect to the diffusion of DG such as in Denmark. Again, this breakthrough of DG can adequately be understood through the perspective adopted in this study, as shown by the analysis performed in Van der Vleuten and Raven (2006). Accordingly, the promotion of DG as a policy capable of destabilising both the prevailing carbon-­based STS and its accordant habits undoubtedly constitutes a worthwhile path for future research, especially for those researchers interested in the fruitful application of the perspective of Veblenian evolutionary economics to the issue of climate change.

8.4  The needed change of climate in economics Our analysis has shown that the concept of habits (and their interplay with the broader carbon-­based STS) is very insightful in understanding the issues at stake in the field of climate policy. On a more theoretical basis, this notion has been shown to also be important with respect to the debate on methodological reductionism and the related agency/structure dilemma. To come full circle with the brief discussion on altruism exposed in Chapter 1, it could also be added that habits provide a key notion for explaining the presence of some degree of altruism among humans (under the form of strong reciprocity). As summarised in Chapter 1, the presence of strong reciprocity is explained by the developed specificities of human psychology – most notably “high fidelity” imitative abilities – and the mechanisms of cultural transmission that go along with it. Within the perspective on habits as adopted in this research, the process of habit formation is inherently a social phenomenon since, based on the

Conclusions   143 idea of mutual constitution, institutions also have the power of shaping habits (e.g. the carbon-­based STS, which favours energy-­consuming practices such as constant indoor temperature throughout the year). Such a process typically involves a conformist imitation of others (whether they are the most successful or the most numerous or simply relatives). Habits are what allow society to hold together and, since the functioning of today’s society rests on the presence of some degree of altruism, it follows that the human reliance on habits is one mechanism through which this propensity is sustained. All together, our analysis strongly suggests that research scientists in economics, as well as many research scientists in other academic social science disciplines, should unlock of their habit of not adequately taking habits into account. Given the current practice in both education and research, this is tantamount to a change of climate in economics. However, considering the urgency of the situation regarding the threat posed by climate change, this broadening of economics to insights from other disciplines and/or from other streams of economics – such as those arising from Veblenian evolutionary economics discussed throughout this book – appears quite necessary.

Notes

Foreword 1 There are different types of “climate sceptics”, ranging from those that deny the existence of climate change to those that consider it as a favourable or harmless issue. However, the most delicate category of sceptics is surely those that attribute climate change to other causes than human activities (e.g. changes of solar activity as exposed in Jaworowski, 2004). 2 In addition, the very political “Synthesis Report” (IPCC, 2007b) – from which the following quotes are taken – was adopted section by section during a Plenary session of the IPCC (Valencia, Spain, 12–17 November 2007). 3 This point is briefly death with in Section 1.6. 1  Introduction   1 The term “mainstream” is used to avoid the problem raised in Colander (2000) with respect to the term “neoclassical”. As noted in Young (2000, p. 417), this is a hotly debated issue among historians of economics but the dominant view is that neoclassical economics is significantly different from classical economics insofar as the core emphasis has changed. Following the analysis of Colander (2000), neoclassical economists could then rather be termed “anti-­classical”, while the term was certainly more appropriate when first coined by Veblen (1900) to qualify the work of Alfred Marshall.   2 This refers to the theoretical representation of the economic agent on which the traditional economic model is founded. It sees an economic agent as self-­interested and a perfectly rational individual that maximises its utility based on perfect information and through using its capacity to ordinate its preferences.   3 As mentioned below, this books consists of a collection of scientific articles, several of which have been published elsewhere. This is why some elements, such as the analytical framework, are repeated in similar forms in different chapters.   4 We recommend the Special Issue of the Journal of Economic Behavior and Organization on “Evolution and altruism” which consists in a very enlightening discussion from many scientists of a paper from Joseph Henrich (2004).   5 The perspective of NIE relies on a view of institutions as “humanly devised” (North, 1990, p. 3) and thus as being caused upward by the choices of individuals.   6 It is beyond the scope of this research to judge whether these limited cognitive abilities have also been shaped by the same joint process of cultural and genetic co-­ evolution as for altruism. However, it seems that there is a major difference in that these limited abilities do not need the presence of others to materialise.   7 This means that people would rather have $100 right away than $110 in one year’s time, while they often reverse this preference if asked to choose between $100 in 10

Notes   145 years and $110 in 11 years. Preference reversal is an extreme case of hyperbolic discounting.   8 It could be added that the maximisation hypothesis requires that preferences be complete, which is also a strong assumption (van den Bergh et al., 2000, p. 45). Besides, the transitivity of preferences (if A is preferred to B, and B to C, then A is preferred to C) is also highly disputed (Tversky, 1969).   9 This can be illustrated by the literature on “anchoring” (Tversky and Kahneman, 1974), which shows how the initial point has a long-­lasting influence in that it serves as a benchmark for later comparisons and judgement. This shows the path dependence of the search process which is further reinforced when the first decision is emotionally charged (Hoeffler et al., 2006). The presence of such a confirmatory bias has been demonstrated for people with strong habits (Faiers et al., 2007, p. 4385). Risk aversion is another factor that contributes to maintain habits which are viewed as comfort and security-­enhancing (Lindbladh and Lyttkens, 2002). 10 More recent works, such as Nelson and Sampat (2003), could also be mentioned since their perspective seeing physical and social technologies as co-­evolving is in line with part of our work. 11 This optimality was named after the economist Vifrido Pareto. The first theorem postulates that any Walrasian equilibrium (i.e. any equilibrium from a perfectly competitive market) is Pareto-­efficient. A Pareto-­efficient outcome is reached when no more Pareto-­improvement can be made, that is when it is no longer possible to make an individual better off without making another one worse off. According to the second theorem, any efficient allocation can be achieved through using competitive markets and provided that lump sum transfers are made in order to reach the desired Pareto-­ efficient state. 12 The work of Solow and others in this field draw on the earlier work by Hotelling (1931). 13 In Solow (1974), it is recognised that the hypothesis of substitution is central to the main conclusion. 14 The role of money as a medium of exchange is obviously older but its enthronement as a substitute for environmental assets can be connected to the Cartesian view of nature as exposed in Chapter 7. More generally and as noted in Faber (2007, p. 5), the absence of nature in modern science is connected with the beginning of Cartesian philosophy. 15 This debate opposes the partisans of the “weak” and the “strong” approach to sustainability (Gowdy, 2005, pp. 211–212). 16 The bottom line argument – which contributed to the US withdrawal from the Kyoto Protocol in 2001 – is that controlling climate change would hurt the economy. It can be illustrated with the following quote “a vague premonition of some potential disaster is, however, insufficient grounds to plunge the world into depression” (Nordhaus, 1990). 17 If the core assumptions of the model do not hold in reality then the proposed outcome is no longer efficient. 18 Climate policy is then only justified if the costs (i.e. the departure from optimal equilibrium) are more than offset by the benefits (i.e. avoided damages of climate change). 19 A simplified causal chain of climate change and its impact is: economy, population technology → GHG emissions → atmospheric concentrations → radiative forcing → climate change (increased temperature, precipitations, etc.) → impacts (on ecosystems, agriculture, forestry, etc.) → damages. 20 The climate sensitivity could even be higher if the possibility of enhanced feedback is accounted for. As mentioned in Weitzman (2009b, p.  5) this possibility has a real physical basis. One example is the heat-­induced release of the methane trapped in the permafrost. 21 Using a low discount rate of 2 per cent makes that the value of an impact is reduced

146   Notes by half in 35 years and by 86 per cent in 100 years. An economic catastrophe at the turn of next century then becomes unimportant when entered in current assessments. 22 For instance, in Maréchal and Hecq (2006), we discuss the difficulty of applying the concept of emission trading in its usual form to carbon sinks given the uncertainties involved. 23 We could also add that this framework seemed well-­suited to account for an interdisciplinary approach (as it is open to biological metaphors as well as to insights from psychology and sociology). Given its specificities, the openness to an interdisciplinary logic is a must in order to get an adequate picture of the climate issue. 24 As raised in Hodgson (1997, p. 400), the term evolutionary economics is associated with different schools such as the Austrian school or the Schumpeterian school. Our perspective clearly is grounded in the school of “old institutionalism” founded by Thorstein Veblen, most notably given the focus on the notion of habits coupled to a perspective centred on the concept of path dependence and lock-­in. 25 In one of his late writings, Stephen J. Gould recognised that it was not yet possible to provide a clear-­cut answer to some of the crucial questions raised by his theory (Gould, 2002). 26 It is all the more so given that the economic sphere is a complex system. As mentioned in Prothero (1992), the empirical literature that has followed the work of Gould and Eldredge (1972) tends to show that the theory of punctuated equilibrium is valid for complex species. 27 It is also possible that a characteristic has arisen for reasons that can not be ascribed to natural selection and is then selected for a new use. 28 Etymologically, it is fitness towards (aptus + ad) and fitness by reason of (aptus + ex). 29 Emotions such as anger certainly play a role in explaining why preferences are also process-­regarding (Bowles and Gintis, 2004). 30 See also Cordes (2004, p. 15). 31 This concept – which is linked to the more general concept of “bounded rationality” – should not be reduced to its pejorative connotations of passivity. In line with the work of Tomasello et al. (2005) that shows how social learning is essential in human learning process, the docile should rather be viewed as receptive to social influences than merely passive (Simon, 2005, p. 95). 32 The work of Herbert Simon and Joseph Henrich meet in making informational constraints one of the key of their respective theory. Herbert Simon has recently reaffirmed that his notion of docility could not be used to justify reciprocal altruism but as explaining non-­reciprocal altruism (Simon, 2005). 33 The other crucial issue is that of the creation of novelty and the related question of intentionality (or that of endogenous versus exogenous economic change). This question is briefly discussed in Chapter 8. 34 One example that is often quoted is that of James Watt with respect to the Newcomen engine. 35 A good illustration is the debate on the costs of GHG stabilisation in Azar and Schneider (2002, 2003) and Gerlagh and Papyrakis (2003). For a good introduction to the importance of modelling assumptions for climate policy, see Dowlatabadi (1998). More recently, the Stern Review has also triggered numerous debates on economic modelling – most notably on discounting – as explained in Chapter 6. 36 This brief historical account on TC modelling draws on Jorgenson (1996), Mulder et al. (1999) and Ruttan (2002). 37 For a good overview of these attempts – both within and outside mainstream economics – see Ruttan (2002). 38 For a good summary of TC modelling in energy/climate models see Löschel (2002) and Castelnuovo et al. (2002). The potential consequences that arise from modelling TC in an endogenous manner are discussed more thoroughly in Castelnuovo and Galeotti (2002) and Bosello et al. (1998).

Notes   147 39 The model used for evolutionary economics in the comparative analysis is that of Nelson and Winter (1982). 40 However, the authors nuance this convergence by saying that “in evolutionary models, technological and behavioral diversity, uncertainty, path dependency, and irreversibility are elaborated in a more sophisticated and explicit way than in neoclassical growth models” (Mulder et al., 2001, p.  168). As explained below, the only important feature that is missing from this account is the notion of systemic interdependencies. 41 It should be noted that a “system” is a network of elements whereas a “regime” is a network of peoples. Socio-­technical regimes serve to maintain and stabilise STSs (see Geels and Kemp 2007). 42 In line with Dosi (1997, p. 1539), we decide to talk about David and Arthur’s theory despite the theory of path dependence drawing on earlier works. 43 Even though the issue of increasing returns has been acknowledged to be of importance, most CGE models tend to rule it out since this complicates the model. For instance, the necessary adoption of a different pricing rule renders the outcome of the model Pareto-­inefficient as explained in Villar (1996). 44 Such a self-­reinforcing dynamic is illustrated with the “Polya-­urn process” (Arthur et al., 1987, p.  295). At first, the urn contains one red ball and one white ball. The process starts with one ball that is randomly chosen and replaced. Then, one ball is added to the urn based on the colour of the randomly chosen ball. Then, another ball is randomly picked and so on. Obviously, the respective proportion of white and red ball in any future point in time is path dependent and conditioned by the first choice. 45 Given its status of pioneer work in the domain, the detractors have first focused their critics on the QWERTY case which they consider as the “founding myth” of the literature on path dependence (Ruttan, 1997, p. 1523). 46 The discussed designs are the Dvorak keyboard as compared to the QWERTY keyboard in Liebowitz and Margolis (1990, 1994) and the Betamax videotape recorder as compared to the VHS in Liebowitz and Margolis (1994, 1995). 47 As mentioned later in Margolis (2005), more recent studies seem to confirm that the Dvorak keyboard is slightly superior to the QWERTY keyboard in term of speed (i.e. such a 2–3 per cent advantage was already acknowledged in Liebowitz and Margolis, 1990). 48 The inherent inertia that goes together with a lock-­in process can be illustrated with the QWERTY case. Although this design of keyboard can be argued to have developed for deliberate and justified reasons (to avoid type-­bar clashes), the main criteria for this decision is no longer relevant in today’s computer era. This is what is called the “persistence of obsolete intentions” in Foray (1997, p. 745). 49 The common background behind the various cases studies is explained in more details in Chapter 2. 50 See Unruh (2000) for a general description of the circumstances that favoured the ICE and Foreman-­Peck (2000) for a more detailed analysis of the crucial small events (e.g. races, etc.). Cowan and Hulten (1996) also provide an account of the deliberate strategies adopted by the actors in the ICE side in contrast with the negative role played by the Stanley Brothers with respect to the development of the steam engine. 51 This echoes the above discussion on the notion of Punctuated Equilibrium and its compatibility with Darwinism. 52 In other words, dynamics involve processes that see individuals interacting with an emergent population in a self-­reinforcing manner. For more detail on the general theoretical background, see Dopfer (2005). 53 Beside the three aforementioned cases (i.e. keyboards, videotape recorders and car engines), this analysis also draws on studies relating to British railway systems, nuclear reactors, railway gauges and the “battle of the current”. 54 Note that, in line with Unruh (2002, p. 317), the approach of Chapter 2 with respect to

148   Notes climate policy may appear to be somewhat “techno-­centric”. However, it is clearly recognised that the solution to this issue is certainly not entirely a technological one. This is already implicit in the framework sketched in Chapter 2 (as the role of habits is mentioned in conclusions) but it is obviously much clearer in the rest of the work (Chapters 3, 4, 5 and 6) where the notion of habits (and its interplay with the broader STS) is developed in more detail. 55 The exact quote is that “standardization on the wrong system [. . .] seems only too possible in the presence of strong technical interrelatedness, scale economies and irreversibilities due to learning and habituation” (David, 1985, p. 336, emphasis added). 56 This clearly constitutes an added value as compared to the great bulk of studies on habits in the realm of social psychology where this larger perspective is missing. 57 The very crucial question of the role of habits with respect to rationality and deliberation will be further discussed in Chapter 8; our vision on that issue is the outcome of the entire analytical path followed throughout the work. 58 Due to their importance, the main insights from Chapter 5 are discussed in the concluding chapter with the aim of putting them in a broader perspective. 59 It is important to note, however, that the sector of agriculture is a major source of GHG emissions. It contributed 13.5 per cent of global annual emissions in 2004, which is roughly the same as the transportation sector (IPCC, 2007, p. 36). 60 As explained in Krausmann et al. (2008), the path followed by agricultural systems is obviously connected with (or has even been shaped by) the presence of cheap and abundant sources of energy which characterised the first decades of the carbon-­based STS. 61 This is illustrated with the rapid policy impetus for agro-­fuels or the many credits granted for research on carbon capture and storage (CCS) although these two strategies are highly disputed. This idea is further discussed in the concluding chapter. 62 Without forgetting to take into account the habits of consumers. 2  The economics of climate change and the change of climate in economics   1 A version of this chapter was published in Energy Policy 35(10), pp. 5181–5194.   2 The impact that the “Stern value” of €5,500 billion has had on the media and decision­makers is a good illustration (Stern, 2006).   3 Among the most important decisions based on economic arguments is undoubtedly the US withdrawal from the Kyoto Protocol, based on the idea that it is “fatally flawed” and would hurt the economy (see http://georgewbush-­whitehouse.archives. gov/news/releases/2001/06/20010611-2.html, accessed 24 February 2012).   4 We use the word “traditional” (“modern”, “mainstream” or “orthodox” could also be used) to avoid the problems arising from the somewhat ambiguous use of the term “neoclassical”, as shown in Colander (2000). By traditional economics, we refer to the Walrasian model of welfare economics which can be defined as the theoretical synthesis of the Marshallian approach with marginal production theory and the rigorous precision of mechanical mathematics. It can be dated back to the second half of the nineteenth century with the work of economists such as Alchian and Friedman.   5 See Note 2, Chapter 1.   6 For a good introduction to the debate on the importance of culture, see Henrich (2004).   7 The range of models used in the Energy Journal’s Special Issue on the Kyoto Protocol (see Weyant, 1999) provides a clear example of the omnipresence of CGE models in economic analyses of the climate issue.   8 The focus on flexible mechanisms and the creation of an international emission trading system are the clear results of having adopted the framework of traditional economics.

Notes   149   9 This notion has indeed played a dominant role in international talks and has formed the basis on which many countries have shaped their position on climate issues. 10 It follows that corrective measures should only be implemented if they are shown to be less expensive than the benefits arising from greater energy efficiency (see also Sutherland, 2000, p. 98). 11 Routines are a key concept in evolutionary economics which refers to regular and predictable patterns of behaviour. 12 This is clearly in line with those authors that see energy consumption as “the routine accomplishment of what people take to be “normal” ways of life” (Shove, 2005, p. 117). 13 The process leading to locked-­in socio-­technical regimes (see Section 2.3) may also explain the reproduction of practices and habits. 14 In fact, in the original work of Nelson and Winter (1982), routines are organisational (i.e. relate to firms). It is now standard practice to use the term “routine” for collective behaviour and the term “habit” for individual behaviour (Dosi et al., 2000). 15 For a good overview of the history of the different “induced” TC modelling – within and outside the traditional paradigm – see Ruttan (2002). 16 See Grubb et al., 2006, and Koehler et al., 2006, for a brief historical overview of climate modelling with ETC. 17 We can also add that CGE domination in climate modelling makes it difficult for a widespread diffusion of ETC modelling as CGE models “face considerable difficulties in incorporating ETC” (Koehler et al., 2006, p. 46). 18 Sutherland (2000, p. 90) confirms that “most economic analyses of the cost of achieving the term of the Kyoto Protocol conclude that such costs would be high”. 19 The need to “understand better the underlying elements and issues in experience curves” (Koehler et al., 2006, p.  31) can be considered as a plea for some form of contextualisation but the systemic nature of it is still lacking. 20 Arthur’s theory of self-­reinforcing mechanisms can be compared to the famous “Polya-­urn” process (see Arthur et al., 1987, p. 295). 21 See the pioneer work of Frankel (1955) based on the concept of “interrelatedness” in Veblen ([1915] 2003) and, for more recent formalisations, Katz and Shapiro (1985, 1986) and Farrell and Saloner (1986). 22 This notion is inspired by the “scientific paradigm” of Kuhn (1970). 23 Note that all three regimes are built around and dependent upon a specific source of energy which highlights the relevance of evolutionary concepts for energy-­related studies. 24 As the Betamax’s playing time had been extended well before the crucial arrival of the pre-­recorded tape (see Cusumano et al., 1992). 25 The choice of the LWR technology – which is found to have emerged through a decision from Captain Rick Hoover that was not grounded on any scientific consensus – is recognised as suboptimal for civil applications compared to other nuclear technologies (Foray, 1997, p.  739). Interestingly, this example is not mentioned in Liebowitz and Margolis (1994, 1995). 26 See also the “battle of the current” case in Hughes (1983) and David and Bunn (1988). 27 It could be argued that these preferences are already historically determined. 28 See Unruh (2000) or Arentsen et al. (2002). 29 This might soon become the case of climate measures as global emissions have been continuously rising ever since the signature of the Kyoto Protocol in 1997 (IEA, 2011). 30 When there is protection (whether public or not), a niche is said to be technological. If not, it is called a market niche (Mulder et al., 1999, p. 11). For instance, the internet was developed within a technological niche whereas railways grew within a market niche (Windrum and Birchenhall, 2005, p. 125).

150   Notes 31 The failure of the milk cart is another example that illustrates the need to take the user’s acceptance into account and not just focus on technical aspects. 32 An evolutionary perspective also needs to concentrate on the efficacy of interactions (Dopfer, 2005) or functional compatibilities (Windrum, 1999). 33 See, for instance, Berkhout et al. 2000. 34 The case study on the comparative diffusion of totally chlorine-­free pulp bleaching technologies in the US and Sweden stresses the crucial role of co-­evolution of technology and endogenous preferences (see Reinstaller, 2005). 3  An evolutionary perspective on the economics of energy consumption   1 A version of this chapter was published in the Journal of Economic Issues 43(1), pp. 69–88.   2 For instance, the US Union of Concerned Scientists introduces one of his position papers on climate change by recalling that “Global warming poses a profound threat to humanity and the natural world and is one of the most serious challenges humanity has ever faced” (UCS, 2007, p. 1).   3 Veblen’s contribution is acknowledged in the conclusions of David’s article (see David, 1985, p. 336).   4 In line with Gowdy (2008, p. 632), the rational choice model refers to the behavioural model built around the concept of Homo oeconomicus and which is used to inform policy-­making (see below). The notion of rationality is further discussed in the concluding chapter.   5 Energy-­related GHG emissions make up 80 per cent of total GHG emissions in the 27 EU countries (EEA, 2007).   6 The rebound effect comes from the fact that energy-­saving technologies trigger behavioural responses by the economic agents, which can mean that the full profit of energy conservation cannot be tapped (e.g. you buy a more energy-­efficient car but you drive more). For a good definition and overview of the rebound effect, see Berkhout et al. (2000).   7 An emission reduction potential is said to be “no regret” when the costs of implementing a measure are more than offset by the direct or indirect benefits (not including climate-­related benefits) it generates based on traditional financial criteria. The most obvious non-­climate benefits are those arising from reduced energy bills (see Chapter 2).   8 The reason for this initial opposition lies in the theoretical incompatibility between the Homo oeconomicus paradigm and the existence of profitable investments not being spontaneously undertaken. “Locked” in their theoretical background, economists were thus quite sceptical about the evidence coming from engineer-­type bottom­up studies (see DeCanio 1998).   9 See the limits of market forces in de Almeida (1998); of energy labels in Gram-­ Hanssen et al. (2007); and of price signals in Meier and Eide (2007). 10 It refers to the idea that the sole selection operating at the individual level can not explain what exists and happens today. As explained in Chapter 1, it has been shown that socially acquired characteristics of human beings are better explained by group-­ level analysis (Henrich, 2004). 11 Here again it is interesting to note how Veblen’s work is insightful as he already touched upon similar ideas. In fact, its notion of “cultural complex” coupled with the materialist determinism his work is imprinted with leads to a view that is very close to Unruh’s TIC. 12 In line with the concept of “path dependence” which refers to the fact that technological systems follow specific trajectories that it is difficult and costly to change (Arthur, 1983; David, 1985). As shown in Arthur (1989), these trajectories depend on

Notes   151 historical circumstances, timing and strategy as much as optimality (the main focus of mainstream economics). 13 That means that a completely different STS could emerge from a similar context depending on how things happen in early stages. For instance, railway gauges would probably be of a different width had Stephenson been born in another mining district (Puffert, 2002). 14 See Note 14, Chapter 2. 15 Discarding information is a way to solve cognitive dissonance that is produced by receiving conflicting information. There is even the presence of what is termed a “confirmatory bias” as people favour and seek out information that confirms their views, beliefs and behaviours (see Faiers et al., 2007, p. 4385). This is in addition to a reduced capacity to detect environmental change in the presence of strong habits (Verplanken and Wood 2006, 92). 16 My translation from the French. 17 As shown by Bargh (1997). It is also important to note that social processes like imitation and conformism are involved in habit forming (Hodgson, 2004, p. 652). 18 As noted in Limayem et al. (2001, p. 277), habits are, unlike reflexes, “based in part on the ability of the individual to learn or acquire/absorb the particular behaviour into a cognitive schemata or script”. 19 The functionality (or the goal-­directed nature) of habits is important as shown in Ouellette and Wood (1998). 20 A good example of a perturbed habit context is the eight-­day closure of a freeway that lead to the development of a new script-­based travel mode choice (Fujii and Gärling, 2003). 21 It rates 9.06 on a scale ranging from 1 to 10, where 1 is “not at all interesting” and 10 is “very interesting”. For instance, “the feeling of acting individually to fight against a global issue” has a score of 8.30, whereas the score of “individual follow-­up” is of only 5.60. The complete result is available in the June 2007 report (in French), avail­ able at www.defi-­energie.be. 4  Changing habits and routines in energy consumption   1 This chapter was co-­written with Nathalie Lazaric.   2 Given that economics developed “along some paradigmatic lines determined by the cultural crucible in which the stuff of our mind is initially mixed” (Perlman and McCann, 1998, p. 2), it was strongly influenced by the climate of Newtonian mechanistic science that reigned at the time of its first development. Accordingly, modern economics can be viewed as nothing else than the coupling of the “marginalist revolution” with Cartesian “logical rigor”. This Cartesian/Newtonian legacy thus allowed a shift of “analytical mode” which “moved from the concern with the empirically observable to developing formal rules of analysis” (Perlman 1996a, quoted in ­Alcouffe and Kuhn, 2004, p. 224).   3 This might not be as basic as it first seems since, as recalled in Kirman (1989, p. 138), the “independence of individuals plays an important role in the construction” of aggregation functions in mainstream economics.   4 The meso level is a level that is wedged between the traditional micro and macro scales (see the “Micro-­meso-macro” approach in Dopfer et al., 2004).   5 A theory that depicts collective learning as resting on individual habits, routines and other types of more or less formalised practices (Commons, 1934; Veblen, [1915] 2003).   6 An empirical study performed by Wood et al. (2002) has clearly demonstrated that people had thoughts unrelated to the task at hand when performing a habit, while the thoughts they had when performing a non-­habitual form of behaviour were connected with the task.

152   Notes   7 Herbert Simon coined the term “procedural rationality” to characterise this use of resource-­saving habit-­like decision processes.   8 This would thus include rational optimisation as a process that relies on habits.   9 The functionality (or the goal-­directed nature) of habits is important as shown in Ouellette and Wood (1998). 10 Veblen ([1899] 1994, p. 106) also mentioned the fact that habits were “a method of responding to given stimuli”. 11 As shown by Bargh (1997). It is also important to note that social processes like imitation and conformism are involved in habit forming (Hodgson, 2004, p. 652). This is in line with Jager (2003) where is it mentioned that the initial performance of behaviour before it becomes a habit forming is deliberation, learning from peers or imitation of successful behaviour. 12 Echoing Dopfer’s sentence on “emotional intelligence and intelligent emotions” (see Dopfer, 2005, p. 25), we could say that the general disposition to rely on habits could be considered as a form of “habitual intelligence”. 13 See the work of Bargh (1996), or more recently Betsch et al. (2004) and Jackson (2005). 14 These features are comparable to the “distinctive properties of routine actions” mentioned in Cohen (2006, p. 388). 15 As noted in Limayem et al. (2001, p. 277), habits are, unlike reflexes, “based in part on the ability of the individual to learn or acquire/absorb the particular behaviour into a cognitive schemata or script”. See also the encoding or cognitive processing that characterises the first stage of habit formation in Jager (2003). 16 As mentioned above, free will plays a role in the learning phase of habits. More generally, relying on habits is a deliberate choice since “there is still a sort of economic calculation in the unwillingness to subject existence to economic calculation” (Bourdieu, 1989, p. 180). 17 It also reflects the difference generally made between tacit and explicit knowledge in evolutionary economics (see footnote 8 in Nelson and Winter, 1982, p. 32). Wallenborn (2006) allows us to come full circle in trying to link the concepts developed within evolutionary economics with the work of Giddens. Indeed, after mentioning Gidden’s definition of “practical consciousness” as being “all things actors know tacitly [. . .] without being able to give them direct discursive expression”, he adds that it is not “unrelated to the concept of routine” (Wallenborn, 2006, p. 65). 18 As suggested in Triandis (1977, p.  205), habits thus “become a better predictor of behaviour than behavioural intentions”. 19 The failure of intentions to predict behaviour for people with strong habits has been shown to be the case for car use (Verplanken et al., 1999) as well as for food purchases, watching TV news and riding the bus (Ji Song and Wood, 2007). 20 Simon (2005) explains this concept using the example of hot stoves that we learn not to touch without actually having to experience touching it ourselves. 21 Betsch et al. (2004) show the importance of time pressure on the prevalence of counterintentional behaviour. 22 As noted in Lindbladh and Lyttkens (2000), this does not preclude the possibility that habitual behaviour can sometimes be more risky like, for instance, the habit of not wearing a seat belt in a car. 23 See also the aforementioned empirical result in Hoeffler et al. (2006). 24 We could also add the reduced capacity to detect environmental change in the presence of strong habits (Verplanken and Wood, 2006, p. 92). 25 As noted in Jager (2003), short-­term benefits of habits often tend to increase with time. 26 As noted in Cohen (2006, p. 388), the emotional grounding of routines was implicit in Nelson and Winter (1982). 27 Concerning the rise of environmental awareness, see for instance the many studies

Notes   153 that have used the New Environmental Paradigm (NEP) scale. A survey of a great deal of such studies can be found in Dunlap et al. (2000). 28 See also the limits of traditional instruments such as, for instance, market forces in de Almeida (1998); of energy labels in Gram-­Hanssen et al. (2007); and of price signals in Meier and Eide (2007). 29 Even though the range of what people report to be a comfortable temperature is wide, indoor climate are converging (Shove, 2005). 30 The numbers of blood donors decreased after the introduction of a reward as it appeared to conflict with the values of voluntary donors (for a recent debate on crowding-­out effect, see Mellström and Johannesson, 2008). 31 The rebound effect comes from the fact energy-­saving technologies trigger behavioural response by the economic agents, that can cause that the full profit of energy conservation cannot be tapped (e.g. you buy a more energy-­efficient car but you drive more). For a good definition and overview of the rebound effect, see Berkhout et al. (2000). 32 For an overview of studies that show the ways in which behaviour is influenced by performance context, see, for instance, Dijksterhuis et al. (2005), Chartrand (2005) and Wood et al. (2005). 33 See Note 20, Chapter 3. 34 See Note 21, Chapter 3. 35 Conversely, those measures that target individual are considered “downstream interventions”. 5  Not irrational but habitual   1 A shorter and earlier version of this text was published as Maréchal (2009), “The crucial role of habits in energy consumption: an evolutionary approach on changing current patterns”, Peer-­reviewed Proceedings of the 2009 ECEEE Conference on “Act! Innovate! Deliver! Reducing energy demand sustainably”, 1–6 June 2009, Colle-­sur-Loup, France. A modified version of this chapter was published in Ecological Economics 69(5), pp. 1104–1114.   2 Even though the range of what people report to be a comfortable temperature is wide, indoor climates are converging (Shove, 2005).   3 Given the mutual constitutiveness, it is also crucial to take into account the interactions between the two types of barriers as suggested in Wilhite (2007).   4 In other words, dynamics involve processes that see individuals interacting with an emergent population in a self-­reinforcing manner.   5 The functionality (or the goal-­directed nature) of habits is important as shown in Ouellette and Wood (1998).   6 As shown by Bargh (1997). It is also important to note that social processes like imitation and conformism are involved in habit forming (Hodgson, 2004: 652). This is in line with Jager (2003) where it is mentioned that the initial performance of behaviour before it becomes a habit forming is deliberation, learning from peers or imitation of successful behaviour.   7 Note that this figure is based on only 68 responses as 38 individuals could not specify their preferred class of alternative vehicles.   8 For LPG, the most important barriers are technical ones, whereas for CNG it is supply-­related ones (mostly the lack of recharging infrastructures).   9 The supply-­side stakeholders were selected to be representative of all the different types of alternative vehicles currently available (Prius, Areva, etc.) as well as of those car companies not selling any such vehicles. The experts were chosen from among non-­governmental organisations, political parties, universities and research centres. As far as the fleet managers are concerned, the persons interviewed were selected to cover the full range of entities with a fleet of vehicles (taxi companies, municipal ­districts, public administrations, police departments, etc.). The interviews were

154   Notes p­ erformed between February and June 2008. They consisted of “face-­to-face” interviews for the first two groups, while fleet managers were interviewed by phone. 10 Throughout the study (and thus this chapter), the scale used ranges from 1 to 10, with 1 referring to a complete disagreement with the proposition and 10 to a complete agreement. The complete results can be found in the June 2007 report (in French) available at www.defi-­energie.be. In our sample, which consisted of 519 households registered in March 2009 (see below), this value increased to 7.17. 11 The answers might be biased by the overrepresentation of households with higher level of education in the first two editions of the Brussels Energy Challenge. It has been shown in Bartiaux (2007, p. 95) that people with higher levels of education tend to sort more of their waste than those with lower levels in the case of weak pressure. There probably is a positioning effect of showing that an individual is not trapped in his habits and can easily adopt a new behaviour. 12 An exception is, for instance, the recent work of Gram-­Hanssen (2008c) on stand-­by consumption, where she discusses the role of embodied habits in connection with technologies. 13 The most recent official measure made by the National Institute for Statistics indicate that this proportion is 57.3 per cent. (see http://statbel.fgov.be/fr/binaries/ mono_200102_fr%5B1%5D_tcm326-35799.pdf, accessed 20 February 2012, page 113). 14 There is no difference between the two values in terms of statistical significance. 15 This explanation may seem a bit awkward but it is based on the results from the initial sample of 565 households in which there were 126 respondents to the question “Are you a landlord or a tenant?”, with 32 reporting to be tenants. In that slightly larger sample, the “ease to adopt new habits” was larger for tenants (6.91) than for landlords (6.78), although tenants also reported higher habits than landlords for both electricity and heating. However, 46 households had to be deleted from the analysis because some reported data on other variables were inaccurate. For the sake of compatibility with the broader study, we use the same reduced sample of 519 households (in which there are only 109 respondents to the landlords/tenants question). 16 This distinction – borrowed from the work of Anthony Giddens – is similar to the difference between “procedural” and “declarative” memory expressed in Lazaric (2007). However, discursive knowledge is probably less focused on cognitive aspects than on the social dimension. The opposite is true for “declarative” memory. This is likely due to the discipline where both concepts evolved. 17 For instance, the English term “stand-­by” has been changed as it was not considered to be sufficiently understandable. 18 The lack of intention is also not included in the SHRI construct described in Verplanken and Orbell (2003). However, this index contains an identity element (e.g. Behaviour X is something that is “typically me”) which we decided to drop after discussions with the others analysts. 19 This means that the households reporting a lower value are considered as not having the targeted unsustainable habits and thus not taken into account in the analysis. This does not preclude the possibility that the good action (i.e. putting on a jumper when feeling cold or fully switching off the television) is also driven by habits but it was not possible to include the positive action in the questionnaire given the constraints of the study. 20 Out of the 256 households that report not having the unsustainable habit of leaving their television on “stand-­by”, 166 also report not having the other heating-­related bad habit. Within that sample of 166 individuals, the average index (i.e. the four dimensions grouped in one index) for the electricity-­related action is significantly higher than the same index for the heating-­related action (t = 2.719; p < 0.001). 21 The latter may be deemed to involve a bit more of “deliberation” since it first requires the realisation that one is cold. Moreover, it is known that thermostat regulation is

Notes   155 more of a collective decision that often leads to conflicts among household members (Orsini and Wallenborn, 2008, pp. 166–167). 22 As mentioned in Verplanken and Orbell (2003, p.  1325), this problem is slightly attenuated in the case of a multi-­items instrument. 23 Although it is of no value in statistical terms, there is, for instance, one household that reported values of 10, 10, 10, 1 with respect to the four items for the “stand-­by” question. Such an answer means that the “stand-­by” habit is perceived as purely automatic but easily reversible at the same time. 24 Regarding households without children, the values are 7.57 and 6.94 for electricity and heating respectively. These two values decrease to 7.19 and 6.73 for households with children. 25 This does not have an impact on the results. 26 Note that these weighted proportions are based on the respective importance of each district in the total sample of 8,279 requests. These weighted proportions do not differ widely from the ones obtained using the importance of each district population in reality (38.49 per cent and 29.04 per cent respectively). Thus, the fact that our database is not perfectly representative of the respective population of each of the 11 districts is not a strong bias. 27 The respective proportions of newcomers in the “heat production”, “shell/insulation” and “appliance” categories are 31.6 per cent, 34.2 per cent and 43.6 per cent. All three are higher than the average proportion of newcomers in the nine districts covered in the sample of 6,051 requests which is 28.9 per cent. 6  Overcoming inertia   1 This chapter was co-­written with Nathalie Lazaric. A shorter version was published in Climate Policy 10(1), pp. 103–119.   2 The range of models used in the Special Issue on the Kyoto Protocol (see Weyant, 1999) provides a clear example of the omnipresence of CGE models in economic analyses of the climate issue.   3 The concept of “bounded rationality” refers to the cognitive boundaries that prevent people from seeing, seeking, using and sharing relevant accessible and perceivable information when making decisions. Rationality is bounded since individuals face limits both in formulating and solving problems and in processing information.   4 Tacit knowledge means that people are not often aware of the knowledge they possess or how it can be valuable to others. Tacit knowledge is not easily shared since, as illustrated by one of Michaël Polanyi’s famous aphorisms, “we know more than we can tell”. Tacit knowledge consists often of habits and culture that we do not recognise in ourselves. The process of transforming tacit knowledge into explicit knowledge is known as codification or articulation.   5 Note that this theory is somewhat at odds with the abundant empirical evidence of behavioural inconsistencies such as loss aversion or hyperbolic discounting. Beyond these inconsistencies, Quiggin (2008, p. 199) also adds that markets “do not work in the smooth and frictionless” way assumed in standard models.   6 One example of misplaced concreteness is the battle over the figures contained in the Stern Review (Stern, 2006) – notably regarding the appropriate discount rate to be used – which has given rise to extensive debates in the literature (see, for instance, Barker, 2008; Nordhaus, 2007; Tol and Yohe, 2006). The focus could have been placed instead on the meaning of the proposed measures and the costs of adaptation of socio-­economic systems to a changing climate.   7 For a good overview of that debate, see IPCC (1996, Chapters 8 and 9) and the 1994 Special Issue of Energy Policy (Huntington et al., 1994).   8 Interestingly, Barker (2008, p.  175) notes that it may also be the case in the debate

156   Notes around the appropriateness of CBA in the field of climate change judging by the responses of traditional economists to the Stern Review (Stern, 2006).   9 See Sutherland (1991) and Howarth and Andersson (1993), who explain the “efficiency paradox” through the existence of hidden costs – mostly transaction costs. 10 See the limits of, for instance, market forces in de Almeida (1998); of energy labels in Gram-­Hanssen et al. (2007); and of price signals in Meier and Eide (2007). 11 Note that, as mentioned in Schleich and Gruber (2008, p. 450, footnote 1), “the categorization of barriers is contested in the literature in the sense that different authors use different typologies”. For instance, Kounetas and Tsekouras (2008, p.  2519) present four distinct categories of factors to explain the efficiency paradox. One of them does refers to non-­economic factors (e.g. environmental regulation, labels, etc.) but those that are not of a psychological nature. 12 However, routines are not reducible to the mere sum of individual habits. As Hodgson (2007a, p. 111) clearly puts it “[r]outines are organizational meta-­habits, existing on a substrate of habituated individuals in a social structure”. 13 This does not preclude that some barriers are at play in both individual and collective behaviours. This is the case of the investor/user dilemma (a form of the “principal-­ agent” problem) according to Schleich and Gruber (2008, p. 461). 14 Although it was not apprehended in the same manner as in this chapter, the important role of inertia in climate policy has already been acknowledged in Grubb et al. (1995). 15 For a good overview of the importance of modelling for climate policy in a context where the objective is to achieve a low-­carbon society, see the Special Issue of Climate Policy (Vol. 8) edited by Strachan, Foxon and Fujino. 16 It should be noted that a “system” is a network of elements whereas a “regime” is a network of peoples. Socio-­technical regimes maintain and stabilise STSs (see Geels and Kemp, 2007). 17 In line with the concept of “path dependence”, which refers to the fact that technological systems follow specific trajectories that are difficult and costly to change (Arthur, 1983; David, 1985). As shown in Arthur (1989), these trajectories depend on historical circumstances, timing and strategy, as much as optimality (the main focus of mainstream economics). As defined in Puffert (2002, p.  282), a path dependent process is “one in which specific contingent events – and not just fundamental determinative factors like technology preferences, factor endowments and institutions – have a persistent effect on the subsequent course of allocation”. 18 Habits can be characterised as a context-­dependent form of acquired automaticity. However, this automaticity is somewhat limited (i.e. it is only a “predisposition”) by a required functionality or correspondence with objectives. 19 This high degree of constraint arise from the feeling of time pressure as well as the information overload that characterise today’s society, as explained in (Lindbladh and Lyttkens, 2002). 20 To put it differently, “habits are the constitutive material of institutions”, while the presence of institutions mean that “accordant habits are further developed and reinforced among the population” (Hodgson, 2007a, p. 107). 21 For instance, in the “battle of the motors”, US engineers were able to switch from electric to gas-­powered vehicles because they “did not put all the eggs in one basket, nor were they irrevocably committed to any particular technology” (Foreman-­Peck, 1996, p. 9). 22 See the set of necessary conditions in Windrum (1999, p.  31) and the key aspects identified for regime shifts in Mulder et al. (1999, p. 9). It should be noted that simply transposing successful measures will not be a guarantee of success as such measures are often context-­specific. 23 See Note 30, Chapter 2. 24 For example, as far as car fuel is concerned, agro-­fuel is a form hybridisation whereas the development of fuel cells is a niche.

Notes   157 25 See Note 21, Chapter 3. 26 The example of Russian soldiers that, although disguised as civilians, formed ranks and marched away perfectly illustrates what Cohen (2006, p.  388) calls “the occasional ‘misfirings’ in which routines are executed in inappropriate but compelling circumstances”. 27 For instance, as far as green products are concerned, when consumers actually purchase a car, they do not always put into practice their intentions (Meyer et al., 2006; Englert et al., 2009). 28 See also the work of Dennis (2006) where the inadequacy of the mainstream model regarding the efficiency paradox is discussed in terms of policy implications. 29 The numbers of blood donors decreased after the introduction of a reward as it appeared to be conflicting with the values of voluntary donors (for a recent debate on “crowding-­out” effect, see Mellström and Johannesson (2008). 7  The sustainability of EU agricultural systems   1 This chapter was co-­written with Hélène Aubaret-­Joachain.   2 The introduction of milk quotas is one of the best known policies implemented to this end.   3 As mentioned in Foster (1997, p. 429), given that “economic processes tend towards timeless equilibrium states”, it leaves room for analysis to be performed considering economic evolution as a reversible and ahistorical process.   4 Still, given that agriculture is a major source of GHG, these shortcomings are also worth mentioning for the purpose of this chapter.   5 Our translation of the term “entrepreneurs paysans”.   6 Our translation of “le retard agricole français” (see Dumont, 1946, 1949).   7 Such actors were, among others, “agricultural consultants”, “Chambers of Agriculture” or “commercial agents of multinationals”.   8 Our translation of “nous rendre comme maîtres et possesseurs de la nature”.   9 Our translation of the “L’idéologie qui identifie le mieux au plus et le progrès à la croissance économique” from Deléage (2004, p. 23) cited in Prével (2007, p. 31). 10 Our translation of “nous rendre comme maîtres et possesseurs de la nature” (Descartes, 1637). 11 Allanson et al. (1994, p. 31) also acknowledge that modernisation of agriculture in the UK involved mechanisation. Smith et al. (2005, p.  1493) suggest that, along with intensification, mechanisation is a common characteristic of modern agriculture in a quest for an “increased factor productivity [. . .] measured in terms similar to industrial productivity”. 12 Our own translation of “cette servitude est en partie volontaire dans la mesure où elle repose sur l’adhésion à l’idéologie du progrès” (Prével, 2007, p. 17). 13 Even though there has always been economists interested in the evolutionary tradition (such as Thorstein Veblen or Joseph Schumpeter), the book An Evolutionary Theory of Economic Change is often considered as having founded “modern” evolutionary economics (Arena and Lazaric, 2003a). 14 It thus provides an alternative to simple aggregation by building “on the notion of circularity between individual and population” (Dopfer, 2006, p. 18). 15 The concept of path dependence stresses the historically contingent nature of economic change and refers to the fact that technological systems follow specific trajectories that it is difficult and costly to change (Arthur, 1983, 1989; David, 1985). 16 As shown in Arthur (1989), these trajectories depend on historical circumstances, timing and strategy as much as optimality (the main focus of mainstream economics). 17 Following the definition given in Puffert (2002, p. 282), a path dependent process is “one in which specific contingent events – and not just fundamental determinative factors like technology preferences, factor endowments and institutions – have a per-

158   Notes sistent effect on the subsequent course of allocation”. As shown in Arthur (1989), path dependent trajectories depend on historical circumstances, timing and strategy as much as optimality. 18 Such a contributing factor is, for instance, the cost (economic as well as cognitive) of switching to a new system (see Wilson and Tisdell, 2001). 19 See Note 30, Chapter 2. 20 For example, as far as car fuel is concerned, agro-­fuel is a form of hybridisation whereas the development of fuel cells is a niche. 21 The FAO’s International Conference on Organic Agriculture and Food Security was held on 3–5 May 2007 in Italy. Those benefits include, among others, a reduced pollution of drinking water and of the environment due to the absence of pesticide leaching and the reduction of nitrogen and phosphorus leaching (Brandt, 2007, pp. 16–19); higher soil stability and fertility; a lower and more efficient use of water; and a lower energy consumption (Niggli et al. 2007, p. 2, 4 and 8). 22 This survey was carried out in Australia, but similar negative perceptions are also attested in Europe (see for instance Prével, 2007b). 23 Hybrid strategies between these two trajectories are also possible, as suggested in Vanloqueren and Baret (2009). 24 This interplay between am STS and its supportive sets of accordant habits and practices has been extensively discussed in Chapter 3 with respect to energy and climate and the related need to turn to a low-­carbon economy. 8  Conclusions   1 This point will be illustrated later with the current policy-­making in the EU and its promotion of CCS and large-­scale offshore wind energy to the detriment of DG.   2 There are different levels of STS depending on the level of aggregation at which the analysis is performed. Accordingly, the electricity-­generating STS can be viewed as nested within the wider carbon-­based STS, but it also contains the renewable energy STS, which includes the wind STS. The wind STS can be partitioned into the large-­ scale three-­bladed horizontal axis system and the small-­scale vertical axis system.   3 The authors acknowledge that their view of the concept of niche is largely inspired by the work of Ernst Mayr according to which new species do not only emerge through adaptation, but this process usually also involves some form of isolation (see Schot and Geels, 2007, p. 612).   4 These adaptive capacities depend on whether the required resources for transformation are external or internal to the STS and whether the responses to selection pressures are coordinated in a coherent manner within the members of the STS.   5 The consequence is that the transformation will be carried out by incumbent actors and thus driven by the values, routines and cognitive structures that have been shaped by the incumbent STS, resulting in a transformation that is incremental and path following (Smith et al., 2005, p. 1500). As mentioned above, this strongly resonates with the current promotion of CCS.   6 Echoing this view is one essential finding of the case study on chlorine-­free pulp bleaching technologies where the role of policy entrepreneurship is underlined. More particularly, what is recognised as crucial in explaining the greater success of one policy over the other is the presence of “policy entrepreneurs” and their “capability to induce a revaluation of existing shared mental models and belief on specific issues and related routines by concerned actors and groups” (Reinstaller, 2005, p. 1368). These actors and groups include consumers (and their related habits, values, modes of interaction, etc.) as well as the many members involved in a given STS (recognising that STS membership is an element that is not clearly bounded and homogeneously defined).   7 Of course, this can only be the case if the incentive is perceived and used by individuals so that it materialises into an increased demand for energy-­efficient technologies and

Notes   159 products. Again, this shows the importance of accounting for the interplay between the different levels.   8 As explained below, the efficiency of the related triggered behaviour is valid in stable contexts where resorting to habits allows for economising cognitive resources that can be devoted to other tasks.   9 This term has been coined by Herbert Simon in opposition to ‘substantive’ rationality (see Simon, 1976). 10 Note that the efficiency of habits is also acknowledged in the work of Gary Becker where it is recognised that “[t]he costs of searching for information and of applying the information to a new situation are such that habit is often a more efficient way to deal with moderate or temporary changes in the environment than would be a full, apparently utility-­maximizing decision” (Stigler and Becker, 1977, p. 82). 11 Moreover, for many individuals, these “green” values have most likely been either recently adopted and/or driven by social desirability in the face of overwhelming media coverage of the issue of climate change. 12 If the data are available, it could also be useful to compare the evolution of the respective energy consumption levels. 13 For a good overview of the debate, see the Special Issue on “Universal Darwinism” in the Journal of Evolutionary Economics (16(5)). Note that the term “Generalized” is now preferred to the initial “Universal” (see Hodgson, 2007b, p.  265, for a brief explanation on this). 14 To be more precise, Generalized Darwinism is about “ontological communality, at a high level of abstraction and not at the level of detail” (Hodgson, 2008, p. 400). 15 There is feedback between variation and selection such as in the case of niches. 16 As exposed in Vanberg (2004), the idea that generalising Darwinism does not amount to denying the existence of human intentionality is connected to adopting a different account of rationality. 17 This can be illustrated with the following quote from Thorstein Veblen cited in Hodgson (2004, p.  652): “man mentally digests the content of habits under whose guidance he acts, and appreciates the trend of these habits”. When a change of context, for instance, renders a habit no longer functional, it can thus be reflected upon and changed if needed. 18 As argued in Chapter 5, this is also a key aspect of habits which makes them difficult to deal with from a policy perspective. 19 Since conscious maximisation is not suggested, choices are not necessarily welfare-­ enhancing and preferences are not presumed to be correct and updated with new information. 20 When A is preferred to B, and B is preferred to C, then A should be preferred to C. 21 Veblen’s perspective on institutions also is in departure from most mainstream economists as well as from those gathered under the school of NIE (Gronow, 2008). 22 Co-­generation is often called “combined heat and power” (CHP). Although there is still no consensus in the literature about the definition for DG (Pepermans et al., 2005), it can be related to the use of small generating units installed close to load centres. Thus, only micro-­CHP can be included in DG. 23 Within the framework of its Recovery Plan, the European Commission decided to grant subsidies in the field of energy (EC, 2009). What is striking in this text is that the only two climate-­friendly options that are envisaged are CCS and large-­scale offshore wind technology. After the vote of the Parliament on 6 May 2009 (P6_TC1COD(2009)0010), the budget allocated to CCS was €1.05 billion while the offshore wind programme was allocated €565 million (for the upcoming two years). The rest of the €4 billion budget is assigned to the improvement of existing infrastructures, but only due to concerns regarding securing supply through reinforcing gas and electricity interconnections.

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Index

Aarts, H. 51, 60 abatement costs 28 Abraham, C. 88 Abrahamse, W. 95, 108 Ackerman, F. 1 action: habits of 52, 53, 59, 61; individualcollective 72; and intention, gap between 73 adaptation 10 agency and structure 57, 79, 132, 142 Aghion, P. 12, 30 agricultural sustainability 24–5, 111–26 agricultural systems: concentration of 112, 117, 118; entrepreneurial farmers 115; evolutionary economics and 112, 119–25; hybridisation in 122, 123, 126; intensification of 111–12, 116–17, 118, 123; lock-in and 120–1, 125, 126; multifunctional 111, 121, 122–3; organic 123–4; path dependence in 125, 126; productivist 111–12, 114, 116–18, 123, 125; specialisation of 111, 116, 117, 118, 123; terms of trade 118; transition in 122–3, 125–6 Ajayi, O.C. 121 Aldrich, H.E. 138, 141 alternative vehicles 81–3, 134 altruism 3, 4, 9, 10, 11, 27, 142–3 amplification effect 135 applied theory papers 16–17 Arrow, K. 27–8 Arthur, W.B. 13, 15, 34, 35, 37, 43, 49, 66, 120, 131 aspirational groups 72 automaticity 53, 58–9, 60, 61, 62, 63–4, 133, 139; distinct features of 54, 64, 86, 87 automobile sector 47, 78, 81–3, 129, 134 Autonomous Energy Efficiency Improvement (AEEI) 31

awareness, lack of/limited 54, 59, 64–5, 86, 87 Ayres, R.U. 100 Bamberg, S. 54, 70, 75, 84 Bargh, J.A. 54, 63, 64, 87 Barnes, W. 49, 66 barriers to energy-efficient investment 29, 101 Barro, R. 12 Bartiaux, F. 65, 89 Becker, G. 133, 134, 139 behaviour, repeated 61, 62, 87 behavioural cues 64 behavioural economics 99 behavioural lock-in 50, 66, 69; in energy consumption 77–96 Beliefs-Preferences-Constraints (BPC) model 140 Berkhout, F. 105 Betamax 36 Bever, T.G. 77 biology 2; micro-macro debate in 10 Birchenhall, C. 122 bottom-up studies 28, 29, 101 Boulding, K.E. 2, 101, 119 bounded rationality 20, 29, 33, 46, 48, 98, 101, 102, 119, 155n3 Bourdon, J. 118 Brette, O. 15, 52, 58, 61, 71 British Petroleum (BP) 30 Brussels Energy Challenge 56, 75, 78, 83, 84–5, 107, 135 Brussels Motor Show 78, 81 Buenstorf, G. 72, 108 Bunn, D. 142 business-as-usual emissions 30 Camerer, C. 64

Index   185 capital: human 12, 30; human-made 6; natural 6, 99 carbon capture and storage (CCS) 129, 142 carbon lock-in 98 Carillo-Hermosilla, J. 49, 71 cars see automobile sector Cartesian-Newtonian paradigm 46, 112, 125 Castelnuovo, E. 42 causation 4; circular 21, 49, 53, 57, 58, 70; cumulative 15, 16, 46, 58, 120, 138; as interactive 120; linear 15 CBA see cost-benefit analysis (CBA) challenges, energy 56, 75, 107 Chartrand, T.L. 53, 54, 62, 64, 86 choice consistency hypothesis 140 circular causation 21, 49, 53, 57, 58, 70 CLEVER project 81 climate change xi–xii, 1, 7–8, 44, 97, 98–100 Coase, R. 99 cognition 63 cognitive abilities 4–5, 60 cognitive dissonance 68, 135 cognitive script 61 Cohen, M.D. 66 collective action 72 commitment strategies, energy consumption 94, 107 Common Agricultural Policy (CAP) 111, 116 Commons, J.R. 72 comparative feedback 56, 75, 94 competitive efficiency 12–13 complementarities 37–8 computable general equilibrium (CGE) models 6–7, 12, 27, 97 confirmatory bias 68, 76 consciousness 63; discursive 65; of habits 139; practical 65 consumer groups 22 consumption 5, 6; see also energy consumption contextual change, and energy consumption 74, 90–3, 94–5, 108, 109, 132, 135 contingent reinforcement 51 continuity hypothesis 32 contrast groups 72 control, lack of 54, 64, 87 Cordes, C. 72, 108, 136 cost-benefit analysis (CBA) 6–8, 99, 100, 114 counterfactual threat 14

Cowan, P.A. 37, 72, 122 crowding-out effect 73, 108 cues: behavioural 64; habit-triggering 55, 61, 74, 86, 90–3 cumulative causation 15, 16, 46, 58, 120, 138 Cusumano, M. 37 Damasio, A.R. 53, 63 Darwin, C. 15, 136, 138 Darwinism, generalized 136–7, 138, 141 Dasgupta, P. 99 David, P.A. 13, 14, 15, 34, 35, 38, 39, 43, 47, 49, 66, 120, 131, 142 De Almeida, E. 69 de Vries, H.J.M. 103 DeCanio, S.J. 29, 100 decision-making: complexity 83; constraints 83; energy consumption 83; routines 29 declarative memory 65, 86 deductive methods 113 deliberation 68, 72, 73 Denmark, wind energy 41–2, 130 Descartes, R. 46, 112, 113, 116, 125 determinancy, principle of 15 Dewey, J. 60, 138 Dijksterhuis, A. 54, 64, 65, 86 discounting: hyperbolic 4, 8, 99; intergenerational 8 distributed generation 141–2 distribution 5 diversity 38, 40 docility 11, 20, 48, 67 dominant design, lock-in of 39 Dopfer, K. 18, 27, 44, 53, 58, 80, 119, 123 Dosi, G. 34, 36, 39, 125 dualism 113 Dumais, S.T. 63 ecological economics 1–2, 112, 119, 137 economic change, path dependence of 102–4 economic growth 5, 99; progress and 116 Ecoteam Programme 94 Edison, T. 38, 142 education 89 efficacy 58 efficiency 10, 44, 58; competitive 12–13; energy see energy efficiency; as feature of automaticity 54, 64 efficiency gap/paradox in energy 17, 19, 20, 24, 28, 29, 57, 69, 70, 78, 79, 100–1, 104, 131, 133, 135

186   Index Eldredge, N. 10 electric cars 129 electricity generation 38, 129, 130, 131; alternating current (AC) 142; direct current (DC) 142; distributed 141–2 embeddedness 15 emission reduction potential, `no regret’ 17, 28, 42, 45, 100, 150n7 emissions: business-as-usual 30; reduction effort 30–1 emotions 26–7, 45, 68–9 empirical papers 17 endogenous technological change (ETC) modelling 12, 31, 34, 103 energy consumption 20, 44–5; challenges 56, 75, 107; commitment strategies 94, 107; contextual change and 74, 90–3, 94–5, 108, 109, 132, 135; decisionmaking 83; efficiency gap/paradox in 17, 19, 20, 24, 28, 29, 57, 69, 70, 78, 79, 100–1, 104, 131, 133, 135; evolutionary view of 48–51, 58; feedback strategies 94; habits in 19, 20, 22–3, 43, 48, 54–6, 57, 58, 69–71, 77, 78, 83–96, 107, 109, 134–6, 139; changing 71–6, 85, 90–3, 107–9, 134; incentives systems 20, 72, 73, 74, 79, 107, 108; lead users 108–9; locational change and 74, 90, 94–5, 132, 135; routines 22, 69–71; stand-by 88, 94 energy efficiency 28, 29, 44, 45; firms 102; subsidies 20, 23, 90–3 energy-efficient investments 29, 100, 101 The Energy Journal 31 energy paradox 44, 45, 48 entrenchment, paradox of 40 equilibrium: general 1, 32, 80; punctuated 10 Erickson, J. 2, 7, 99 ETC see endogenous technological change (ETC) modelling European Commission 111 European Union (EU), agricultural sustainability 24–5, 111–26 evolutionary economics 2, 3, 5, 9–11, 17, 18, 29, 46–8, 127, 136–41; and agricultural policy 112, 119–25; and energy and climate policy 97–110; and energy consumption 48–51, 58; and technological change (TC) 32–41, 42, 103 exaptation 10 exhaustible resources 5–6 expected utility theory 99 externalities: negative 99; network 35–6, 39

extreme events 8 Faes, S. 50, 87 feedback: comparative 56, 75, 94; energy consumption 94 Feldman, M.S. 62–3, 73, 102, 107 Finman, H. 30 firms: energy efficiency 102; inertia 102; innovations 102; organizational routines 102 Fischer, C. 94 Food and Agriculture Organization (FAO) 123–4 Foray, D. 14, 39, 40 Foster, J. 46, 99 framework papers 16 France, agricultural system 24, 114–16, 118 free will 59, 62, 63 Freeman, C. 13 Frey, B.S. 73, 108 Galeotti, M. 42 Gardner, B. 88 Gardner, W.L. 168 gas turbine technology 40–1, 106 Geels, F. 13, 47, 103, 110, 120, 137 general equilibrium economics 1, 32, 80 Generalized Darwinism 136–7, 138, 141 Georgescu-Roegen, N. 101 Giddens, A. 65, 70, 73, 79, 104, 131 Gintis, H. 3, 27, 140 Gould, S. 10 Gowdy, J. 2, 4, 5, 7, 10, 99, 140 Gram-Hanssen, K. 79, 80, 105 Gronow, A. 138 group-level approaches 3, 10, 27, 32, 46, 57, 120 Grübler, A. 47, 104 Gunby, P. 122 habits 4–5, 21, 43, 98, 101, 102, 109, 131–6, 137, 142–3; of action 52, 53, 59, 61; and automaticity 53, 58–9, 60, 61, 62, 86, 133, 139; awareness of 86; bad 50, 67; changing 71–6, 85, 90–3, 107–9, 134; as comfort/security enhancing 68, 83; confirmatory bias 68, 76; consciousness of 139; as contextdependent 22, 74; counterintentional 20, 50, 54, 64, 66, 69, 73, 87, 109, 131, 133; cues for 55, 61, 74, 86, 90–3; defined 51, 60–1; distinctive features of 61–5; emotions and 68–9; energy consumption

Index   187 see under energy consumption; evolutionary framework 59–61; formation and persistence of 66–69; institutions and formation of 49, 59, 67, 79, 140–1, 143; intelligent 53, 62; intrinsic 48, 69; key features of 132–4; of life 61; path dependence of 133, 134; procedural rationality of 134; as propensities 51, 61, 71, 133, 138–9; rationality and 137–41; reinforcement of 67, 68–9; reward reduction 55–6, 74–5; self-reporting of 85–6, 87, 88, 89, 139; short-term rewards 20, 67, 134; of thought 52, 53, 59, 61; unconscious character of 80–1, 86 habitual intelligence 53 Harris, J.M. 119 Henrich, J. 3–4, 11 heterogeneity of agents 34 Hodgson, G.M. 15, 21, 22, 46, 57; on Generalized Darwinism 136, 137, 138; on habits 49, 51, 52, 59, 60, 61, 62, 64, 79, 134–5, 139–40 Hoeffler, S. 67, 68 Hogg, D. 121 Homo oeconomicus paradigm 1, 3, 17, 26, 29, 44, 100, 117 Howitt, P. 12, 30 Hughes, T. 142 human capital 12, 30 human-made capital 6 hybridisation 19, 106, 128, 129, 130; in agricultural systems 122, 123, 126 hyperbolic discounting 4, 8, 99 ideas, lock-in of 36 imagination 72 incentives systems 20, 72, 73, 74, 79, 107, 108 income 89 income compensation principle 8 individuality 45, 57 inertia, organizational 102 inferior designs, lock-in of 14, 37, 38–9, 47–8 information, path dependence of 67, 133 innovations 102 institutionalist theory 60 institutions 21, 72, 101; and habit formation 49, 59, 67, 79, 140–1, 143 intelligent habits 53, 62 intention(s) 20, 50, 55, 62; and action, gap between 73; lack of 54, 64, 87 intergenerational discounting 8

Intergovernmental Panel on Climate Change (IPCC) xi–xii, 26, 97 internal combustion engine (ICE) 14; gaspowered 37, 40 investment, energy-efficient 29, 100, 101 irreversibility 6 Islas, J. 40, 130 Jackson, T. 45, 54 Jacobsson, S. 110 Jager, W. 51, 53, 55–6, 67, 73, 74–5 James, W. 60 Jonard, N. 39 Kahneman, D. 4, 48, 67 Katz, M. 35 Kemp, R. 13, 47, 103, 120, 127, 130 Kilpinen, E. 139, 140 Kindleberger, C. 13 Klöckner, C. 64, 86 knowledge, tacit 98, 155n4 Knudsen, T. 66, 134–5 Kyoto Protocol 30 Laibson, D. 4 laissez-faire approach 6 Laitner, J. 30 Lancaster, K. 7 Langer, E. 65 Lauber, V. 110 Lawn, P.A. 113 Lazaric, N. 53, 62 lead users 108–9 learning: by doing 12; by searching 12; social 48, 52–3, 59–60, 67, 72, 108–9 learning curves 35 learning economies 35 Liebowitz, S. 14, 36, 37 life events, and behavioural change 75, 108 light water reactors (LWRs) 37 linear causality 15 Lipsey, R. 7 Loasby, B. 72 locational change, and energy consumption habits 74, 90, 94–5, 132, 135 locational cues 74 lock-in 51, 98, 120, 126, 128; and agricultural systems 120–1, 125, 126; behavioural 50, 66, 69; carbon 98; of dominant designs 39; of ideas 36; of inferior designs 14, 37–8, 47–8; of routines 29; of socio-technical systems 18, 19; technological 2, 11, 13–15, 18, 24, 34, 35, 36–9, 41, 43, 49, 102–4

188   Index loss aversion 4, 8, 99 low-carbon economy 14, 79; transition to 127–36 Lowe, P. 116 Lucas, R. 30 macro dynamics 33 macroinventions 11 Manne, A. 31 Marenzi, N. 31 Margolis, S. 14, 36, 37 market failures 29, 45, 100 markets, perfect 1 Marsden, T. 123, 124 Martiskaïnen, M. 55, 84, 94 Matthies, E.C. 56, 75, 76, 107 maximisation hypothesis 113 mechanistic reductionism 46, 49, 113 Mehier, C. 15, 58, 71 memory, procedural and declarative 65, 86 meso scale analysis 18, 32, 33, 34, 58, 80, 123 micro-foundations approach 9, 10, 113 micro-generation technologies 141–2 microinventions 11 Midmore, P. 124 mindfulness 65 Mokyr, J. 11, 37 Moldoveanu, M. 65 motivation 22, 59, 62, 63, 74; extrinsic 73, 74, 75, 76, 108; intrinsic 73, 74, 75, 76, 107–8 Mulder, P. 12, 34, 36, 103 Munier, F. 72 Nannen, V. 97 natural capital 6, 99 natural selection 10 Neal, D.T. 22, 60, 62, 66, 73, 74 negative externality 99 Nelson, R.R. 5, 12–13, 17, 30, 32, 102, 104, 119 network externalities 35–6, 39 neuroeconomics 26–7, 45, 99 New Growth Theory 12 New Institutional Economics (NIE) 4 Newton, I. 46, 112, 113, 125 niche accumulation 106, 122 niche development 128, 129 niche management 19, 41, 124, 126, 129, 130 ‘no-regret’ emission reduction potential 17, 28, 42, 45, 100, 150n7 no-regret paradox 18, 33

Nordhaus, W.D. 6 optimal growth theory 6 Orbell, S. 54, 61, 64, 86, 87 organic agriculture 123–4 organizational inertia 102 organizational routines 71–3, 102, 107 paradox of entrenchment 40 Pareto efficiency 145n11 Pareto optimality 5 path dependence 2, 11, 14, 15, 18, 24, 34, 43, 48, 66, 72, 97, 101, 127, 128, 131, 138; in agricultural systems 125, 126; of economic change 102–4; of habits 133, 134; of information 67, 133; of technological systems 35, 47, 49, 120 peer groups 72 Peirce, C.S. 52, 61, 138 Perez, C. 13 perfect markets 1 perfect rationality hypothesis 18, 45, 46, 58, 105, 113 performative routines 73, 107 Perkins, R. 14 Perpignan, St Charles market 109 Pierson, P. 67 Pigou, A.C. 99 policy: analyses and their limits 98–101; evolutionary approach to 101–10; lead users and 108–9; maintenance of solution diversity in 105–6 Porter hypothesis 30 pragmatism 138, 139, 140 preferences 3, 4, 28, 99, 140; intrinsic 48, 69 Prével, M. 115, 118 procedural memory 65, 86 procedural rationality 134, 152n7 profit gap 38 progress 125; and economic growth 116; and productivism in agriculture 118 property rights 99 Puffert, D.J. 38–9 punctuated equilibrium 10 QWERTY keyboards 14, 36, 38, 47 railway gauges 37, 38, 39, 48 Ramazotti, P. 49, 56, 66–7, 76 rational choice model 43, 44, 45, 48, 99, 107 rationality 45; bounded 20, 29, 33, 46, 48, 98, 101, 102, 119, 155n3; habits and

Index   189 137–41; perfect 18, 45, 46, 58, 105, 113; procedural 134, 152n7 Raven, R. 106, 130, 142 rebound effect 42, 44, 131, 153n31 reciprocity, strong 3, 10, 27, 99, 142–3 recycling 76 reduction effort 30–1 reductionism 1, 57; mechanistic 46, 49, 113 repeated behaviour 61, 62, 87 representative agent hypothesis 1, 32, 44–5, 80 resources, exhaustible 5–6 returns to adoption (RCA) 13, 35–6, 103–4 reversible time 15 rewards for habits: reduction of 55–6, 74–5; short-term 20, 67 Richels, R. 31 Romer, P. 12, 30 Rouleau, L. 69 routines 5, 21–2, 58; changing 71–6; decision 29; distinctive features of 61–5; in energy consumption 22, 69–71; evolutionary framework 59–61; formation and persistence of 66–9; locked-in 18, 29; organizational 72–3, 102, 107; ostensive dimension of 73, 107; performative 73, 107 routines’ consumption 72 Sala-i-Martin, X. 12 Sanden, B. 39 scale economies 35 Schäfer, M. 54, 70, 75, 84 Schenk, N. 33, 58, 80 Schnellenbach, J. 105 Schot, J. 110, 130, 137 Schumpeter, J. 102 Schumpeterian Growth Theory 12 Scott, P. 37 second best choices 7 self-determination theory 63 self-interest 45, 99 Self-Report Habit Index (SRHI) 87, 88 Shapiro, C. 35 Shiffrin, R.M. 63 Shove, E. 47, 49, 54, 69, 104 Siero, F.W. 56, 75, 94 Simon, H. 11, 29, 46, 48, 67, 98, 102, 119 Smith, P.K. 64, 86 social comparison theory 56, 75 social identity theory 56, 75 social learning 48, 52–3, 59–60, 67, 72, 108–9 social psychology 60, 61

socio-economic status 89 socio-technical systems (STSs) 13, 15, 16, 47, 49, 50, 79, 120; carbon-based 70–1, 79–80, 93–4, 104; electricity-generating 129, 130, 131; locked-in 18, 19, 102, 103–4 Solow, R.M. 5–6, 12 Sonnino, R. 123, 124 standardisation 38, 40 steam engine 14 Stern Review 23, 99 Stiglitz, J. 27 strategic niche management (SNM) 19, 41, 124, 126, 130 strong reciprocity 3, 10, 27, 99, 142–3 structuralism 21 structuration theory 70 structure and agency 57, 79, 132, 142 subsidies, energy efficiency 20, 23, 90–3 substitutability 6, 28 sustainability: agricultural 24–5, 111–26; Walrasian model of 6 Swan, T. 12 systemic interdependencies 34, 47, 103, 120 tacit knowledge 98, 155n4 techno-institutional complexes (TIC) 35, 47, 103 technological change (TC) 11–16, 18, 30, 31, 97; evolutionary approach of 32–41, 42, 103 technological lock-in 2, 11, 13–15, 18, 24, 34, 35, 36–9, 41, 43, 49, 102–4 technological paradigm 36, 39 technological regimes (TR) 35, 36 technological systems 13, 34–5, 103, 120; path dependency of 35, 47, 49, 120 technology optimism 44 temporal asymmetry problem 21, 67, 74, 133–4 terms of trade, in agricultural sector 118 thought, habits of 52, 53, 59, 61 Townsend, D.J. 77 transactions costs 29, 101 transition 105, 106; in agricultural systems 122–3, 125–6; to low-carbon economy 127–36; stages 130 transitivity 140 Triandis, H.C. 50 Turvey, R. 105 Tversky, A. 48, 54, 67, 70, 83 United Kingdom (UK), agricultural system 121–2, 123

190   Index Unruh, G.C. 34, 37, 40, 49, 71, 103, 120 van den Bergh, J.C.J.M. 2, 4, 7, 10, 97, 105, 110, 127 van der Vleuten, E. 130, 142 van Vuuren, D.P. 103 Varilek, M. 31 VCRs 37, 38 Veblen, T. 2, 15–16, 32, 37, 60, 71, 101, 102, 103, 120, 138, 140; cumulative causation 15, 46, 58, 120; on habits 43, 50, 51, 52, 54, 59, 61, 69, 95 Verplanken, B. 76, 90, 108; on habits 51, 53, 60, 61, 67–8, 86, 87, 133 (automaticity features 54, 64; counterintentional 50; cues 55, 60, 74) VHS 36 Vrba, E. 10

Waibel, H. 121 Waller, W.T. 52 Walrasian theory 6 Wang, Z. 72 Weitzman, M.L. 100 welfare economics 5–6, 27–8 Whitehead, A.N. 63 Wilhite, H. 106 wind energy 41–2, 130 Windrum, P. 122 Winter, S. 5, 12–13, 17, 30, 32, 102, 104, 119 Witt, U. 11, 32, 136 Wood, W. 22, 50, 55, 60, 62, 64, 66, 68, 73, 74, 76, 77, 90, 108 Yildizoglu, M. 39