Paternalism, Autonomy, or Both? Experimental Evidence from Energy Saving Programs

TL;DR

This paper introduces a hybrid approach combining paternalistic targeting and autonomous choice to optimize energy saving programs, demonstrating improved social welfare through empirical analysis of a randomized field experiment.

Contribution

It develops a new method that integrates observable characteristics and autonomous decision-making to better target treatments, enhancing policy effectiveness.

Findings

Hybrid approach improves social welfare in energy programs

Method accurately estimates treatment effects for subgroups

Optimal allocation balances paternalistic and autonomous choices

Abstract

Identifying who should be treated is a central question in economics. There are two competing approaches to targeting - paternalistic and autonomous. In the paternalistic approach, policymakers optimally target the policy given observable individual characteristics. In contrast, the autonomous approach acknowledges that individuals may possess key unobservable information on heterogeneous policy impacts, and allows them to self-select into treatment. In this paper, we propose a new approach that mixes paternalistic assignment and autonomous choice. Our approach uses individual characteristics and empirical welfare maximization to identify who should be treated, untreated, and decide whether to be treated themselves. We apply this method to design a targeting policy for an energy saving programs using data collected in a randomized field experiment. We show that optimally mixing paternalistic assignments and autonomous choice significantly improves the social welfare gain of the policy. Exploiting random variation generated by the field experiment, we develop a method to estimate average treatment effects for each subgroup of individuals who would make the same autonomous treatment choice. Our estimates confirm that the estimated assignment policy optimally allocates individuals to be treated, untreated, or choose themselves based on the relative merits of paternalistic assignments and autonomous choice for individuals types.