Sunday, 28 June 2015

How the right nudge can lead to constructive social behaviour

Studying behaviour ‘can lead to better results for schemes, policies’
By doing so, policymakers can ‘nudge’ citizens towards beneficial outcomes
By Louisa Tang, TODAY, 25 Jun 2015

The online sphere was identified today (June 25) by Head of Civil Service Peter Ong as an area with great scope for policymakers to understand Singaporeans’ behaviour and apply, in his words, “the right nudges”.

“The digital space is an emerging domain where behavioural study is relatively new and carries great potential. There are many nudge effects in the online space,” said Mr Ong, who was speaking at regional behavioural economics conference held at Raffles City Convention Centre.

“For example, the first few comments on a new article may have a disproportionate influence on the tone of the subsequent discussion. Also, how can the silent majority be nudged to speak up in the online space, so that a better balance of views is captured?”

Apart from online space, Mr Ong said that behavioural interventions could also be applied via smart devices to, for example, achieve “constructive social behaviour” or help people to control their daily calorie intake. More complex problems such as promoting and sustaining philanthropy and volunteerism, as well as forming gracious social norms could also be addressed, he suggested.

“These would be the areas that I see great potential for behavioural insights to be applied, and I urge the community to research more in these areas and share results,” Mr Ong said.

Mr Ong noted that in Singapore, elements of behavioural economics and insights have long been present in public policies — “not in an ideological way, but simply aimed at ensuring better outcomes of schemes or policies implemented”, he said.

Citing several examples, he revealed that in a trial which the Ministry of Manpower conducted in collaboration with United Kingdom Behavioural Insights Team, placement rates for jobseekers went up significantly after initiatives such as placing stars on the walls of the consultation room in the job centre to visually represent the number of people who found jobs, and installing a message board for job seekers to express their commitment to the job search.

Almost half of those who benefitted from these measures found jobs within three months, compared to 32 per cent of those who did not receive the interventions.

Other recent examples include the Land Transport Authority’s Travel Smart Rewards scheme, under which commuters are incentivised to take public transport during off peak hours, and the Health Promotion Board’s Million KG Challenge — a weight management programme that rewards participants for taking steps to achieve and maintain a healthier body weight.

Mr Ong noted the importance of conducting trials before the rollout of intervention initiatives. This helps policymakers “detect any unexpected and unintended behavioural response from citizens” and reduces the likelihood of a wrong intervention, he said.

While it is “increasingly important” to understand behaviours and encourage citizens in the right ways, Mr Ong said policymakers must be careful not to overreach. “This is but one tool that policymakers can rely on. It should be a complement to traditional approaches and knowledge, to build on and not replace them,” he said.





How the right nudge can lead to constructive social behaviour
Pink letters, lucky draws and posters with social messages are among many ways the Government uses to shape citizens’ behaviour. Understanding what makes people tick is a powerful tool that can be applied to policymaking, says Mr Peter Ong, Head of Civil Service and Permanent Secretary at the Finance Ministry, at a conference to discuss insights on behavioural economics.
Published TODAY, 26 Jun 2015

Last year, the Ministry of Manpower (MOM) improved its reminder letters by simplifying the language used, including a social norm message saying “96 per cent of employers pay their levy on time”, and printing it in pink.

These interventions were tested on those who did not pay their levies on time. There was an improvement of 3 to 5 percentage points of employers who paid their foreign domestic worker levies on time, when they received the pink letter, compared with those who received the regular letter. Why should simple changes to a letter have this effect, even in situations where there is already a high compliance rate?

The fact that people do not always make the most rational or optimal choice is now well documented.

Whether a scheme has opt-in or opt-out clauses can result in vastly different participation rates, even though the options are essentially the same. This cannot be fully explained by conventional decision-making theories, unless you believe that it takes a lot more effort to tick a box to select one option compared with another.

Rather, it is this status quo bias, or a strong preference for the current state we are in, that affects a whole range of public policies from organ donations to participation in insurance schemes.

Another bias that we tend to have is a lack of self-control, which causes us to go for short-term gains at the expense of longer-term benefits. This bounded willpower results in under-saving for retirement. This is not optimal.

These are only two of the many cognitive biases that affect decision-making in our daily lives. While we cannot completely eliminate them, it is possible to minimise the effect of these biases so that decisions we make can result in better outcomes that we would have wanted from the beginning.

Sometimes it just boils down to not having enough bandwidth to follow up on a desired course of action. Hence, finding a way to send the right signals and capturing the attention of the citizen can help, as in the case of the MOM pink letter.

ROLE OF BEHAVIOURAL INTERVENTION

In Singapore, elements of behavioural economics (BE) and behavioural insights have long been present in public policies — not in an ideological way, but simply aimed at ensuring better outcomes of schemes or policies implemented.

Since 2009, default enrolment of all citizens and permanent residents over the age of 21 has been in place under the Human Organ Transplant Act, with an option to opt-out if desired.

On retirement savings, Professor David Laibson (Harvard) has shown through his research that automatic enrolment resulted in a huge increase in the number of people who enrolled to a voluntary retirement savings scheme in the United States. People often do not save, or do not save enough, if left to their own. In designing the Central Provident Fund (CPF) system, policymakers took into account this behavioural trait and designed a system where people can save adequately.

In the past few years, we have studied and applied BE more systematically in Singapore, in tandem with it developing as a discipline in academia. Likewise, many governments are also beginning to understand the power of applying this knowledge in the context of policymaking.

Understanding citizens’ behaviours and applying the right nudges will become increasingly important. Citizens will resist if there is excessive use of penalties to discourage certain behaviours. It would not be in the Government’s interest to keep imposing large financial penalties to achieve preferred outcomes.

Likewise, it will also be too costly for governments to over-incentivise good behaviours (eg. encouraging participation in savings or insurance schemes). And in some instances, the nature of the issue also makes it inappropriate for Governments to put in place any financial incentives (eg. organ donations).

Behavioural insights offer us a way out of this dilemma. With small and light touches — or nudges — large behavioural changes can be achieved. Let me highlight a few areas and some examples.

First, citizens can be nudged towards better outcomes for themselves. Everyone wants to stay healthy, but we are often affected by a lack of willpower. Often, we value the pleasure of indulging in unhealthy diets or putting off regular exercise, over the longer-term benefit of staying in good health. The Health Promotion Board has been working on ways to nudge citizens towards healthy eating and healthy lifestyles through programmes such as the Million Kg Challenge — a weight-loss programme where participants are rewarded for taking steps towards achieving and maintaining a healthier body weight.

The Million Kg Challenge nudges each participant towards their weight-loss goal by making goals salient and achievable at each stage — starting from easier tasks such as completing an e-learning module that works towards earning more modest rewards such as supermarket vouchers. The rewards are then stepped up to more sizeable gifts such as vouchers for sporting goods in order for participants to push themselves to do more.

Providing easy access to information on healthy lifestyles via platforms such as the e-learning module reduces the barriers to getting started. Starting with smaller, achievable goals before scaling up is aimed at helping participants overcome the lack of willpower.

To further nudge participants out of inertia, there is even an option for participants to nominate a buddy to join them in the challenge. This creates a sense of accountability between friends that helps in sustaining motivation. Nudges such as these not only benefit citizens, but reduce pressures on unnecessary healthcare expenditure in the system.

In the US, it was found that university students were often under the impression that peers drink more than they actually do. By telling them that “90 per cent of students consume fewer than four drinks during a night out” and reducing the perceived peer pressure, social messaging can be an effective nudge to discourage binge drinking in social situations. But of course, I am sure binge drinking is not exactly a problem among our Singaporean students.

Second, nudging can be used to improve public service effectiveness. In a trial conducted by MOM in collaboration with the UK Behavioural Insights Team, outcomes for job seekers were improved by setting up a commitment device — a statement of commitment to the job-search process that each jobseeker had to sign off on. The job-search process was broken into smaller and more easily attainable tasks for the job seekers to follow-through.

The consultation room at the job centre was also revamped to boost the morale and motivation of job seekers. Stars were put up on its walls to visually represent the number of people who succeeded in finding jobs through the career centre, and a message board allowed job seekers to express their commitment to the job-search process.

These interventions were tested in a trial and the results showed significant improvement in job placement rates for job seekers — 49% of job seekers who received these interventions found jobs within three months, compared with 32% for those in the control group. This translated to potentially 4,000 more job seekers per year finding jobs within three months, from visiting the job centre.

Another example is the Land Transport Authority’s Travel Smart Rewards scheme, which was trialled in collaboration with Stanford University and the National University of Singapore. Commuters making off-peak or “decongesting trips” earn points that can be used on a chance-based online game that rewards cash to commuters. Participants are also ranked on leader-boards to encourage some friendly competition and, of course, more decongesting trips.

To cap it off, a lucky draw — which leverages on the fact that we like large windfall gains — is held every month for the best participants with a cash prize of S$1,500. From its inception in 2012 until July of last year, the scheme has managed to shift 10 per cent of its participants’ weekday morning peak period trips to off-peak periods.

Other than the payment of foreign worker levies that I mentioned earlier, the Inland Revenue Authority of Singapore found that using an SMS reminder increased the percentage of people who paid overdue property taxes before a penalty was imposed, from 16 per cent to 47 per cent. We have thus increased the effectiveness of tax collections while we reduce the incidence of penalties.

Third, nudging can be used to improve social graces in social contexts. While riding on a public bus or train, you may have noticed the use of nudges to encourage more graciousness in social behaviour. For one such nudge, 1,000 commuters were interviewed in a nationwide study to establish their behaviour on public transport. The results of the survey were then turned into a series of posters that spoke of what commuters said they would do. For example, one poster states that “98 per cent felt that it is faster for everyone when they queue up and give way to alighting passengers”. Another asks: “94 per cent say they will give up their seats to those who need them more, are you one of them?” Posters such as these are ways in which the LTA has tried to use social norms to encourage more thoughtful behaviour among public transport users.

CHECKING RESPONSES

Closely allied with behavioural interventions is the use of randomised controlled trials (RCTs). Just as a brief summary, such trials typically involve having a policy intervention on a small group (called the “treatment group”) and measuring the effects of the policy against a similar group without the policy intervention (called the “control group”). Such “placebo tests” are well established in the clinical profession. Some of the interventions I mentioned earlier were indeed tested using RCTs. It is a positive development worldwide that trials are also becoming popular in policymaking circles.

Especially for behavioural issues, trials are important because the responses of citizens towards a nudge will be highly contextual — a nudge that works well in one context may not do well in another. Conducting trials before the actual roll-out helps policymakers detect any unexpected and unintended behavioural response from citizens. This reduces the likelihood of a wrong intervention.

Sometimes, we also need to ascertain the impact of the intervention and weigh this against the cost. Having an RCT also allows us to do just that.

It should be clear from the examples mentioned that Singapore has incorporated behavioural interventions into policymaking. We will continue to tap the power of behavioural insights.

But we cannot ignore the fact that behavioural interventions also face diminishing returns — something economists are acutely aware of. Gains from these applications will eventually plateau. There is a limit to how much we can vary fonts and the colours of letters. There is also a limit on how many times we can use lucky draws to incentivise citizens towards certain commuting behaviours.

Looking forward, there is great scope for behavioural interventions to be applied in new areas. The digital space is an emerging domain where behavioural study is relatively new and carries great potential.

There are many nudge effects in the online space. For example, the first few comments on a new article may have a disproportionate influence on the tone of the subsequent discussion. Also, how can the silent majority be nudged to speak up in the online space so that a better balance of views is captured?

Another emerging space is smart devices, which most of us carry. How can we apply behavioural insights so that smart devices become a nudge for constructive social behaviour? Or nudge you to stop eating when you have exceeded a daily calorie intake?

Finally, there is still great scope to apply behavioural interventions in more complex problems such as promoting and sustaining philanthropy and volunteerism, as well as forming gracious social norms.

These would be the areas that I see great potential for behavioural insights to be applied, and I urge the community to research more in these areas and share results.

Behavioural economics and insights have come a long way, and will have a key role to play in the public sector. Given its power to shape citizens towards improved well-being, it is important for behavioural insights to be systematically considered in policymaking.

But we must be careful not to overreach. This is but one tool that policymakers can rely on. It should be a complement to traditional approaches and knowledge, to build on and not replace them.

Conferences such as this are important in this regard. Hearing from experts and practitioners help us learn from each other’s experiences, foster new connections and create opportunities for collaboration.

It is my hope that this conference will help us develop an awareness of just how this discipline has progressed in recent years; and explore where we are headed in the near future.


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