Climate change is sometimes described as the "world's most perfect problem," due to its unique combination of being long-term, uncertain, irreversible, and global. That makes it hard for any of us, including policy makers and businesses, to act.
Professor Gernot Wagner, a climate economist at Columbia Business School, as well as Kiel University Professor Till Requate and Bard College Berlin Professor Israel Waichman, co-edited a special issue of npj Climate Action focused on behavioral economics. Their editorial introducing the issue unpacks this conundrum, moving beyond standard economic models to explore how behavioral science can explain our lack of progress and facilitate more effective future interventions.
In a Q&A, Wagner breaks down how we can move from individual competition to collective cooperation, overcoming the cognitive limitations and "tragedies of the horizon" that currently hinder our path to a more sustainable future.
Columbia Business School: How can the science of how people behave help us solve the problem of climate change?
Gernot Wagner: Climate change is the world's most perfect problem because it is more long-term, uncertain, irreversible, and global than any other policy challenge. Behavioral economics is the science and art of coaxing people into doing what may actually be in their rational self-interest, even when feelings and other behavioral impulses pull them in a different direction. With eight billion of us who are not always fully rational, this science provides a lens to evaluate how hard and soft interventions can facilitate the effective future actions needed to address the climate threat.
CBS: We often think people act logically, but we usually take mental shortcuts. Is this "mental gap" what makes it so hard for us to take action?
Wagner: Yes, the fact that we are not always fully rational compounds the difficulty. Or perhaps better: It may be perfectly ‘rational’ for us to choose not to include every single known consequence in our every decision. We’d drive ourselves crazy, if we did. Mental shortcuts are there for a reason. That’s why choice architecture matters. We all take these mental shortcuts, and behavioral economics seeks to understand them and the social contexts that influence our choices.
CBS: What are the "positive tipping points" you refer to in your work?
Wagner: There are plenty of negative tipping points – the ones that make the climate problem even worse. So it’s good to see positive ones as well, the moment when a technology, like solar panels or heat pumps, becomes such a "no-brainer" that there is simply nothing left to debate because it is both cheaper and better than the alternative. Unlike commodities like coal and gas, climate technologies only get better and cheaper over time, and we are currently at an inflection point where underlying economic forces are pushing us toward these positive socio-economic shifts.
CBS: Do people find it easier to go green if the eco-friendly choice is simply the default option they are given?
Wagner: Yes, people are significantly more adaptable to green changes when they are presented as the default. This is the core idea behind a behavioral "nudge". The same logic that encourages healthier eating without taking away individual choice by placing the salad before the fries in a cafeteria applies to, for instance, pre-setting thermostats to energy-efficient temperatures. While these interventions are powerful, they have very real limitations unless they are used to move us toward broader systemic changes.
CBS: At what point do we need to move past behavioral nudges and into harder policies?
Wagner: Nudges eventually hit a wall. While we should use them to make things like biking easier or eating healthy more likely, of course it takes policy to guide the big societal changes needed. The key question to me is whether the small behavioral nudges lead to these policy changes, or whether they may be a distraction. It clearly can’t be either-or but instead needs to be yes-and.
CBS: How do small personal choices lead to the big, global changes we really need to tackle the climate crisis?
Wagner: The goal is to ensure that small steps act as a foot in the door that leads to more significant action, rather than creating a warm glow effect where a small deed makes someone feel the problem is solved and prevents them from supporting broader policy. There’s a happy balance between competition and cooperation. Ultimately, the name of the game is to find ways where individual actions complement collective action to motivate changes that are commensurate with what the latest science and economics demand.
