The 5p plastic bag charge in the UK: A microeconomic success story

Much of (micro)economic theory is based on the following ideas. People make conscious choices. These choices depend on what these people want. People typically want, keeping all else the same, more money. To quote (in a rough translation) a popular Austrian comedian, Alf Poier, on this matter:  “I quickly realized that money is quite valuable and doesn’t take up much room.” This also means that in order to get more money, people would be willing to give up other things that they want.

And we just saw an incredible demonstration of that with the UK-wide introduction of a 5p charge for every plastic bag in essentially all supermarkets from the beginning of 2016. The effects of this policy have started to become evident. It seems that the introduction of the 5p charge for every plastic bag has reduced plastic bag consumption in supermarkets by roughly 80%.

What I find most impressive about this is that 5p for a plastic bag does not seem a lot of money and I usually argue that people typically try to get the big decisions right, but will not spend too much time thinking about small impact decisions. And here we have a comparison between two very small things: the loss of 5p versus the discomfort of having to bring your own bag to the shop. And yet, this had such a tremendous effect, with the discomfort of bringing your own bag valued less than 5p by most people most of the time.

As shopping is an almost daily activity for most people, I guess, one could see this as a decision between the loss of 5p per bag every day in a whole year (worth approximately 36 pounds assuming you use two bags every day) versus adopting a general policy of bringing a bag (or two) to the supermarket whenever you go shopping (which maybe requires a mental effort only a few times before the taking of bags to the supermarket becomes an almost automatic, that is mentally costless, behavior).

Nevertheless I do find the 80% reduction in the use of plastic based on such a small charge a remarkeable example of the forces of basic microeconomics at work.

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2 thoughts on “The 5p plastic bag charge in the UK: A microeconomic success story

  1. This 80% reduction is indeed interesting since I also believe that people do not tend to think very carefully about such decisions. In the case at hand, this is supported by the overwhelming evidence that I never manage to bring a bag with me and always have to buy one of the larger bags which are not costless ;). Let me therefore set up two more possible explanations for this. First, paper bags are not included in the charge implying that people might have simply substituted plastic bags for paper bags. If you are in the supermarket and face the choice on whether to pay 5p for a plastic bag or use a costless paper bag (assuming it is offered) you take the latter. Not a particularly thrilling explanation – still just basic microeconomics at work. Secondly, and much more interesting is what I call the “cash-dispenser-fee-phenomenon”. Having talked to several people about the cash-dispenser-fee, it is striking that most do not really care about the possible size of the fee, they are simply upset that they might have to pay for something that was free of charge since they can remember. A typical reaction on this is the “I-show-my-protest-against-this-by-refusing-to-do/buy-the-things-that-are-charged-although-I-now-that-nobody-cares” behavior. The result is the same, but the motives behind such decisions are quite different from the ones usually assumed in microeconomics. Would be interesting to find out what which ones really drove the decision to give up plastic bags here!

  2. about paper bags: I have not made a full study of this, but I am in the UK at the moment, and none of the 5 supermarkets that I have been to lately offer free paper bags. In some supermarkets you can buy a good quality bag for about 1 pound, which should last a very long time. What I do not know is whether these 1 pound “high quality” bags were on offer before the 5p plastic bag charges was introduced.

    on consumers being upset at the new charge and not buying bags simply because of that: if this is true then one would expect that in the long run consumers will get used to this charge and resume buying them at a higher rate. it would be interesting to see if that happens.

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