DRAFT: Conspicuous Conservation: The Prius Effect and WTP for Environmental Bona Fides∗

Veblen explained in 1899 that “in order to gain and hold the esteem of man it is not sufficient merely to possess wealth or power. The wealth or power must be put in evidence, for esteem is awarded only on evidence.” Since then, a considerable economics literature has explored the concept of conspicuous consumption and its implications in various settings, with particular focus on purchases that signal prestige, luxury and exclusivity.1 While consumption of luxurious automobiles, jewelry and apparel surely still afford desired social status in the 21st Century, evolving social norms suggest esteem can be attained through the demonstration of certain kinds of austerity–specifically austerity that minimizes the environmental impact of consumption. In fact, amid heightened concern about environmental damage and global climate change, costly private contributions to environmental protection increasingly confer status once afforded only through ostentatious displays of wastefulness. Consumers may, therefore, undertake costly actions in order to signal their type as environmentally friendly or “green.” The status conferred upon demonstration of environmental friendliness is sufficiently prized that homeowners are known to install solar panels on the shaded sides of houses so that their costly investments are visible from the street. We call this behavior “conspicuous conservation.” Home solar panel installation and car ownership decisions are two of the most visible consumption decisions households make. Since the U.S. introduction of