Economics, simply, is the study of incentives. It’s absolutely fascinating to me because it’s a triumph of mathematical logic over subjective guesswork. It’s applicable to every day life and it answers the big questions on how we can solve the big issues facing society today.

photo: jared

Recently, I went to Reading Festival. It’s a weekend music festival with 80,000 people. And as you can imagine, there are some huge effects on the environment from such an event. People burn and dump all kinds of things around the site, leaving both air and ground pollution behind. Not only is it bad for the environment, it’s potentially harmful to the health of the music fans who attend the festival.

I want to focus on three specific issues at Reading Festival:

• There is a huge amount of litter around the site. People don’t bother putting their rubbish in the bin.
• Those who are more considerate for the environment often find the bins will overflow from the sheer amount of trash. Because of the overflowing trash, the busiest parts of the arena had a very pungent foul-smelling stench. And it cost a lot of money for the festival to employ people to regularly empty the bins.
• Some revellers at the festival insist on throwing the contents of their drinks over huge crowds of people, especially in crowded tents. This is a huge nuisance and it’s highly unhygenic. Several friends of mine have told me of instances of people relieving themselves in paper cups and then throwing these over crowds of people - frankly a very disgusting and antisocial thing to do. There is also a risk of injury to the person hit by the bottle/cup.

The festival has a paper cup deposit scheme. The scheme is very simple and straightforward and in my opinion did a great job at changing some of the incentives to reduce litter and anti-social behavior.

It worked by placing a deposit of 10p on the cup which each drink was sold in. A pint of beer would cost somewhere in the region of £3.50 ($7) which would include 10p which would be refunded when the cup was returned.

This created positive incentives for several different groups of people.

Those who’d have littered:

photo: bobcat rock

The 10p deposit multiplied by the number of drinks consumed over the whole weekend and the number of people in the group would have added up to a fair bit of money. I saw many people who had stacked up whole piles of cups in their backpacks, obviously with the intention of getting their deposits back at the end.

Some people would continue to litter. They would lose their 10p deposit which goes into the coffers to employ somebody who would tidy up the litter.

Those who were anti-social:

The deposit also creates a disincentive to throw the contents of your drink over large crowds of people for the same reasons: you’d never get your 10p back. I would say that this is actually quite a weak incentive as I still saw a fair amount of this happening. Whether me and my friends were drenched in cups of beer, water or urine I’ll never know. But whatever it was, I’m sure it would have been more of a frequent occurance if the deposit system didn’t exist to encourage people to hold on to their empty drink cups.

Those who were environmentally conscious:

photo: Matthew Johnston

I’d like to believe the vast majority of people would look for a bin to throw their rubbish into. For those people, it wouldn’t be any harder for them to hand them in to get a 10p deposit back instead. It’s a great way of rewarding environmentally conscious behaviour.

There are even more environmentally conscious people in society who would pick up other people’s litter in order to keep their own towns, cities and streets clean. Unfortunately, this doesn’t happen at festivals because nobody actually lives there - for 360 days a year, they don’t benefit from a cleaner environment at Reading Festival.

The 10p deposit rewarded these more environmentally conscious people and gave them incentives to keep the place tidy. I saw two enterprising girls who, in the interval between two acts, walked through the arena collecting the cups which people had left behind or thrown. They could probably have got a free lunch from the amount of deposit money recieved from returning the cups.

For the festival organisers:

The scheme costs very little. It saves the festival organisers money - the bins don’t fill up as quickly and litter in busy areas (where it would cause the most discomfort to revellers) would quickly be picked up by the revellers themselves. And there is no reason to think that the 10p price hike on all drinks would have caused a fall in sales, because everybody knew they’d get that money back.

Conclusions

photo: Steven Fernandez

This, in my opinion, is economics at it’s best. A scheme which benefits everybody - the organisers who recieve additional funds towards cleanup and have less to cleanup, the music fans who benefit from a more hygenic festival experience and the entrepreneurs who benefit from free lunches at the same time as helping to keep the environment clean. Best of all, it barely costs anybody anything.

Some of the big problems facing society today such as the environment can be solved with bottom-up approaches, harnessing the power of crowd-sourcing and economic incentives. These solutions are simpler, cheaper and infinitely more effective than the centrally-planned approaches such as employing huge armies of litter pickers. That, to me, is the beauty of good economics.