While teaching the concept of externalities, which is a term economists use to describe effects not captured by market price—for example, pollution—in my high school economics class at Shady Side Academy, an Independent School in Pittsburgh, PA, the students began discussing why some of them had water in disposable plastic bottles they had just bought at the school cafeteria, when a water fountain was readily available right outside the classroom door and reusable bottles are so readily available and relatively easy to carry around. A 16 ounces bottle costs $1.50 at the cafeteria and to buy it a student must walk across a courtyard.
We read some articles of the negative environmental effects when plastic bottles end up in landfills or are discarded in the environment and end up in the sea. We looked at pictures of the Ocean Garbage Patches and discover that, according to NOAA, there are no scientifically reliable estimates for the size and mass of the patches and the consequences for marine life are unknown. That seems like a perfect example of a product which price most probably does not fully incorporate the external, negative effects of its consumption.
In the presence of negative external effects, economic theory suggests that the price is lower that it should be, and consumption that it would if the price incorporated all the costs. I try to teach my students that what really matter in economics is how people actually behave –not how they say in a survey they would behave- when faced with a decision. With these ideas in mind, and having explored behavioral approaches, we designed a project to explore ways to reduce the consumption of disposable plastic water bottles at school. Like any good scientific experiment we needed to change one variable at the time, measure the changes and compare them to the control group, in our case the normal average bottle consumption.
The school administration and Metz Culinary Management, the company that runs the school food services, where eager to help us and this experiment could not have been performed without their help. Like many institutions, the school has a strong commitment to a cleaner environment, but also sees disposable plastic bottles as a source of revenue. Being an independent school, it is funded by tuition and other sources of revenue, including selling food to its students and losing one revenue stream means that it has to be compensated somewhere else.
We decided to run the experiment during the winter months, so that weather would not be a factor, as the number of bottles sold is greater in the fall and late spring. The price was raised by 40%, from $1.50 to $2.50 for a week. The table below shows the results:
For such a big price increase, the reduction in sales was not very meaningful. Extrapolating from the data, a much greater price increase would be necessary to achieve significant results.
To understand the result it is important to spend a few words describing the school and its student population. Shady Side Academy, a private institution located in Fox Chapel, PA, with a student population of 505 students for the 2015-16 academic year, the year the study was conducted. Fox Chapel is located in one of the most affluent zip codes in America. This characteristic is reflected through the average household income for the area of USD $175,122, which is approximately three times the national average household income, USD $51,939. With a yearly tuition of approximately $28,000, even students of families that do not reside in the area share a similar economic background. It is probable that income levels and the fact that students do not pay directly in cash, but that expenses are charged to student accounts explain the strong insensitivity to a change in price.
The second week we decided to wage an information campaign about the negative effects of plastic. We made signs and announcements at school assemblies and the price was brought back to the original $1.50. That week the school sold 335 bottles. Information alone seemed to have a lesser effect than price change. Most students are already aware of the impact that plastic has on the environment, and with recycling bins readily available for disposal, it is possible that students do not feel they are negatively impacting the environment.
The third week we purchased 100 reusable plastic bottles with a logo we designed and in the school colors to invite students to carry them around and refill. They were sold in the school cafeteria at the same price as a disposable bottle. One had just to walk to the side, fill it up with water, and carry it around to be refilled at one of the several fountains available.
That week the school sold 280 bottles, in what it might look as a relatively successful decrease. All the reusable bottles were sold in just few days, but as the graph below shows, after an initial dip, sales of disposable bottles picked up quickly and reverted to usual values.
After a few days, we began noticing the reusable bottles abandoned around the school. If one assumes that, in time, all the reusable bottles end up in a trash can like the disposable ones, the amount of plastic sold that week was actually greater.
The fourth week of the experiment we decided to set up a donation box next to the refrigerator where the disposable bottles are sold. A big sign invited students to donate the amount a student was going spend on water to the local food bank and just use the water fountain. As in the other cases, the results were negligible.
Our study is not new. In fact, Washington University and Muhlenberg College have completely eliminated the sale of plastic water bottles. Before making that drastic decision, they have attempted to reduce consumption using the same techniques we tried. But they realized that the only effective way to do it is simply to ban plastic bottles while presenting alternatives.
It was an important lesson for the students, who now have a better understanding of human behavior and how preserving the environment is a hard, but winnable fight as long as society makes it a priority and institutes the right policies.
Guido Giuntini teaches Senior School Economics at Shady Side Academy in Pittsburgh, PA. Students who helped with the experiment include: Gray Garrard, Annika Dhawan, Sharon Savarirayan, Chris Caputo, Tanay Kumta, Luke Pellegrini.