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AREAS OF CONTRIBUTION OF THE BEHAVIORAL AND SOCIAL SCIENCES TO ENERGY POLICY The Committee on Behavioral and Social Aspects of Energy Consumption and Production has identified a set of overlapping areas in which the behavioral and social sciences, in particular the noneconomic disciplines, may make contributions to energy policy and analysis. From within this set, it has chosen three topics to consider in detail during its second year of operation. This section of the report presents the initial list and the topics as defined for consideration in the second year. POSSIBLE AREAS OF CONTRIBUTION Thirteen topics were initially identified by the committee. Although this list is not meant to exhaust the possibilities, it does suggest a wide range of potential contributions. Consumer Response to Incentives Recently, economic incentives regarding energy use have changed in several ways: prices have risen, tax advantages have been offered for investments in energy efficiency, and a number of programs based on loans and free assistance have been tried, with limited success. The response of energy consumers to price and income incentives can be expressed in terms of elasticity of demand, but this term begs the important cognitive and behavioral questions about how consumer response is determined. That is, consumer response is influenced by many variables in addition to those that generally enter economic analyses of elasticity. Energy users respond to 5

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6 a range of variables that may be considered as "internal" to the consumer, including attitudes, beliefs, uncertainty about personal futures, modes of information processing, interpersonal influences, and personal norms. Analysis of the effects of these variables may help to explain some of the variation in response left unexplained in economic analyses. This analysis might address such questions as: What decision processes do consumers actually use when making energy investments? How do these processes vary in different segments of the consumer population? How do noneconomic factors such as personal norms, social values, and social imitation influence consumer responses to incentives in the energy system? What alternative models, other than those of implicit discount rate, payback, and the like, are supportable by empirical evidence? Consumer Response to Information Various media disseminate information of possible use by consumers for making energy decisions: mass media, direct mail messages, advertising, government pamphlets, appliance labels, utility bill inserts, outreach programs, word of mouth. Policy makers sometimes seem to assume that consumers have Full information" about their energy options or that the official information made available to consumers is actually processed and is used by them in making energy decisions. The behavioral and social sciences do not make such assumptions. They focus attention on what determines whether consumers who receive information attend to it, understand it, believe it, and use it for action. Thus, there is an extensive literature in social psychology on the role of credibility of the source of information in determining audience response, and there is some knowledge about the sources of credibility. Insight may also be gained from the conception of an information system for energy, one characterized by incomplete, sometimes inaccurate, and always conflicting information. Some knowledge is available about the process and outcome of decisions made in such an uncertain informational environment, and this may be useful for understanding consumer responses . involving energy. at.

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7 Attitudes, Social Interactions, and Energy Consumption Although there is ample evidence that energy consumers respond to changes in price, it is also apparent that a variety of interpersonal and psychological factors act to block or potentiate economic forces. Some of the best documented evidence is about the influence of friends and neighbors and the effects of personal commitment, "self- monitoring" of utility meters, and feedback about energy consumption. In addition, the literatures on diffusion of innovation, cognitive dissonance reduction, and other processes of social influence are applicable more generally to energy consumption issues. These litera- tures are relevant to the issues of consumer response to incentives and information already mentioned. They also point to other influences on energy consumption that may affect the process of future policy initiatives. Energy Use and Social Values Social values about consumption, economic growth, social and geographic mobility, technology, freedom, democracy, and the environment may greatly influence the behavior of energy consumers. For example, research on adoption of a lifestyle of "voluntary simplicity" suggests that such a value may be influential among a possibly sizable portion of the population. Furthermore, the portrayal by media or government sources of energy conservation as sacrifice, efficiency, or emergency preparedness may affect consumer behavior by making certain values salient. Some empirical questions are suggested: Who are the energy-conscious consumers? How did they get that way? To what extent may different types of energy-using behaviors be influenced by particular values, or appeals to them? Energy Conservation in Rented Buildings Economic signals tend to be ineffective when one party benefits from another's investment in energy efficiency-- as when tenants pay heating and cooling bills--or has no incentive to protect that investment--when landlords pay bills. Still, where conservation has a net benefit, it is possible in principle for landlords and tenants to share it. Some plans for sharing the costs and benefits of energy efficiency have been developed, but only a few

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8 have been studied empirically, and only to a limited extent. There is some potentially relevant knowledge from literatures on game theory and strategic interaction and on negotiation processes, but it teas not yet been applied to the question of rented buildings. These literatures may suggest new approaches to the problem. It is possible to design field experiments to study these approaches in detail and to assess the potential for encouraging investment in energy efficiency in rented buildings. Energy Conservation by Organizational Consumers There is evidence that industrial consumers beve done much to decrease energy use per unit of output, but these adjustments are not evenly distributed, even within the same industry. Factors other than the economic costs and benefits of energy systems are probably at work. But so far, very little effort has been made to explain why some firms institute conservation programs while similar ones do not or why some firms are more successful than others in implementing conservation programs. In the commercial sector, energy conservation seems to have been less generally successful. There, conservation takes place primarily in a widely diverse stock of buildings, and problems concerning the interests of landlords and tenants are especially troublesome. While there has been only limited research on the organizational processes influencing energy use and conservation in the industrial and commercial sectors, a number of concepts from the literature of organizational behavior can be applied: e.g., organizational slack, institutionalization of functions, diffusion of innovation among managers, incremental decision making. The outcome of conservation efforts may depend not only on organizational aspects of the programs themselves but also on whether they are especially restricted to capital investment or involve substantial changes in individual behavior. Distributional Implications of Energy Policies In the U.S. energy system, resources tend to be allocated by price. This has the advantage of allowing individuals to make personal decisions reflecting personal tastes. It teas the disadvantage of making energy allocations

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9 For this reason, dependent on the distribution of income. policies emphasizing further price increases for energy are frequently criticized as inequitable. Such criticism raises several empirical questions: What are the direct and indirect effects on the welfare of various income groups of policies that raise energy prices? How do people at different income levels in different regions cope with the energy situation? What is the potential for socially disruptive behavior as one response to perceived inequity? How effective are various policies designed to mitigate economic hardships resulting from rising energy prices? Information is becoming available . on some of these questions. Major Changes in the Economy Structural changes are taking place within the American economy that may have important implications for energy consumption and the availability of capital for alterna- tive uses. These changes include the growth of the service, retail trade, and state sectors, in contrast to the industrial sector; changes in the mix of consumer products toward less energy-intensive ones; changes in the rate of replacement of industrial and building stocks; shifts in the geographic location of production and investment to the sunbelt; and persistent, high inflation. These forces in turn interact with and condition demographic effects, such as settlement patterns, changes in household size, changing proportions of adults in the work force, and the emergence of the dual-career household, with its greater disposable income and different spending patterns. How will these major changes in economy and society affect energy production and consumption? Organization of Production and Investment Control of production and investment in goods and services in the U.S. economy by the private sector, by large corporations in particular, may have important implica- tions for energy consumption. For example: (1) Producers of energy-using consumer goods may respond to high energy prices not only by producing energy-efficient goods for the market, but alternatively by attempting with adver- tising or political activity to maintain demand for their

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10 relatively inefficient products. What determines the nature of the producers' response? (2) Considerations of mass marketing may favor providing energy services with technologies that use standardized fuels and can be mass produced (e.g., furnaces) rather than with decentralized energy technologies that are most efficient when custom designed for the site (e.g., passive solar space conditioning). (3) Financial resources tend to become concentrated in actors who lack commitment to particular localities, making it more difficult for local groups to implement solutions to localized energy problems. Examinations of such indirect but potentially major influences on energy consumption may increase under- standing of the outcomes of energy policy options. Local Energy Initiatives and Responses With a decreased federal commitment to meeting energy needs with programs of energy assistance, home weather- ization, and the like, the activities of local government, community, and trade groups take on increased signifi- cance. Many such groups have already become involved in energy activities, but careful studies of these projects have not yet been done. The limited research on local energy activities and the extensive literature on local actions not involving energy can be used to address a number of important questions, suab as: Is it likely that enough localities will get involved in energy issues to make a difference on a national scale? Are local groups likely to develop new energy systems that make optimal use of local resources, or are they more likely simply to copy what other localities have done, with minor adaptations? Will local government or community groups distribute resources more or less equitably than resources have been distributed in the past? Will local consumers be more or less satisfied with the energy system with increased control by local groups? What are the strengths and weaknesses of various institutional arrangements for solving local energy problems? Response to an Energy Emergency It would be valuable to have a good understanding of the likely behavior of individuals, communities, and organizations in a major energy emergency. But a new

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11 situation could be different in important ways from the typical emergency situations--floods, earthquakes, wars, and so forth--experienced in the past. For example, large segments of the public might deny the existence of a cereals crisis even when it is at its worst. Some literatures in the social and behavioral sciences are relevant, however. We have extensive knowledge of social responses to past emergencies, including natural disasters, technologically related disasters, wartime mobilizations, and small-scale energy emergencies, and generalizations can be drawn from this knowledge. While it is questionable how well such generalizations would apply to a major new energy emergency, some judgments can be offered on the bases of two kinds of analysis: a classification of major foreseeable energy emergencies according to categories that influence the likely types of social response, and an analysis of the similarities and differences between foreseeable energy emergencies and the emergency situations of past experience. Such analyses may provide insight into the implications of various approaches to the problems of preparation for and response to energy emergencies. Consumer Options in an Energy Crisis Current policies affect the ability of consumers to respond quickly and effectively to a future oil shortage. They affect the availability of options such as mass transit, the financial status of consumers who may be faced with fuel rationing by price, and present conserva- tion efforts that will affect consumers' ability to withstand future shortages. The last category includes investments in fuel-efficient household equipment that may make a given amount of fuel last longer, and adiust- ments in ambient temperature that will leave less room for adaptation in a crisis. Some data are available on what consumers at different income levels have been doing so far in response to the energy situation, and these may be analyzed to yield information in which consumers have "slack" remaining to use in an emergency. Probably the best of this information is in consumer surveys of the Energy Information Administration (EIA), which have not yet been analyzed for their implications for emergency response. In addition, it is possible to use approaches based on game theory to analyze the conditions under which consumers have an interest in stockpiling or making other

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12 preparations, both in the absence of a crisis and during the warning period before a shortage hits. This approach may give further insight into the process of adjustment in an energy crisis. Administration of Scarcity In an emergency such as a major oil shortage, supplies may be allocated directly by government or indirectly, as in rationing by price. The social and political implica- tions of these alternatives, especially those involving price rationing, have not been studied, although guess- work has been published (e.g., Bezdek and Taylor, 1981). Experience with the politics and administration of past emergency relief and income transfer programs might be examined to suggest conclusions or identify potential problems regarding the effectiveness, efficiency, and equity of different systems for controlling demand in an energy emergency. TOPICS SELECTED FOR DETAILED STUDY BY THE COMMITTEE After considering the areas of potential contribution by the behavioral and social sciences and the issues likely to be of the greatest relevance to policy in the next few years, the committee defined three topics for its immedi- ate consideration: the behavior of energy consumers, local actions to provide energy services, and preparation of and response to energy emergencies. These topics cut across most of the areas originally identified by the committee, yet they do not deal at all with some of those issues. The three topics are described below, with the rationale for the selection of each. The Behavior of Energy Consumers Federal energy policy has always emphasized the market character of the U.S. energy system, and this emphasis is particularly pronounced in the present administration's approach to energy demand. The federal role is, according to present policy, to be restricted primarily to the development of high-risk production technologies unlikely to be developed by the private sector without federal assistance. Direct federal influence on energy demand is

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13 to be minimized, on the assumption that energy consumers will make economically rational decisions about providing energy services for themselves. Since present policy relies so heavily on a market model of the behavior of energy consumers, and since this policy represents a clear departure from that of past administrations, it is particularly timely to examine the factors influencing the behavior of energy consumers. In this examination the committee intends to look broadly at these influences, minimizing assumptions about which ones may be paramount. Such a broadly based examination of the energy consumer may identify limitations, or secondary effects, of a greatly increased reliance on market mechanisms for directing energy demand. It may help explain the outcomes of past policies aimed at overcoming imperfections in the energy market. It may also increase the ability of the policy community to project trends in energy demand, particularly by disaggregating demand by segments of energy consumers. The next section of this report presents the committee's work on this topic during the first year. Local Actions to Provide Energy Services A confluence of recent events has brought energy issues to the attention of state and local governments, community groups, and trade associations, in most cases for the first time. This has happened in part because recent shocks to the national energy system have had pronounced local effects: local areas have been affected differently as a function of climatic variation and the particular fuels on which they depend. Higher energy costs have strained municipal budgets at a time when revenue has been limited, and both private individuals and groups organized to help the poor have turned to local agencies for help. In addition, some groups have identified local energy activities with particular economic or environ- mental goals. All these pressures for local action have iEnergy services are the things energy is used for: space heating and cooling, mobility, mechanical work, etc. They may be provided by fuels or electricity, or by improving the energy-efficiency of the technologies that, by using fuels and electricity, provide the services.

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14 come at a time when technological developments in renewable energy and increased knowledge of energy efficiency options gave promise that something could be accomplished at the local level with limited capital. For these reasons, a variety of energy-related activities were begun at the local level during the late 1970s. These have usually focused on such options as weather- ization of the homes of low-income and elderly people, rehabilitation of municipal buildings, and the actual provision of energy from locally available wood, wind, water, and direct solar sources. The recent decrease in federal interest in the demand side of energy and in conservation and solar energy makes it particularly appropriate at this time to examine the possible roles of local actors, who until now have been only minor players on the energy scene. Three types of actors at the local level have become involved in energy issues: municipal governments, nongovernmental public organizations (community and nonprofit groups, both preexisting and ad hoc), and utility and trade groups. Each of these types of actors has its own strengths and organizational problems, and existing research can point to potentials and pitfalls that may accompany their efforts involving energy. For example, researab on community power structures and decision-making processes points to some difficulties that local government is likely to have in becoming seriously involved in energy activities and in developing policies and programs with the full participation of local constituencies. The vast literature on innovation and diffusion processes should provide suggestions about the ways in which energy activities may spread among local areas and about the ability of local groups to adapt imported ideas to local conditions. Research on social movements identifies some factors likely to influence the ability of community energy groups to mobilize political and human resources and to provide sustained services to their constituents. Studies of local administration of educational and human service programs suggest some difficulties likely to face local actors in their attempt to provide energy services. The committee intends to draw on the expertise of social scientists who have worked in areas such as these to identify key issues likely to arise with local approaches to energy problems. It may also be possible to document these issues as they appear in existing energy activities at the local level. This process

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15 should produce some insight about the extent to which local activities around the country may be able to duplicate the results achieved in a few well-publicized successes and thus fill the gap left by declining federal efforts. Preparation and Response in Energy Emergencies There has been increasing concern recently over the possibility of a major energy emergency occurring in the near future (Lewis, 1980; Alm et al., 1981; U.S. Senate, Committee on Energy and Natural Resources, 1980; Bezdek and Taylor, 1981). The concern is heightened by the lack of accepted plans either to prepare for or to mitigate the effects of a crisis and the incomplete knowledge of how and where the effects will be most strongly felt. The concern becomes even greater with the realization that we do not know what sort of emergency might occur. Most writers on the subject have considered disruptions in oil imports, neglecting other plausible types of energy emergencies. But crises might also arise from other sources--to name a few: a rapid increase in military demand for oil in response to an international threat, weather conditions disrupting waterborne shipments of coal, regulatory shutdown of nuclear power plants in response to a major accident. And the seriousness of such crises would depend on other energy-related events: for example, a disruption of oil supply that might not by itself create a crisis may create increased military demand for oil, to magnify the effect of the supply disruption. The concerns of policy analysts about emergency unpreparedness apply most strongly with respect to plausible emergencies that have not been analyzed at all. For this reason the committee has decided to examine not only major oil shortfalls, but also the general problem of energy emergencies as social and behavioral phenomena. We will define dimensions of energy emergencies that may be useful for thinking about emergency planning and response. For example, emergencies vary according to whether they are perceived as caused by acts of God, human forces largely beyond the control of U.S. citizens, or the behavior of U.S. politicians, businesses, or others. They vary according to whether their onset is sudden or there is a warning period, and according to whether their duration is expected to be

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16 short, long, or indefinite. These and other dimensions of the emergency itself have a bearing on the way citizens and organizations prepare and respond. The committee plans to draw on knowledge about social response to past emergencies to clarify, as much as currently possible, the relationships between such dimensions of emergency situations and modes of preparation and response likely in the face of major shortfalls of oil supply or other energy emergencies. The committee's analysis of energy emergencies will clarify the major problems of preparation and response characteristics of various types of energy emergency and of energy emergencies in general. This should aid in analysis of policies under consideration for emergency preparation and response by suggesting the relative strengths and weaknesses of particular policies for particular emergency situations. The committee will also examine some of the possibilities for strategic response inherent in the particularly complex type of emergency situation exemplified by the deliberate interruption of a source of imported oil. In such a scenario the likelihood of the emergency is influenced by the course of emergency preparations, a lengthy warning period allows further preparation before the direct effects of the emergency are felt, and public officials are motivated to convince the domestic audience that the problem is serious and the foreign audience that it is not. These and other prop- erties of the situation have some subtle implications, some of which are discussed in the appendix to this report.