The Prius Effect : Conspicuous Conservation

Dec 5, 2011

By Ken Blanchard

In 2007 Al Gore III, son of climate change crusader Al Gore Jr., was pulled over for driving his Toyota Prius a hundred miles an hour. I was deeply shocked. A Prius can go 100 miles an hour? 

I doubt that the Prius will ever be the getaway car of choice but clearly someone is buying them. In 2010 Toyota’s green gem controlled more than half the market for hybrid automobiles, according to the U.S. Department of Energy. In their paper “Conspicuous Conservation,” economists Steven and Alison Sexton explain why. The Prius is disproportionately popular in “green locales,” where environmentalism is a very strong cultural force. In such places, it is important not only to be green but to look green, if you want to keep your customers and friends.

The Prius is, by all accounts, a comfortable, well built car. So are the hybrid versions of the Camry and the Honda Civic, but the Prius roars past them in the market place. What the Prius has that the other cars do not is something economists call signaling. Hybrid Camrys and Civics look pretty much like their non-hybrid versions, but a Prius is a Prius a mile away. Because it doesn’t look like anything else, everyone who sees you driving one knows that you are part of the solution, not part of the problem. 

Signaling has been understood by economists for a long time. When someone buys and sports something very expensive precisely in order to advertize their status and wealth, that’s called conspicuous consumption. When they buy a Prius to publically signal their environmental bona fides, the Sextons call that conspicuous conservation. 

Buying something in part for its signaling effect doesn’t mean that you don’t genuinely care about the issue. I’m sure the guy behind the wheel of a Prius probably does care more about global warming than the guy sitting high in a Humvee. Signaling does, however, introduce distortions into the market. 

Alison Sexton says in many cases solar panels are installed on the wrong side of a house. That happens when the side that gets less sun is also the side most visible from the street. If you have to choose between really saving energy and making a statement about yourself, the statement may come first. 

The solar panel market in California is heavily concentrated in the Bay Area, just the kind of place that voted heavily for Al Gore. That is not, however, where the sun is concentrated. Solar panels would be more productive in the sunnier stretches of California. Unfortunately, the folks living out there are least likely to install them. The Freakonomics web site has suggested that, if Bay Area folks really care about the environment, they would buy solar panels for Republicans in Bakersfield. 

There is a cheaper solution than a Prius. For about five bucks you can buy a metal tag reading Hybrid and slap it on your gas guzzler. Might as well bite the bullet and attach it to a twelve cylinder Ferrari. The cops will never catch up with that. 

Dr. Ken Blanchard is a professor of Political Science at Northern State University and writes for the Aberdeen American News and the blog South Dakota Politics.