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A growing number of policies and programs aim to increase investment in

energy efficiency, because conventional wisdom suggests that people fail to take up these investments even though they have positive private returns and generate environmental benefits. Many explanations for this energy efficiency gap have been put forward, but there has been surprisingly little field testing of whether the conventional wisdom is correct. This article reports on the results of an experimental evaluation of the nation’s largest residential energy efficiency program— the Weatherization Assistance Program—conducted on a sample of approximately 30,000 households in Michigan. The findings suggest that the upfront investment costs are about twice the actual energy savings. Furthermore, the model-projected savings are more than three times the actual savings. Although this might be attributed to the “rebound” effect—when demand for energy end uses increases as a result of greater efficiency—the article fails to find evidence of significantly higher indoor temperatures at weatherized homes. Even when accounting for the broader societal benefits derived from emissions reductions, the costs still substantially outweigh the benefits; the average rate of return is approximately −7.8% annually.

  • ["How Hayekian is Sunstein’s behavioural economics?" ]Robert Sugden. Abstract: I comment on Sunstein’s paper proposing ‘Hayekian behavioural economics’. In

essentials, Sunstein is merely re-naming a familiar approach to normative economics, initiated in Sunstein and Thaler’s seminal 2003 paper. I argue that this approach cannot fairly be described as in the spirit of Hayek’s work. Sunstein’s approach is based on a ‘constructivist’ conception of rationality that Hayek consistently criticized. Although Hayek and Sunstein both address ‘knowledge problems’, the two problems are fundamentally different. I develop what I claim are truly Hayekian critiques of Sunstein’s claim that fuel economy mandates can be more Hayekian than carbon taxes.