Firm hand of a gentle nudge

Planners traditionally add more trains or expand the road network to deal with congestion. But the LTA is also encouraging commuters to travel during off-peak hours, and is offering grants to companies which implement schemes to boost off-peak travel
Planners traditionally add more trains or expand the road network to deal with congestion. But the LTA is also encouraging commuters to travel during off-peak hours, and is offering grants to companies which implement schemes to boost off-peak travel. ST PHOTO: KUA CHEE SIONG

Singapore policymakers are increasingly exploring mechanisms which "nudge" citizens towards better decisions, from eating better to saving more for retirement. This approach mirrors a growing trend worldwide of using behavioural science to inform policymaking.

Those of us who have made New Year resolutions to lose weight, eat healthier or save more for retirement are well aware that the spirit is willing but the flesh is weak.

Policymakers too have realised that people sometimes need to be "nudged" towards making better choices. The use of such behavioural interventions has been growing in popularity among policymakers here, with several government bodies already doing so.

Rather than laying down mandates to force people into action, the idea of nudging is based on research that shows it is possible to steer people towards better decisions by using policy mechanisms.

This approach is based on behavioural economics principles. Unlike standard economics, behavioural economics does not assume human beings always make rational decisions. If they did, people would not make bad choices, such as smoking, not saving for retirement or not exercising, so the argument goes.

Examples of these policy "nudges" include making enrolment in retirement savings schemes automatic, and equipping people with methods to measure and therefore reduce their energy consumption.

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Governments have strong ideas about what is good for citizens, and there's always the presumption that the government is trying to nudge people towards better behaviours.

MR DONALD LOW, associate dean for executive education and research at the Lee Kuan Yew School of Public Policy, on the "soft paternalism" of governments that tries to subconsciously dictate what is best for people.

"Behavioural economics provides policymakers with new perspectives which are grounded in how people actually make decisions," said Dr Thia Jang Ping, the director of the Institute of Governance & Policy at the Civil Service College.

"It helps us design policies and services that are more likely to create better outcomes.

"For example, letting people know that their energy consumption is higher than average can spur them to conserve more than they otherwise would. It complements the traditional economic approach which relies on market price signals and regulation."

The key lies in nudging people towards voluntarily making the "right" choices that policymakers want them to make, said Associate Professor Yohanes Eko Riyanto of Nanyang Technological University.

The Manpower Ministry did just that in 2014. It found that sending pink reminder letters instead of the usual white to employers of foreign domestic workers who had defaulted on paying levies prodded more of them to make payments.

The ministry simplified the language used in the letters and included a social norm message saying "96 per cent of employers pay their levy on time".

These interventions were tested on those who did not pay their levies on time, and resulted in a 3 to 5 percentage point improvement, compared with employers who received the regular letter.

Employers likely felt compelled to pay up because the colour reminded them of late reminders sent by phone and utility firms.

While Britain has its well-known "Nudge Unit", there is no central agency coordinating all of the Singapore Government's behavioural interventions. Instead, agencies run their own programmes, and some have set up specialised units focused on behavioural principles.

Economists say there is significant scope for wider use of behavioural interventions here.

They can be used to encourage people to stop smoking, overcome gambling addiction, donate more to charity, or reduce the use of plastic bags, said Prof Riyanto.

Policies based on behavioural principles are often more cost-effective and efficient than conventional methods, he noted.

For instance, using a tax to curb demand might result in distortions in other parts of the economy. Using a nudge, however, simply calls for a small policy tweak such as introducing a default option or sending reminders.

But this approach to policymaking is not without its detractors.

Nudging has been criticised as an insidious form of "soft paternalism" that tries to subconsciously dictate what is best for people.

"Governments have strong ideas about what is good for citizens, and there's always the presumption that the government is trying to nudge people towards better behaviours," said Mr Donald Low, associate dean for executive education and research at the Lee Kuan Yew School of Public Policy.

Mr Low, who has edited a book on behavioural economics and policy design in Singapore, noted that some forms of "coercion" can be justified.

For instance, forced-savings programmes like the Central Provident Fund scheme might be justified in principle because people tend to suffer from "present bias" and are too focused on their current selves to think about the future. "In some cases, the benefits of universal participation might outweigh the benefits from trying to customise policies to every individual's needs," he added.

Policies can also be designed to allow people to opt out, said Mr Low. However, it can be tricky to craft a "default option" which is in the best interest of the majority.

Organ donation is a commonly cited example.

Singapore's Human Organ Transplant Act (Hota) was amended in 2009 to allow the kidneys, heart, liver and corneas to be removed and used for transplant when a person dies, unless the person has opted out, is a minor or is mentally disordered.

Despite this, Singapore, with one of the best health-care systems in the world, is not among the top 50 countries when it comes to transplants.

"Part of the reason is that doctors know this law represents a weak form of consent," said Mr Low.

"When you actually need people to give strong consent, defaults might not work so well."

Ultimately, designing effective behavioural interventions comes down to finding out what is holding people back from making the right decision. "It's not always clear what the 'nudge' should be, and governments will have to continue experimenting."

A version of this article appeared in the print edition of The Straits Times on January 09, 2016, with the headline 'Firm hand of a gentle nudge'. Print Edition | Subscribe