Rational ignorance and sustainability

“Infinite growth of material consumption in a finite world is an impossibility,” E F Schumacher once said. Sustainable consumption has been the talk of the town in the intellectual state of policy freaks.

However, economics, business and marketing scholars fail to understand the ideal policy to hit the right chord while framing, implementing and managing sustainable consumption. Consumption over the years has been seen as a subjective ideology, and placing an everyday priority in mind feels like an impossible task.

“Wise consumption is much more complicated than wise production,” said Leo Tolstoy. Mapping consumption is a hard task but not impossible. Economics and Behavioural Economics have taken the lead in this regard. While marketing sustainable goods, the concept of Nudge is used a lot. A forgotten concept in the field of Behavioural Economics is the concept of Rational Ignorance.

Basic microeconomics predicts that individuals acquire information until the expected marginal benefits equal the expected marginal costs. Beyond that point, acquiring information becomes selfishly counterproductive; while you will avoid more mistakes, it is cheaper to commit them.

Rational ignorance defined

Simply put, rational ignorance occurs when the cost of educating oneself is higher than the potential benefit of knowing it. One example is voting behaviour. As the potential personal reward from the work is likely to be less than the expense of it, voters frequently have minimal incentive to learn about candidates or parties.

Sustainable consumption has gained immense attention in academia over the last few years but hasn’t yet been present in consumption choices or household decisions. As consumers, while shopping, through Grannovetter’s theory of social embeddedness, we make choices based on what we translate from our social networks. The problem motivating people to move for sustainable consumption is not the nudge or the positive reinforcement but rather the lack of information acquisition or what is theoretically termed rational ignorance. 

The first efforts to deal with sustainable consumption and public policy targeted production and supply chains to produce and implement more sustainable manufacturing means. However, the policy has shifted from production to consumption over the last few years. Public policy uses mainly three different means of intervention: regulatory, which includes bans; economic interventions, which include taxes and subsidies and informative, which includes labels and certifications. Even though the former two are pretty effective, the latter fails due to rational ignorance. 

What more can we do?

This underlines the need for a parallel policy intervention along with the information, which brings us to one of the reasons why we put more time into comparative shopping for big-ticket items like cars and home appliances than for fruits and vegetables. Policies should focus mainly on providing sustainable options in big-ticket items such as houses with rainwater harvesting solar panels or even electric cars rather than smaller sustainable items such as LED bulbs or recyclable cups, which consumers pay little attention to.

In collaboration with the UN Environment Program (UNEP), the Government eMarketplace encourages sustainable public procurement (SPP) of goods and services. Since the portal Green Room Air Conditioners (RAC) launched in June 2021, it has worked to encourage consumers to adopt ecologically friendly goods and services.

A typical product category on GeM is writing and printing paper, an uncoated paper made from hardwood pulp and used to create textbooks and notebooks. To help government purchasers find solar-powered renewable items such as inverters, streetlights, torch lights, study lamps, water heating systems, and battery-powered e-rickshaws for passengers, GeM has developed marketplace filters.

(The writer is a student at the Indian Institute of Foreign Trade, Delhi)