SCIENTIFIC AMERICAN October 1994 135

THE ANALYTICAL ECONOMIST

For environmental economists,compact ßuorescent lights areamong the greatest inventions

since Þberglass insulation or double-glazed windows. Anyone who installsone saves money, cuts air pollutionand reduces the potential risk of globalwarming in one fell swoop. Further-more, conventional lightbulbs typicallylast less than a year, so compact ßuo-rescents could displace incandescentsrelatively rapidly (in contrast with otherkinds of technology, where it may take10 years or more for old models to wearout). Yet these miraculous devices havecaptured a mere 2 percent of the light-bulb market; roughly 10 billion con-ventional incandescent bulbs still Þndtheir way into light sockets every year.Lighting specialists report no shortageof the new lamps, so supply seems tobe close to demand.

How could something that appearsto be so obviously superior have suchmodest marketplace success? The an-swer turns out to be one statistical quirkand two large doses of economic reali-ty. Least important is the quirk: unitsales are a misleading measure becausea compact ßuorescent lamp (CFL) lastsabout as long as 10 incandescents; ifhalf the light sockets in the world heldCFLs, the lights would still account foronly about 5 percent of bulbs sold. Asimilar paradox occurred early in theautomobile age: tire sales plummetedwhen more durable models appeared.

The leading dose of economic realityis the fact that CFLs are expensive tobuy. ÒFirst cost,Ó replies Don Pendletonof the International Institute for EnergyConservation even before an interview-erÕs question is Þnished. PendletonÕsown home contains 66 light sockets, henotes; putting CFLs into all of themcould cost $1,000Ñhardly what mostpeople expect to spend when they go tobuy a carton of lightbulbs.

Although compact ßuorescents mayyield big savings over the long term,their payback period takes longer thanmost consumers are willing to wait, ac-cording to Owen Bailey of the RockyMountain Institute. A typical unit thatburns for three hours a day reaches thebreak-even point after three years andsaves the owner about $35 over the

course of its 10-year life. But many peo-ple work on a time horizon of two yearsor less. ( Indeed, many homeowners orrenters may not even be in the samehouse by the time their investmentbears fruit.) Furthermore, the time andinconvenience required to sort throughthe diÝerent models of CFLs and Þgureout which ones might Þt in which light-ing Þxtures may outweigh the savingsfrom buying just a few lamps.

Those demands explain why CFL in-stallations are so much more prevalentin hotels, oÛces and other commercialsettings, says Robert D. Sardinsky ofRising Sun, an energy-eÛcient lightingconsultancy. Not only do businessesgenerally look to a longer-term bottomline, they are more likely to look strict-ly at the Þnancial payoÝ. That payoÝ isalso higher for businesses, notes EvanMills of Lawrence Berkeley Laborato-ry. Every time a janitor replaces a light

bulb, a company pays at least $2 in la-bor costs (and occasionally as much as$100 for Þxtures that can be reachedonly by tall ladders); the longer life ofCFLs cuts that bill by 90 percent.

High initial cost may be only a screenfor the most prevalent reason consum-ers give for not buying CFLs. Althoughthe lights may save money, says ThomasY. Moore of Energy Strategy Reports, aconsulting Þrm that advises electric util-ities on conservation techniques, con-sumers do not perceive them as yieldingan overall improvement in their quali-ty of life. Moore quotes a marketing fo-cus-group participant who pointed to acompact ßuorescent and said, ÒThisthing solves a problem I donÕt have.Ó

The diÝerence between the ÞnancialpayoÝ and perceived beneÞt is an oft-elided distinction in economics. Theequations of economic theory are allcouched in terms of Òutility,Ó an abstractmeasure of happiness vaguely akin tothe Socratic notion of Òthe good.Ó Yet

most economists simplify their prac-tice by assuming that maximizing utili-ty is essentially equivalent to maximiz-ing monetary return.

In the case of CFLs, the diÝerence be-tween proÞt and utility comes in a hostof details. Sardinsky notes, for example,that the electronic components in somecompact ßuorescent Þxtures produce ahum that is masked in commercial set-tings but may be audible in a quiet liv-ing room. Another aesthetic considera-tion is the quality of light from a CFL:its color diÝers from that of a tungstenÞlament, and the light comes from anextended source rather than a deÞnedpoint. Meanwhile, Pendleton says, thosewho prefer mood lighting may be putoÝ by the diÛculty of dimming a CFL.He also points out that the momentarydelay between ßicking a switch and see-ing a compact lamp illuminate discon-certs some people. And although man-ufacturers have made progress in mini-aturization, ÒcompactÓ is still a relativetermÑmany Þxtures simply have noroom for the bulky CFL package.

All these factors combine to makeconsumers leery of buying compactßuorescents even at low prices. Utilitiesaround the U.S. have promoted expan-sion of the CFL market, some by oÝer-ing rebate coupons. But many custom-ers have failed to respond, even whenthe lights are free. MooreÕs Þrm foundthat nearly a third of those who did buyCFLs either had not gotten around toinstalling them or had since removedthem. (Mills notes that the situation dif-fers signiÞcantly in other nations, thanksin part to stronger incentives for CFLs;sales of incandescent lamps have stag-nated in Europe, and China is rapidlyovertaking the U.S. as the single largestmarket for the new lamps.)

At existing rates of CFL marketgrowth, it will be about another decadebefore compact ßuorescents overtaketheir tungsten ancestors, according toÞgures compiled by Mills. For a prod-uct that oÝers savings as enormous asthis one doesÑCFLs have already re-duced peak demand by the equivalentof perhaps 10 large nuclear powerplantsÑ20 years may seem a long timeto supplant a clearly inferior competi-tor. The factors that have slowed theiradoption seem to show that, even inenvironmental economics, money isnÕteverything. ÑPaul Wallich

Is a Bright Idea Flickering?

Compact ßuorescent bulbs solve a problem consumers saythey donÕt have.

Copyright 1994 Scientific American, Inc.