Economics blog

Energy saving tips from the Government - effective Government intervention

Proposing Government intervention strategies for dealing with externality market failure is a common enough exam question.  Many of my students will concentrate on the use of indirect taxation, subsidies, pollution permits or regulation as a method of reducing consumption - often forgetting that the Government can use good, old-fashioned advice as a way of altering purchasing patterns.

This article from the Telegraph highlights advice from a Government science adviser (Professor David Mackay) suggesting that households should increase the repair of faulty appliances rather than just buying new fridges, washing machines, dryers and dishwashers. In this way, he suggests, we can reduce the waste of resources and the pollution that comes from the disposal of old appliances. The article, however, gives two conflicting arguments from MPs on the relative merits of the proposal. One MP agrees, quoting the huge unnecessary volume of waste created each day in the UK. Another suggests that the frequent replacement of appliances brings a new raft of more energy-efficient products into households and thus reducing long-term energy use.

When presenting this article, I would be asking my students "what is the likely impact of recommendations made by Government advisers?", "what are the knock-on effects of reduced consumption of household appliances to their respective markets and the economy as a whole?" and "why are consumers currently less willing to repair their appliances?".

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