Plastic Bags and Incentives

People respond to incentives. That’s probably the most powerful lesson a study of economics provides. It appears to be trivially true but it is quite surprising how often that is neglected by policy makers, analysts, and indeed by the average guy on the street.

Fortunately, every so often you do come across happy examples of properly designed incentive mechanisms that elicit the desired (and expected) behavior from the public without the need for authoritarian meddling. An item in reports that a combination of charges and loyalty points have reduced the use of plastic carry bags at some retailers by as much as 85 percent. (Hat tip: Kashyap Patel)

Since launching a 5p charge for food bags last May as part of its Plan A scheme to reduce waste, Marks & Spencers says the number of bags taken to cart posh ready meals home has fallen by 80 per cent, from 460m bags a year to 80m. . .

“We are really pleased at how quickly customers have reacted and adapted their shopping habits by investing in durable alternatives in which to carry their purchases,” said the National Trust’s Stuart Richards, adding that in the trust’s shops, sales of reusable jute bags have soared as plastic bag use has fallen away.

. . .

Retailers who have incentivised customers to reuse bags have also seen success. Tesco, which offers one Green point to its clubcard customers for every bag they reuse, says it has cut bag use by 50 per cent since it launched the scheme in August 2006, saving three billion bags in the process.

Good to see that a market mechanism is being used there, as opposed to silly schemes at banning the use of plastic bags as they attempted to do in Maharashtra. I have visited that issue before on this blog and recommended a small user charge. Please see the post “Banning Plastic Bags” (Sept 2005), and “Monkey See, Monkey Do: Plastic Bag Version” (Feb 2008).

I will end this with a quote from the Sept 2005 post on the matter:

Practically every problem we see around us admits a market solution. Get the incentives right and the market will figure out the most efficient way of solving the problem. On the other hand, banning is the strategy of the failed Nehruvian ideology of command and control. It will not work and will make matters worse. They will encourage corruption and bribery. The police will use the ban as a baton to beat the shopkeepers with to extract even more than they already do.

Author: Atanu Dey


5 thoughts on “Plastic Bags and Incentives”

  1. what ever may be the result., one will surely happen

    “The police will use the ban as a baton to beat the shopkeepers with to extract even more than they already do.”


  2. Your favorite China has chosen to take the banning route though, when it comes to plastic bags. 😉

    Most western countries (including US) have banned leaded petrol/gasoline, instead of offering different options (leaded and unleaded) and letting the consumers and free market decide, and that (banning) is the saner/wiser policy. So, it depends.


    1. From the smiley in the end of your line about “your favorite China” I guess that you meant it facetiously. But I should clarify that I am not an admirer of China. I think the China story is pretty pathetic. I bring up China every now and then because in comparison to the India story, even the pathetic China story looks great.

      On the matter of banning: the policy makers of western countries are not enlightened beings. They too do stupid things fairly regularly. But they do get more of their policies right than do the policymakers of the developing countries. Indeed, there is a causal relationship between the right policies and how developed the country is. A poor economy is proof that its policies are on the whole more defective than effective.

      Just because the US bans something does not make it right. In the case of leaded gasoline, a tax would have been better than a ban. Would you like to guess how much leaded gasoline would have been bought if a tax of say $5 a gallon were imposed on leaded gasoline to internalize the negative externality of lead in gasoline?


  3. Atanu, yes, that comment re: China was meant facetiously.

    Yes, the policy makers of the west are not enlightened beings and I didn’t say anything one way or the other, but all that is irrelevant, as is your “Just because US bans something….” comment.

    “Would you like to guess how much leaded gasoline would have been bought if a tax of say $5 a gallon were imposed on leaded gasoline to internalize the negative externality of lead in gasoline?”

    Have you actually talked to an owner of a gas station to see whether he’d be OK with offering $5/gallon leaded gas and all the costs associated with ordering and carrying it, or would you make that decision for him because that’s what your theory says? Your statement about $5/gallon leaded gas is good in theory, but there’s also reality/practice, though I can understand why you take that approach of being consistent. And my comment wasn’t to make a statement that banning is OK, but just to give a counter-example that worked just fine.

    Unless you want to write a post and illustrate the wrongs, the negatives and the ill-effects of banning leaded gasoline.

    BTW, good to see you mention “negative externality” in your comments – you should do that more often. 🙂


  4. Atanu, This is really burning point for whole world from environmental point of view. I do agree that “Banning” plastic bag is not only the solution to stop plastic bag use. There is lot more to do. Government agencies should come out with reward and incentive based scheme to reduce use of plastic bags. Government can come out with financial packages for those major chain store retailers who are serious about this problem and willing to take solid action. Retailers can come out with such a scheme where customer get special credit and discount when they don’t take plastic bag at the checkout counter. That can really help lot. It would really encourage people who are using reusable
    cotton bags

    It is our generation to stop the pollution and start using cotton bags as the solution. With global warming going out of hand from gas exhaustion, we don’t need any more problems especially plastic bags that are harmful when broken down naturally. These broken down elements cause sickness and destruction to the air, soil and water system.

    Use cotton bags starting today as a way to stop the plastic pollution that is becoming a major threat to the environment. Our lives are threatened ever more from the growing usage of plastic bags. It is time you bring a cotton bag to shopping the next time you go to a supermarket.


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