Let’s analyze your perception of the future: How do you think our planet would be affected by climate change? Would it become a place of chaos and desolation? Or one of innovation and hope? Surprisingly, the reality of desolation or hope will depend not only on our actions, but also on our expectations.
Welcome to the exciting world of behavioral economics, where expectations and psychology are as important as data and economic models. Research in this field has found that the way we think about the future could have an effect on our response to present problems and vice versa.
Self-Fulfilling Prophecies
For example, in 1986, Margaret Bray and Nathan Savin developed a model through which they determined that people’s expectations can become self-fulfilling prophecies. Their model highlights how expectations can create feedback loops that shape reality and reinforce the same expectations. Put simply, if we expect a certain outcome, such as a climate disaster, then our actions, influenced by those expectations, will make it more likely to occur. It’s as if our expectations have some kind of magical power to shape reality. This is serious because if corporations and individuals expect the effects of climate change to be irremediable, then they will act in ways that could worsen the problem, such as divesting in mitigation actions due to the influence of defeatist thinking. In other words, we can be trapped by a pattern of pessimism that would lead us to the climate disaster we feared so much from the beginning. But Bray and Savin not only found that pessimism is the engine of a vicious cycle that fuels negative outcomes, but also that such pessimism could persist even in the face of contrary evidence, as strongly held expectations can be very slow to update. They demonstrated that understanding reality can be an extremely slow process when our expectations are so powerful that they can influence reality. In a system as complex as the global climate, this inertia in our thinking can be disastrous.
Updating Expectations
On the other hand, George Evans (2021) addresses from a fascinating perspective how we form and update our expectations in a constantly changing world. Unlike Bray and Savin, who focus on self-fulfilling expectations, Evans focuses on the learning process and how it can be slow, especially for long-term challenges like climate change. Specifically, Evans points out that many of the most pressing challenges we face, including climate change, unfold on much longer time scales than typical economic cycles. Instead of months or years, we’re talking about decades and even centuries. Furthermore, the magnitudes of the changes involved are often enormous. In this context, Evans questions the common assumption in traditional economic models that we can accurately predict the future. Instead, he proposes a more realistic view: we gradually update our expectations as we face new information. This process can be seen as a trial-and-error method, where we continually learn about the world based on our experiences. The key, according to Evans, is that the speed of this learning process is uncertain and can be quite slow, which in turn affects the effectiveness of our actions and policies.
The key conclusion of Evans’ approach is that even carefully designed policies could be less effective than expected if people are slow in their learning and, therefore, in adjusting their expectations and adapting their behaviors. A concrete example that illustrates this idea is the following: imagine that the government introduces a carbon tax to incentivize a transition to cleaner energy. In an ideal world, everyone would immediately incorporate this new price into their decisions, accelerating that transition. But, in reality, many people might see the tax as a temporary inconvenience rather than a lasting change. As a result, they would respond more slowly, postponing investments in green technologies or looking for ways to avoid the tax rather than changing their behavior. Consequently, Evans suggests that this discrepancy between expectations and reality can significantly hinder the effectiveness of policies. If people are slow to recognize and act on new incentives, progress toward policy goals would advance at a painfully slow pace. This finding has profound implications for governments, suggesting that designing effective policies involves not only setting the right incentives, but also actively shaping public expectations to drive rapid and lasting behavior change.
Inertia of Expectations?
Similarly, it is worth highlighting a study published in April of this year by researchers Lawrence Christiano, Martin S. Eichenbaum, and Benjamin K. Johannsen that analyzes the factors that determine the speed at which we learn and adapt our expectations. Using mathematical models, they show that this speed depends on how strongly our expectations shape actual outcomes. In other words, the more our beliefs influence what actually happens, the slower we will be to adjust these beliefs when new information appears that challenges them. It’s as if expectations have their own inertia, making them resistant to change even when data and evidence suggest they should be adjusted. This rigidity could have profound and alarming consequences in the context of climate change. Imagine a society that lives under the belief that the problem of climate change is too vast, complex, and costly to be significantly affected by human action. This belief could perpetuate decisions and behaviors that only worsen the climate crisis, leading to catastrophic outcomes. However, the work of Christiano and his colleagues is not completely pessimistic, but also offers a glimmer of hope: if we can identify the key factors that influence the learning speed of individuals, it is possible to design climate policies and communication strategies that accelerate the alignment of collective expectations with the reality of the climate crisis, allowing us to overcome the inertia derived from those expectations and creating a faster path towards effective action.
What does all this mean for governments and society as a whole?
Perhaps what should be highlighted the most is that it is dangerous to rely on models or predictions that ignore the power of expectations. These would be completely wrong about how quickly policies could work, distorting expectations and, therefore, injecting pessimism into society. Recognizing these limitations is crucial. However, I believe that the deepest lesson is the vital importance of narratives and communication in climate policy. If expectations can perpetuate themselves, then actively cultivating expectations that are congruent with an achievable zero-carbon future through a gradual process of improvement with small but continuous triumphs should be a priority. This will require a new communication strategy, containing clear, short-term, convincing and realistic messages about the direction and possible effectiveness of policies, backed by credible actions. It will also involve setting aside apocalyptic narratives and replacing them with those that emphasize our ability to create a better future.
In the end, changing the expectations of an entire society is a monumental challenge and requires a coordinated effort from governments, businesses, media, and citizens as a whole. But as the climate crisis worsens, we cannot afford to ignore the immense power behind our expectations. By leveraging ideas from behavioral economics, we can design new strategies for desperately needed progress. Therefore, forging expectations of a better future could turn out to be one of the most powerful tools.
So, the next time you think about climate change, remember: the battle is not only fought in the physical world, but also on the vast frontier of the collective imagination. And with the right tools, that is a battle we can all help win. For this reason, it is worth asking ourselves: what story do we want to tell? What future do we want to believe in and, therefore, create? Because in the fight against climate change, unleashing the power of belief in our ability to make a difference can be the first and most important step in creating it.
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