If the costs were the exact same, most people would prefer a more environmentally-friendly product. However, when "green" products cost more, the choice isn't so simple.

If we remember that economics is the study of unlimited wants competing for limited resources, then we should consider that the desire to "go green" exists, but consumers also think of what else could be done with the money and what they really want. In other words, because we all have limited money, how much of it should we spend on the environment given what else we could use it for?

Here are some examples where going green may or may not be worth it to you:

## Hybrid Cars

If the car costs more, which hybrids typically do, your car choice is less about finances and more about making a statement as to who you are or what you believe.

In comparing a very popular car model that has both hybrid and non-hybrid versions, the hybrid gets 45 mpg and the another gets 26 mpg. Sounds like savings. Doing the math shows that with 15,000 miles a year and \$2.50 gas per gallon, the hybrid saves you over \$600 per year. Not bad. But if the car costs \$6,000 more, then it will be in the junk heap before it ever pays for itself, especially when we add in the time value of money.

But that's not all that needs to be considered. What could you have done with that \$6000 up front? While some may say it's nothing more than a vacation, others might say it's the start of their kid's college fund.

## Energy-Efficient Appliances

According to the Federal Trade Commission, the annual cost of operating a popular size refrigerator-freezer is between \$50 and \$70 per year. Supposedly an energy-efficient refrigerator will cost most initially, but will put you on the lower end of that \$50 to \$70 per year range. So suppose the more "efficient" refrigerator cost you \$1000 more initially but enabled you to save \$20 per year. Would that make it worth it? A \$20 difference in annual operating costs might not sound like much initially, but remember that you will enjoy that benefit year after year for the life of the appliance; meanwhile, the initially higher purchase price is a cost you have to absorb only once. However, you need to weigh how long you're going to actually keep the appliance to determine whether it's worth it to stomach the higher initial purchase price.

The National Association of Realtors says that a typical homeowners will stay in his or her home for six years. So that's a savings of \$20 per year for six years, or \$120 in electric bill savings during the time that you owned the appliance. But if you paid \$1000 more to buy the energy-efficient appliance than one that would have been less so-called "efficient," you haven't saved any money. Perhaps the more apt point here is that a difference of only \$20 a year is basically irrelevant to the purchase decision.

## Organic Food

Studies have shown that the main reason more consumers don't purchase organic food is due to price. A study from UC Davis showed that prices for organic foods are 20% higher or more than foods not labeled "organic." If it takes a family of four \$200 a week to feed itself, then it would cost \$40+ a week to go organic. If you were to put \$40 a week into your retirement plan and average a reasonable return of 8% for 30 years, you would have over a quarter of a million dollars.

## Will Going "Green" Save You Green?

Some people value green products more than other things and are therefore willing to pay the price. Other people also value green products over non-green products, and would choose the green products even if the price was equal. Because the price isn't equal, tradeoffs with regard to what else people can do with their money becomes a factor; this is basic economics.

Unlimited wants and limited resources means that choices must be made. This doesn't make those that don't drive a hybrid or buy organic food bad people. It just means that they made different choices. That's what economics is all about.

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