Scott Ogawa has the floor:
Consider [a] heterogeneous group of people who have different internal temperatures. In the Summer, people who are really hot complain a lot to the building manager, since building is [the] only source of cool. People who are really cold do not complain so much since there is always the “outside option” (literally) as relief. Things switch in the Winter. A complaint-minimizing building manager will jack the heat up in the Winter, and the A/C in the Summer.I have no data, and it is tough to trust how things “feel” since we are not the best judges of absolute temperature. Nevertheless, I have heard many folks say the temperature inside big buildings always seems negatively correlated with outside temperature, which is extra strange given this costs more than a positive correlation.
Scott’s solution is something like this: since people differ in their hot/cold preferences you want some variation in the temperature inside. Most buildings aim for uniformity. If half of the building is warm and the other half is cool, people will pick their favorite side of the building. Keeping the mean temperature constant but adding a mean-preserving spread raises overall welfare due to sorting.
Cheap Talk 
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February 6, 2012 at 4:36 pm
Khurram
Neat idea.
But I believe you are assuming that keeping half of the building at 50 and the other half at 90 requires the same resources as heating the building at 70 (thus the free lunch you posit). My knowledge of thermodynamics isn’t so hot (so to speak) but I don’t think that’s a safe assumption. The cost may scale faster than welfare improves.
February 6, 2012 at 5:16 pm
jeff
understood. but the effect is there.
February 6, 2012 at 9:00 pm
Scott
Yeah, you are right about thermodynamics. I believe the energy flow out is proportional to the square of temperature difference. I actually had energy savings in mind, not welfare, when I suggested purposeful temperature variation. To really save energy building managers should keep buildings at 60 in the winter, but provide free space heaters for desk dwellers — and 74 in the summer, with a couple of designated 60 degree areas where people can cool off should they have just been out and about.
And if welfare is main concern, certainly some variation is preferable to none since there is always partial mobility for each individual, at least for short periods of time.
February 6, 2012 at 11:17 pm
jeff
scott, welfare maximization and energy cost minimization are dual. if you can increase welfare with no increase in energy costs then you can reduce energy costs with no decrease in welfare. but you knew that. 🙂
February 6, 2012 at 6:28 pm
anon
The proposed solution assumes that we can choose where we are in the building. But if I’m stuck in the cold part of the building (because I can’t control my classroom assignments, for example) then I’m made even worse off… even in an ex-ante sense, with risk aversion.