Pushing for the art of nudging the people

H is work has helped launch a behavioural economics revolution now reshaping policymaking worldwide.

Yet law professor Cass Sunstein's message to governments is a simple one: Approach policymaking with humility and modesty.

The former regulatory czar of the Obama administration and an influential Harvard don, Prof Sunstein, 59, was in town last week to speak to civil servants at a symposium at the Civil Service College.

The professor is widely considered to be among those who pioneered the application of insights from behavioural economics and psychology to public policy.

Try as they might, governments often do not have all the information they need to design the best possible policies, said Prof Sunstein.

Quoting from a 1944 speech of the aptly named Mr Learned Hand, known as one of America's most influential and respected judges, he said: "The spirit of liberty is the spirit that is not too sure it is right."

The judge's remarks had urged Americans to avoid dogmatism and remain open-minded - a quality modern-day policymakers should aim to embody.

That message seems all the more important today in Singapore, where a more vocal population and seemingly ever more complex policies are creating confusion and sometimes unhappiness over policies such as the Central Provident Fund scheme.

While declining to comment on Singapore specifically, Prof Sunstein does allow this: "I know Singapore has extraordinarily educated citizenry, and that is the best foundation for productive interactions between government and citizens.

"If people are involved in constructing policies, then these policies have a legitimacy that is greater than if the government were dictating them."

Soft-spoken and genial, the professor seems far removed from Washington's stereotypically hard-nosed lawmakers. His fatherly air is in keeping with the approach to policymaking that he advocates: nudging instead of shoving.

Rather than laying down mandates or implementing bans which threaten people into not doing something, the idea of nudging is based on research that shows it is possible to steer people towards better decisions through the use of policy mechanisms.

Examples of these include automatic enrolment in retirement savings schemes and equipping people with methods to measure their energy consumption.

This is because - contrary to the assumption of textbook economics - human beings do not 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.

The use of behavioural economics to better inform policymaking has been growing in popularity in Singapore's public service, with several government bodies already piloting such methods.

With policies becoming increasingly sophisticated, governments the world over are facing the challenge of keeping them both effective and easy to understand.

Behavioural economics offers some insights into doing this well, said Prof Sunstein.

Governments should not only actively invite public comment on their policies, but also build in mechanisms to correct their own mistakes. One way to do this is to have "regulatory look-back" mechanisms - a commitment to evaluate policies at regular intervals.

For instance, the government can "nudge" itself by allowing a policy to automatically lapse after a certain number of years if no action is taken to reinstate it.

Policymakers - whom he calls "choice architects" because they build up the structures around which citizens make decisions about their lives - can themselves benefit from good choice architecture, said Prof Sunstein.

He also emphasised the importance of basing policies on real-world evidence.

"(Empirical research) doesn't always get people marching, but it can be indispensable to helping governments do better."

However, Prof Sunstein noted that critical to the behavioural approach to policymaking is citizens' trust in the government, as nudges will go down well only if people believe in its good intentions.

This entails not just embracing a spirit of openness during the process, but also not hiding the fact that nudges are being used.

"I do think that it is very important for public officials to respect citizens, and so you shouldn't hide nudges - you should be completely open and transparent about them," said Prof Sunstein, adding that empirical evidence shows nudges can be effective even when people know they are being nudged.

"If people don't want to do something simply because the government is suggesting it, then the government should probably work harder to gain people's trust."

Trust can be bolstered by a better understanding of policies and governments can help make policies more accessible by taking a simpler, more targeted approach.

"Human beings have limited bandwidth... they have limited capacity to pay attention to things. Simplification is a way of reducing the bandwidth tax," said Prof Sunstein.

He cited, as an example, a United States government programme that entitles children from lowerincome households to free meals at school.

To increase the take-up rate, the programme was tweaked to include eligible families by default.

"If the government knows that you qualify for a programme because it knows you are young or poor or a small company, then it can personalise the experience of applying for the programme to you, so you don't have to fill out the forms."

Private companies are already capable of tailoring websites and advertisements to the preferences of individual consumers, and public institutions are likely to increasingly follow in their footsteps over the coming decade, he added.

Amid growing evidence backing the effectiveness of nudges, worldwide interest in the use of behavioural economics to inform policymaking has been rising in recent years, he said.

There will be a "flowering" of such policy initiatives in the next 50 years, said Prof Sunstein.

While some governments, including those in Britain and the US, have set up specialised behavioural insight units, another method of integrating these into policymaking is to have officials in positions of authority who know about behavioural tools, he added.

"I think many nations will find in the coming decades that if you have leaders in the government who know about this, then you can have better policies."

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.

In response, Prof Sunstein said that policies which do not respect individual freedom - usually mandates or bans - can sometimes be necessary.

For instance, forced-savings programmes, such as the CPF 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.

Areas such as crime and automobile safety might also warrant "more than a nudge", he added.

Still, criticisms that the use of nudges diminishes individual choice are "based on a misunderstanding of what the whole idea is about".

"There is zero loss of individual choice and individual freedom," he said.

Citing some examples of nudges in action, he said that in order to address a public health problem like smoking, a government may use graphic health warnings. But smokers can say, "I see the warning, it's pretty grim, but I like to smoke. I will take my chances".

Similarly, to save paper, a company may set all its printers by default to print on both sides of a page, but an employee can choose to print on only one side if that is so desired.

To the professor, it is clear that the whole idea of a nudge is that people ultimately have to choose for themselves.

"But when they are choosing for themselves, they might also be able to benefit from a little help," he said.

chiaym@sph.com.sg

This article was first published on August 3, 2014.
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