folk quantification

8/7/2019 folk quantification

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FOLK QUANTIFICATION OF EN ERGY?WILLETTKEMPTONand LAURAMONTGOMERY

Family Energy Project . Instit ute for Family and Child Study. College of Human Ecology . Michig an State Universi tyEast Lansing. MI 48824. U.S.A.%

(Receired 21 April 19%)Abstract-Consumers use simplified measurements as a basis for residential energy decisions. We analyzetheir measurements of monthly consumption. changes through time, comparison of appliances, and lengthof payback period. Because of systematic errors in quantification, consumers choose ineffective energyconservation actions, and underestimate the benefits of previous actions. These errors do not result solelyfrom lack of information since they are made even by consumers who understand technical energymeasurement. To explain the persistence of a seemingly disadvantageous system. we show that consumermethods are cognitively efficient. They are easy to learn and use and are compatible with general-purposebudgeting tasks. However, they lead to higher energy use than would be economically optimal for either theindividual or the nation.

INTRODUCTIONAbout one-third of U.S. energy is consumed directly by individuals, in homes andautomobiles., Constimers measure energy using techniques that differ from those of profes-sional energy analysts. We refer to these informal measurement techniques as folkquantification. Folk quantification, as a basis for consumer decisions, is of practical interest dueto its considerable impact on national energy consumption. Folk quantification is also oftheoretical interest to the cognitive sciences, since it illuminates the principles of peopleseveryday reasoning..4 Nevertheless, this topic has, to date, remained virtually unstudied.Consumer energy choices are more difficult than other market decisions, partly becausemultiple residential energy uses are aggregated into one or two utility bills. Imagine a parallelsituation for groceries: a store without prices on individual items, which presented only onetotal bill at the cash register. In such a store, the shopper would have to estimate item price byweight or packaging, by experimenting with different purchasing patterns, or by using consumerbulletins based on average purchases. Although these cost estimation methods seem unbeliev-ably crude for groceries, we show here that such methods are indeed used to estimatehousehold energy use.

ETHNOGRAPHIC METHODSTo study folk quantification, we use ethnographic techniques. These techniques weredeveloped to study foreign cultures, while minimizing the biases of the interviewers own

culture. Although we are from the same culture as our interviewees, we found that our owntechnical energy training made us see issues differently and measure different quantities.From an energy experts perspective, it is tempting to dismiss folk quantification methods asinaccurate or wrong; economic models ignore them by assuming perfect information. But thesefolk methods make sense to their users, are the basis of current market decisions, and will beused by consumers to interpret future energy information and advertising. We use ethnographicmethods because they facilitate an understanding of folk quantification in the terms of its users.Ethnographic methods are fully described elsewhere;5.h we briefly describe our use of themhere. We interviewed families in their homes.0 Our interviews did not use predefined questions;

tThis research was funded by the M.S.U. Agric ultur al Experiment Station, as Project 3152. Thispaper is A.E.S. Journ alArti cle No. 9987.

:Both authors are also affiliated with the Department of Anthropology at Michigan State University. Correspondenceshould be addressed to W. Kempton.lFor our study, a familywas defined as a co-resident group including a least one adult and having a personalcommitment to one another. In interviews, we usually talked with all adults, and included children when possible.

817


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818 W. KEMPTONand L. MONTGOMERYwe kept within energy topics, but allowed the informants to guide much of the specificdiscussion (this is why interviewees are called informants rather than respondents). After theinformant had talked freely for a while, we would ask questions eliciting clarification or moredetail. Careful questioning often revealed that informants were using terms like energyconsumption and energy crisis differently from us.Thirty Michigan families were interviewed in 1980. This modest sample cannot adequatelyrepresent the nation, but it is adequate to illustrate common nontechnical ways of thinkingabout energy. Of the 30 families, 10 were selected because they had adopted particularenergy-saving devices, such as a solar system, wood heat, or bicycles. The remainder wereselected from an earlier probability sample? to span a range of incomes, occupations, andfamily types. Interview data were compared with utility consumption data. We included equalproportions of families who had reduced energy consumption and families who had not.Interviews were taped and transcribed. As is common in ethnographic reports, we illustratemajor points with quotations from our informants. Unless noted otherwise, quotations are usedonly when similar points were made by several informants.

FOLK UNITS OF MEASUREMENTNone of the families we interviewed used the abstract energy units of physics, such asjoules or Btus, and very few used commercial units, such as kilowatt-hours or Ccfs. Here wediscuss folk units, i.e., those units which are familiar to and used by ordinary people. For

example, gallons, dollars, and months are folk units. Folk units are easily visualized, multi-purpose, and appropriately scaled.In this section we show how folk units, especially dollars,.are used to measure monthlyenergy consumption. For comparison with other fuels, we first discuss gasoline, because it iswell quantified in folk units. Its quantity is measured in gallons, its price in dollars per gallon,and its productive output in vehicle miles traveled. Gallons, dollars, and miles are all easilyvisualized and understood. Vehicle efficiency is quantified by a simple ratio of two folk units,miles per gallon. Therefore, consumers measure and compare energy efficiency much moreeasily for automobiles than for houses and other durable consumer goods.None of the other fuels is as well quantified as gasoline. Fuel oil can be measured in gallons,but its productive output (degree-days of heating) does not correspond to any folk unit.Therefore, a gallon of gasoline is more meaningful than a gallon of fuel oil. Still less meaningfulare units of electricity and natural gas, since consumers cannot easily measure either thecommercial units or the work performed.

Gasoline and fuel oil can also be measured in folk units by using time intervals between fills.For example, a man evaluated his home weatherization as follows: before weatherization, theguy was coming twice a month to fill my tank up, whereas now he only fills it up once amonth. These measures refer to the shortest interval of the season, during the coldest months.Time interval measurements successfully control for price increases, but not for variations inweather and delivery scheduling.When we asked informants to compare types of energy, they used dollars. For example, oneinformant, a heating equipment retailer, ranked fuel oil as his main use of energy. We thenasked him whether he meant that he used the most or it cost the most. He replied: Well, Idont know, cause I dont know how you compare the kilowatts with gallons of oil (laugh). So Idont know, ya know, how we could compare something like that, but as far as money wise,yes, I definitely use more oil than I do electricity . . . Dollars provide the only folk measureavailable for comparison of fuels.Like comparisons across fuels, comparisons through time also used the folk measure, billeddollars, For example, a woman trying to convince her husband that their insulation had reducednatural gas consumption said Yeah, but this year we didnt have any $100 gas bills, did we? Imean we used to have $100 gas bills. Like many others, she used peak dollars to compareyearly totals.

tArea probability samples in 1974 and 1976, from the Lansing. Michigan SMSA. reported in Ref. 7. Several low incomecases were added to compensate for attrition since 1976.


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Folk quantification of energy 819Even people who did examine fuel units found them less useful than dollars. One personreported: Id look a! the kilowatt-hours but that doesnt mean an awful lot to me. Another

said she could remember the dollar amount but not the fuel units because youre rememberingthe balance in your checkbook (pause) you know, or how much it hurts to pay the bill. Dollarsare easier to remember because they are meaningful, that is, they relate to other activities andcomputati0ns.tDollars are used not only for measurement, but also for interpretation of national policy. Weasked one family, who had halved their fuel oil use, whether they thought their conservationactions were a way to solve the energy crisis. They replied with an emphatic no, explainingits not gonna solve the problem until the corporations stop raising energy prices. This wasone of several families who apparently had interpreted public statements about the energycrisis in terms of the monthly payment crisis they experience personally.Written energy records were kept by a minority of the families. Only two included fuelunits. Figure 1 is an excerpt from one of these two; the other is discussed in the section oncalculating savings. Figure 1 records natural gas use, which is metered by Ccfs. Such recordsare unusual, and this one is especially thorough because it records Ccfs and dates as well asdollars. Nevertheless, we find a conceptual bias toward dollars even in this case. The biastoward dollars is pervasive; Fig. 1 manifests it in four ways: (1) Dollars are recorded in largerlettering than Ccfs. (2) Dollars, but not Ccfs, are computed into yearly totals and monthlyaverages. (3) The labelled month is when the payment was made, not when the gas wasconsumed. (4) Ccfs are labelled not by name but as Units used.The consequences of totaling and comparing by dollars is demonstrated in Table 1, which

Fig. I. Excerpt from a family energy record. Dollars, Ccfs, and meter read dates are recorded. At thebottom of each column is the summation of annual dollars, and the monthly dollar average. Ccfs were notsummed.

Table I. Our annual summations from the record excerpted in Fig. I. Some dollar totals are slightly different from thoseof Fig. 1due to correction of arithmetic errors. Between 1975and 1977consumption declined IO%,but this fact isobscured by the dollar summations.

tMany people can name fuel units, but do not associate a meaningful quantity with the name. In a study of 43well-educated households in Princeton, few could accurately give the price of a kilowatt-hour of electricity. Answersranged from $0.03 to $5.00, with a median of $0.31. The correct answer was $0.05, but only 16% guessed $0.10 or under(Ref. IO.p. 76).EGY Vol. 7. No I&B


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820 W. KEMPTONand L. MONTGOMERYsums both Ccfs and dollars from the full household record. Gas consumption drops 10%between 1976 and 1977. The drop is obvious in the Ccf summations but invisible in the dollarsummations.The problem we describe here is due to calculation and measurement methods, notignorance or misconception. All of our informants, including the person who kept the recordsof Fig. 1, were keenly aware of the relationship between consumption, unit price, and billedcost. Several informants told us you have to look at the amount, not just the dollars,presumably reciting advice from utility or government publications. However, when theyshowed us their actual calculations, they had in fact used dollars. At best, consumption amountwas considered indirectly, as in the following quotation from a woman marshaling evidence ofher neighbors benefits from insulation: It [the oil bill] was going up so much a year and theyear after they insulated they paid the same amount for oil as they did the year before theyinsulated. She concluded from this evidence that the insulation cut their bill down. Herapproximation successfully identifies a drop in consumption balanced by rising unit prices,without measuring either consumption or unit price directly.

Such methods seem awkward from the viewpoint of the energy analyst. Why not justmeasure consumption directly? Dollar measurements, though inexact, offer advantages inhousehold management. Dollars apply broadly to housing, food, and other expenses; thus, theyallow comparisons across expenditure categories. Further, monthly measures are needed indollars for money management, which requires anticipating expenses repeated in periodicbilling cycles. We further analyze energy measurement in dollars when we discuss paybackcalculations.DISAGGREGATING ENERGY CONSUMPTION

The preceding methods estimate aggregate monthly energy consumption. Families use othermethods to disaggregate the total into individual activities and devices. Disaggregation isperformed both consciously, by deliberate experiments, and unconsciously, through perceptualand cognitive factors. As an example, we compare folk estimates of lighting and water heating.Residential lighting consumes a small proportion of total residential energy, but when askedfor major energy uses, consumers usually mention lighting and most frequently mention it first.By comparison, hot water heating consumes about 7 times the energy of lighting,? but wasmentioned far less frequently. Our ethnographic interviews did not quantify consumer judg-ments, but a 1978 survey of 400 Michigan families did, as summarized in Table 23 When askedWhat things do you know that a family could do to reduce the energy consumption in their

Table 2. Energy-conservation actions suggested most frequently in an open-ended question. Half of the sample wasasked to estimate annual dollar savings of the actions they volunteered; dollar figures average the estimates of thosewho responded. In contrast to the above folk estimates, energy analysts would rank lighting far below hot water inpotential dollar savings. Data from Ref. 9.Folk estimate ofconservation action Percent mentioning annual savings

(N = 400) DOllWS N

Reduce lighting 59 67 48Lower themstat 58 86 63Insulate 27 133 26Use less hot water 12 32 7

tPer capita U.S. residential lighting is 335 net kWh annually, less than one-seventh of per capita water heating at2450kWh. With net annual residential use at 14855per capita, lighting is only 2% of that total. Data from Table 6. Ref. 1.SProbability sample of 400 Michigan households in 1978.Data from Table 2.12, page 2-23 of Ref. 9, augmented by datafrom personal communication. Related data can be found in Ref. IO. pp. 75-84, and in Ref. I I. These data are analyzedmore fully in Ref. 19.


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Folk quantification of energy 821house?, 59% listed lighting reductions while only 12% listed hot water reductions. When askedto estimate the annual dollar savings of each action, the average for lighting was $67, for hotwater $32. Our inference of an overemphasis on lighting is also consistent with an earlier (1976)survey of actions taken: almost twice as many families reported having made lighting reduc-tions as hot water reductions.*Engineering studies have demonstrated several low-cost water changes which do not affectcleaning or convenience and yield savings much greater than lighting management.,4 We willsuggest reasons for the folk overemphasis on lighting, and argue that this overemphasis reducestotal evergy savings. Historical and cognitive reasons explain the emphasis on lighting.Historically, the older adults of today (and the parents of younger adults) grew up whenhouseholds had few electric appliances. Then, lighting consumed most household electricity(initially 100%) and electricity was more expensive (in inflation-adjusted dollars). Therefore,lighting reductions previously did reduce electric bills effectively.Two cognitive factors, in perception and categorization, also explain the overemphasis onlighting. In perception, the output of lighting is more salient than that of other appliances. Incategorization, lighting is a prototype for household electricity uses. We draw the notion ofprototype from cognitive psychology.6 and cognitive anthropology;7.Xthe prototype is onespecific example that is used to represent a broader general category. As evidence that lightingis a prototype for electricity use, we note that informants usually mentioned it first in lists ofelectrical uses, and often used it as a synonym for electricity (as in the light bill).The practical result of these historical and cognitive factors is that attempts to reduceelectricity use will focus first and foremost on lighting.? These actions have limited potential. Ifresidential lighting were reduced by a third, the average family would only realize a $1.53reduction in their monthly bill.+ By comparison, simple and inexpensive hot water efficiencyimprovements would save $I 1.00 monthly for electric water heating or $4.80 monthly for gas.5

Families reduce lighting predominantly through management. Unlike equipment improve-ments, management requires no cash investment cost. However, it can have high costs inattention and discipline. In one example which was typical, a man wondered aloud whether itwas worthwhile having to yell at my kids and tell them to turn that light off . Further, the smallpotential savings mean that even diligent lighting managers are unlikely to notice any change inmonthly bills, and may conclude that energy conservation efforts are futile.Besides lighting, energy use of other appliances is also estimated by nonenergy factors. Forexample, running time is used as evidence of high energy consumption. This would be correctonly if differing power load were considered. Another factor which we hypothesize, based onlimited data, is that a machines energy use is estimated by the quantity of human labor itreplaces. We advance this hypothesis to explain why appliances such as mixers and dish-washers were mentioned more frequently than other, more energy-intensive ones. This factor isespecially perverse because it leads families to give up precisely the devices which save themost labor.

Some families performed deliberate experiments to disaggregate energy uses. Typically,they would change an appliance or behavior and look for a change in the next utility bill. Inmost cases, the energy was too small to distinguish from other monthly fluctuations. Forexample, one family tried to watch less television, and another turned off their electric rangeelements a few minutes before cooking was complete. Both expressed surprise and frustrationat the lack of change in their bills; the people who turned their range off early concluded Whatthe heck is the use of saving? You know, why try to save when it dont do any good?

Another problem with these experiments is that they measure dollars billed rather thanenergy units. In another unsuccessful experiment, one family noted that their electric bill went+This problem occurs at the program level as well as the individual level. For example, many energy conservation

programs have used a light bulb as a symbol or have used slogans like Turn out that light! The prototypicality of lightingmakes it a good symbol, likely to be chosen by advertising staff not acquainted with energy measurements. Such effortshave perpetuated the overemphasis on lighting.

$The monthly $1.53 estimate is based on one-third of 1100 kWh, annually per househol d (Ref. IO, p. MO), pric ed atSO.O5/kWh,. Note that this argument does not apply to lighting in the commercial and industrial sectors, w here potentialsavings are large.

IHot water improvements are estimated provide annual savings of 2606 kWh, or 144 therms, which we price at%O.OS/kWh, and $04O/therm. Comparable estimates are obtained from Ref. 14.


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822 W. KEMPTONand L. MONTGOMERYup after a plumber raised the hot water temperature. They had him turn the temperature backdown, but reported: That didnt help any. Their measurements combined price increases,water consumption changes, and changes in use of other appliances. We would interpret this asan experiment with too many uncontrolled variables, but the family presented it to us as furtherevidence for the futility of trying to save energy.

MEASURING FINANCIAL SAVINGS FROM CONSERVATIONSince families quantify energy primarily in dollars, they compute financial savings differen-tly from a business analyst. An analyst first would compute units of fuel saved, then wouldmultiply by the marginal price per unit of fuel. Families use a simpler calculation of savings:previous costs minus current costs. The two methods are compared algebraically as follows.For year y, we write energy consumed as E,, price per unit as P,, and cost as C,. For anefficiency improvement made at the end of the year 0. the savings in year 1, S,, is computed as

S, = PdE,,- E,), expert method; (1)s; = co-c,, folk method. (1)

Since cost is the product of price and quantity, we can compare Eqs. (I) and (1) by rewritingthem as

S, = P,E,- PIE,, expert method; (2)S; = P,Eo - P,E,, folk method. (2)

This expansion clarifies the relationship between the two methods. With constant energy prices,they yield equal results. Rising prices cause the folk method to underestimate savings.From yearly dollar savings, the payback period can be calculated in order to evaluate anenergy investment. An investment, I, has a payback period of n years when the savings haverepaid the initial investment; thus,I = s, + s, + * 1 t s,,. (3)

Although simple payback is an imperfect evaluation instrument, it is ideal for the presentanalysis because it is one of the few evaluations used both by energy experts and by families.Families who made major efficiency investments were more likely to compute their savings.A few computed payback explicitly; others made less explicit statements about whether energy

changes helped with the bill. The families most frequently reporting payback were those whi,recently had invested in wood heating equipment. If they had a free source of wood andignored their own labor, the reported payback period was short, often one or two years. As weshall demonstrate in the next section, when payback period is this short, the folk paybackmethod yields a good approximation to the energy experts method.For longer paybacks, the folk method lengthens the computed time to payback, because itdoes not adjust for escalating prices. We found several cases of this; here we quote from onefamily which seemed especially thorough in their computations.? Perhaps because of theiroccupations (the husband was a systems analyst and the wife had been a bank clerk) theyrecorded utility bills in a notebook and tried to calculate how short a time we could get theinsulation to pay for itself. Although they acknowledge they should compute from energyunits, they in fact use the folk method, based on dollars. They say: Its hard for us to figure thedifference between what we would have used compared to what we did use. In their writtenrecords, as in the record of Fig. 1, years were compared by dollar totals. From these recordsthey concluded that the insulation had not paid for itself, and cited other benefits, such ascomfort and home resale value, to justify their purchase. In short, their payback calculation

tThis familys calculation of payback is discussed more fully in Ref. 31.


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Folk quantification of energy 823fails to adjust for fuel price increases and undervalues financial savings, as predicted by Eqs.(2) and (3). The predominance of dollar measurements in this case and in our other interviewsleads us to predict that even if more consumers learned the energy experts method forcomputing payback, most would continue to use the folk method. The problem is not simplylack of information.How do we explain folk methods which work against the goals of their users? We believethis is an example of what Simon calls bounded rationality.~* Simon shows that people adaptknown methods to new problem solving situations, even if the known methods are not optimalfor the new problem. Simon argues that this is often a reasonable strategy, since it avoids theeffort of thinking through new methods. Our findings about energy quantification are alsoconsistent with studies by Gladwin, Lave, and Quinn24 of math problem solving in smallcommercial transactions. They show that people use approximate but easy methods rather thanthe precise arithmetic calculations taught in school.

COMPARISON OF THE TWO PAYBACK MODELSHow can retrospective folk payback calculations affect energy conservation? Studies ofadoption of innovations demonstrate that people evaluate past actions in order to plan futurechanges, and to make recommendations to others.2s-27Moreover, experience gained firsthand, orby a friend, is weighed more heavily in decisions than an impersonal data summary, even if thelatter is based on more information.28.32If a family concludes that its energy conservation

efforts have been ineffective, they will be less likely to recommend the same actions toneighbors or to take further energy actions themselves. Because we believe retrospectiveevaluation strongly affects future adoption, we will make a quantitative comparison of the folkand expert methods for computing payback.?

The simplest folk payback method divides the investment cost by the first periods savings.The payback is n years, computed ash = 1/s;, (4)

where S{ = C,,-- C,. For example, if an energy investment was $400, and the following heatingseason yielded bills $100 lower, the folk model would call this a four-year payback. The dollarmeasurement underestimates savings, as shown by Eqs. (1) and (2), and thus overestimates thepayback period. Other related folk methods are possible; we will analyze the method of Eq. (4)because it seems to be used commonly, and because it yields results intermediate among otherswe have identified.The corresponding expert method computes from energy units and adjusts for fuel priceincreases. Combination of Eqs. (1) and (3) shows that payback is achieved when

I = (E,, - E,)(P, + P2 t . . . + P,). (9To simplify the series of terms for price, we assume steady real price increases of f, so thatP, = P,,( 1 + f) or generally for any year y, P, = P,( 1t f)Y. Since the right side of Eq. (5) can beexpressed as a geometric series, it can be reduced to

1 = OS-.W,[l -Cl +f)l/Il -(I +f)l,which is readily solved for n. With two simplfying conventions, to express investment and

In the following comparison. we simplify the algebra by assuming zero inflation and zero discount rate (thus. realdollars equal nominal dollars. and future benefits equal benefits discounted to present value). Such simplifications areconsistent with the normal use of simple payback. These are conservative simplifications. in the sense that they workagainst our argument. Nevertheless. we are able to demonstrate that the folk method computes a significantly longerpayback than the expert method. This difference is even larger with reasonable figures for inflation and the discount rate, aswe shall demonstrate.


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824 W. KEMPTON and L. MONTGOMERYenergy change as ratios, the expert payback model can be written as

n =ln{l +UM(l+f)(l-r)]}/ln(l+f), (6)and the folk model of Eq. (4) as n = i/[l -(l tf)r], (7)where n is payback period, f is fuel price escalation, i is investment as a proportion of fuel cost(I/C,), and r is energy change ratio (El/E,). Note that we use Eq. (7) to evaluate the folkpayback model, but consumers would actually use the simpler Eq. (4). Since we are primarilyanalyzing heating changes, evaluated seasonally, we will express n in years and f in change peryear, although they can be in any consistent time units. The terms i and r are dimensionless.Equations (6) and (7) allow us to compare the two payback calculation methods as i, f, and rvary. Each variable will be plotted individually, assuming a reasonable base case for purposesof illustration.Figure 2 shows the effect of fuel price escalation on payback period. The figure assumes a30% reduction in energy use (r = 0.7) and an investment equal to one years preimprovementfuel cost (that is, I = Co, thus i = 1.0). The folk and expert methods yield equal results if fuelprices remain constant. At annual price rises of 0.15, which is a minimal figure for the periodpreceding our interviews, the folk method estimates that the payback period is more than twicethe time of the expert method.Another possible expert method, which did measure energy units but did not consider futureprice increases,? would appear in Fig. 2 as a horizontal line at 3.3 years. The folk method wouldstill significantly overestimate payback period. Therefore, the overestimation error of the folkmethod is due primarily to its dollar measurement; its failure to consider future price increaseshas a less significant effect.Figure 3 illustrates the effect of percentage energy reduction on payback. The investment is

7-

8-

l-0 I I I I 1 4

0 .05 .lO .15 .20 .25 .30Fuel price escalation

Fig. 2. Payback period as a function of fuel price escalation. as computed by the folk model and the expertmodel. The curves are derived from Eqs. (6) and (7). Both c urves assume an invest ment equal to one years

fuel cost , and a 30% decrease in energy use due to the investment.

tFor example, some energy auditors assume zero fuel price increases (f = 0) as an approximate way of discountingfuture benefits to their present value.


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Folk quantifioation of energy 82510

9

87

z= 0Q)nY 50p6 4a

3

21

0I I I I I I I I I I10 20 30 40 50 60 70 80 90 loo

Percentage energy reductionFig 3. Payback period as a function of energy r eduction, computed by the folk and expert models. Both

curves assume annual fuel price incr eases of 0.15 and an investment equal to one years fuel cost.

again assumed to equal one years fuel cost (i = l), and the fuel price escalation is set at 0.15.On the abcissa, energy reduction is labelled as a percentage [percent reduction is equal to 100(I - r)]. Figure 3 shows that when energy reduction is large, estimates of the payback period areapproximately equal by the two models. When energy reduction is less than about 40%,however, the folk method significantly overestimates payback period. In fact, small energyreductions will never pay back under the folk payback model, since the curve is asymptotic to23%. The expert curve is asymptotic to 0.Finally. Fig. 4 shows the effect of investment cost on payback (assuming f = 0.15, r = 0.7 as

0 .2 .4 .6 .a 1 1.2 1.4 1.6 1.8 2 2.2 2.4Investment

Fig. 4. Payback period as a function of investment (investment is expressed as a proportion of annual fuelcost), computed by folk and expert models. Both curves assume annual fuel price escalation of 0.15 and a

30% decrease in energy use due to the investment.


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826 W. KEMPTON and L. MONTGOMERYTable 3. Effects of infl ation and the disc ount rate on the two paybac k models. As before, the base case is f = 0.15.r = 0.7, i = I. The numbers in the matrix are folk payback years divided by expert payback years, thus numbers greaterthan one represent an overestimate by the folk method. Discounting is conservatively assumed to aff ect only the expert

method.

5 2.42 2.07 1.66 1.1410 3.10 2.65 2.13 1.4715 4.31 3.68 2.95 2.03I I I I

before). When the investment is less than one-third of annual fuel cost, the payback period isshort, and the two models are comparable. For large investments, the folk model yields muchlonger payback periods.In short, the two models yield similar results when fuel prices are nearly constant, or wheninvestments are highly cost-effective (small cash outlays or large energy reductions). However,a wide intermediate range of cost-effective measures exists for which the folk model causesnegative evaluation by the people who have adopted the measures. If fuel prices continue toescalate, we predict a continued bias against cost-effective energy investments.The preceding discussion did not consider inflation and the time value of money. Each ofthese factors increases the payback period of one model; together they approximately coun-terbalance each other. General inflation further increases perceived fuel price escalation. Thus,under the folk model, inflation would further reduce apparent first-year savings and increase thepayback period. When the expert considers the time value of money, future fuel savings will bediscounted, thus increasing the payback period as computed by the expert. These effects can beincluded in the algebra by adjusting the fuel price escalation factor f. Payback is againcomputed from Eqs. (6) and (7) with f adjusted differently in each equation:

expert f = fr,,, - real discount rate,folk f = flea,t general inflation.

We do not assume that the folk method discounts future benefits. since our case can be madewithout doing so (if we did, our case would be strengthened further.)+In Table 3, each entry is payback years of the folk method divided by those of the expertmethod. The effect of inflation is greater than the effect of discounting. For example, 5%inflation and a 10% discount rate produce about the same two-to-one ratio of expert to folk

payback as does the 0% base case. The folk method computes a longer payback in all but oneinstance, the extreme case of no general inflation and 30% discount rate. Note that the folkmethod overestimates payback even when the discount rate exceeds the fuel price escalationrate.CONCLUSIONS

Using ethnographic techniques, we have analyzed how consumers perceive and measureresidential energy. Folk quantification provides approximate measures, with minimal effort tocollect and process information. Using principles of cognitive science, we have explained whyconsumers choose folk methods over more accurate ones. We make the additional finding that,in the case of energy, measurement inaccuracies are not randomly distributed. They aresystematically biased in ways that cause less energy conservation than would be expected byeconomically rational response to price.

+If we wanted to include a discount rate in the folk model. we would not have any good data with which to estimate thisrate. The problem is that figures publis hed as the implicit consumer discount rate include many other effects, such as themeasurement problems discussed in this paper. As a result. the literature reports i mplausibly wide variation in discountrates for energy equipment purchases. A IS to 25% discount rate is reported to be implicit in air-conditioner purchasesYbut 42 to 300% in refrigerator purchases.


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Folk quantification of energy 827Acknowledgements-We are grateful for support and assistance from our colleagues on The Family Energy Project: R. P.Boger, F. D. Case, P. M. Gladhart, C. K. Harris, D. R. Keefe, J. G. Keith, B. M. Morrison, B. D. Neff, and L. J. Nelson.We especially acknowledge Harris for his extensive comments and suggestions. Also, J. M. Darley, D. S. Dwyer, A. V.Millard, and S. M. Rennie made particularly helpful criticisms, and B. Schlagel, K. Warsco, and M. Wojno helped conductinterviews.

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Verbraucherverhaltens auf den Energiebedarf privater Haushalte, pp. 73-88. Springer-Verlag. Berlin and New York(1982).I?. B. M. Morrison, J. G. Keith. and J. J. Zuiches, Impacts on Household Energy Consumption: An Empirical Study ofMichigan Families. In Sociopol ili cal Eflects of Energy Use and Policy, CONAES supporting paper (1979).NationalAcademy of Sciences, Washington, DC. 20418,U.S.A.13. J. Wright, A. Meier, and M. Maulhardt, Energy Conservation Measures Before You Insulate Your Walls. (1979).Manuscript, 13 pp, Energy Efficient Buildings Program, Lawrence Berkeley Lab., Berkeley, CA 94720,U.S.A.14. W. J. Hopp and W. P. Darby, Energy 5, 1183(1980).15. E. Heider, J. Exp. Psycho/. 93, 10 (1972).16. C. P. Mervis and E. fi. Rosch, Ann. Rec. Psgchol. 32, 89 (1981).17. B. Berlin and P. Kav. Basic Color Terms. University of California Press. Berkelev (1969).18. W. Kempton, The idolk Classification of Ceramics. A Study of Cognitive Prot&pes. Academic Press, New York(1981).19. W. M. Kempton. C. K. Harris, J. G. Keith, and J. S. Weihl. Do Consumers Know What Works in EnergyConservation? Presented at 1982Summer Study, American Council for an Energy-Efficient Economy, Santa Cruz.CA (Aug. 1982).20. H. A. Simon, Q. J. Econ. 69, 99 (1955).21. H. Gladwin. Memory Models from Psychology, Anthropology, and A.I.: Are They Useful in Understanding AdultMathematical Problem Solving? Manuscript (June 1979)available from author, Adult Math Skills Project, School ofSocial Sciences, University of California, Irvine, CA 92717.U.S.A.22. J Lave, A Model of Mundane Arithmetic Problem Solving. Manuscript, I5 pp (1979)available from author at AdultMath Skills Project (see address for Ref. ?I).23. J. Lave. M. Murtaugh. and 0. de la Rocha. Recounting the Whole Enchilada: The Dialectical Constitution ofArithmetic Practice. To appear in Ref. 4 (1983).24. N. Quinn. Am. Ethnol. 5, 206 (1978).25. J. M. Darley and J. R. Beniger, J. Social Issues 37, 150 (1981).26. E. Rogers and F. Shoemaker. Communication of Innovations: A Cross-Cultural Approach. Free Press. New York(1971).27. R. H. Socolow, Ed., Saoing Energy in the Home: Princetons Experiments at Twin Rioers. chapters IO and I I.Ballinger, Cambridge, Massachusetts (1978).18. National Research Council, Behavioral and Social Aspects of Energy Consumpfion and Production : Preliminary

Report. National Academy Press, Washington, D.C. 20418,U.S.A. (1982).19. J. A. Hausman, Bell. J. Econ. 10, 99 (1979).30. D. Gately. Bell. J. Econ. II, 373 (1980).31. W. Kempton. P. Gladhart. and D. Keefe, Home Insulation: The Users View. To appear in Thermal Insulations.

Materials. and Systems for Energy Conseruation in fhe 8Os, ASTM STP 789, F. A. Govan, D. M. Greason. and J. D.McAllister (Eds.). American Society for Testing and Materials, Philadelphia, PA 19103,U.S.A. (1982).32. R. Nisbett and L. Ross, Human Inference: Strategies and Shortcomings of Social Judgment. Prentice-Hall. EnglewoodCliffs, New Jersey (1980).

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