Making Policies More Effective, Scalable, Customised and Sustainable

ETHOS Issue 17 June 2017

Why Behavioural Insights Are Essential to Public Policy

Public policy affects the lives of many individuals. Traditionally, a policymaker might have expected individuals to behave rationally, and would formulate policies based on that assumption. Behavioural science tells us, however, that people may not always behave rationally: they may instead exhibit systemic biases that end up hurting their interests.

Behavioural insights (BI) have opened doors to new ways of thinking about public policy. A BI approach shifts from a purely rational perspective of policymaking to one that incorporates peoples’ actual views and behaviours. It shuns the traditional assumption that people always make the best decisions, and instead researches how people actually make decisions, before implementing large-scale interventions. It means trying and testing new ideas by placing citizens at the centre of issues and formulating solutions for them. These solutions use deliberately designed behavioural nudges that have a high chance of success in changing the behaviour of an individual for his or her long-term well-being. This is what makes BI unique and powerful.

Innovative Uses of BI in Public Policy

Examples in education, healthcare, sustainability and social norms, in Singapore and other countries, illustrate how BI can provide innovative ways to shape policies that benefit individuals and society.

Lifelong Learning — Short-Term Incentives, Long-Term Impact

Although people know lifelong learning helps them adapt, grow and stay economically competitive, individuals often do not take developmental courses, for various reasons. This behaviour is especially prevalent in small and medium-sized enterprises (SMEs), as these companies lack the resources to conduct in-house training. Instead, they tend to rely on employees’ self-motivation to pursue training courses that enhance their skills and improve employability.

In a 2015 randomised controlled trial that my colleague and I conducted in Singapore,¹ we used proven psychological techniques and a one-time, outcome-based financial incentive to motivate workers from an SME to attend short- and long-term vocational training. The trial presented participants with the opportunity to take two valuable courses for free, by offering a one-time cash incentive of $60. This was offered to workers who finished two courses within four months, to reimburse their out-of-pocket expenses for enrolling. This incentive design not only doubled training participation during the intervention period, but also had a sustained effect of increasing the long-term uptake of courses post-intervention, despite the absence of further incentives.

In this example, a simple nudge in the right direction shifted employee mind-sets and helped individuals to get past the initial hurdle of ‘starting’. More importantly, the nudge helped this mind-set and behaviour to ‘stick’, even after the incentive was removed.

Losing Weight — Different Folks, Different Strokes

To tackle obesity, my colleagues and I devised a public initiative called the Self-Management in Lifestyle Enhancement (SMiLE) programme.² SMiLE provides incentive-based behavioural interventions to help people in Singapore lose 5% of their starting weight while emphasising a lifestyle change and focusing on the health consequences of obesity.

We found that financial incentives offered for weight loss worked very well for men. However, this was not the case for women, who had a higher baseline motivation to lose weight and who responded better when they understood the risks of obesity.

Such gender differences in behaviour affect the efficacy of blanket policies. They challenge traditional thinking and the boundaries of conventional policymaking, which often assumes that target groups will respond to policies in homogeneous ways.

Environmental Sustainability — Keeping Energy Usage Down by Keeping Up with Peers

Opower, a leading provider of energy efficiency cloud services in the United States, uses ‘guilt’ and ‘competition’ as a strategy to help millions of consumers lower their energy bills. Opower’s software platform stores and analyses over 600 billion meter reads from 60 million customers globally. The company then works with energy producers to send detailed energy consumption reports to individual households.

These reports include a bar graph that compares a household’s energy consumption to the community average, and to the community’s most energy efficient households. What makes this report truly effective is a box that grades energy consumption using smiley faces: two smiley faces if a household consumes less energy than 80% of its neighbours; one smiley face if it consumes less energy than most of its neighbours; and no smiley face if a household uses more energy than its neighbours.

Using peer comparison as a messaging strategy has worked. As of March 2017, Opower clients have saved US$1,150,746,800 on their energy bills, abated 13,299,477,900 pounds of CO₂ emissions, and saved 11,694,214,500 kilowatt hours of energy.³ These figures keep increasing by the second.

Who knew that peer comparison and a desire to stay ahead would inspire energy conservation?

Social Norms — Encouraging People to ‘Join the Rest’

Humans are social beings. Describing what most people would do in a certain situation often encourages others to follow.

The UK’s Behavioural Insights Team (BIT) leveraged social norms to increase tax payments. BIT teamed with Her Majesty’s Revenue and Customs department to send letters to people informing them that most people made tax payments on time. This led to a substantial increase in tax payment rates, with the most successful message yielding a 5% increase in tax payments.⁴>

In Singapore, local agencies such as the Land Transport Authority have also adopted social norms to improve the timeliness of tax payments (Editor’s note: see Leong Wai Yan’s article on p. 34).

These examples show how simple nudges can work wonders in changing behaviours. More importantly, such nudges are not costly to implement and can be easily scaled up. That said, there remains many more avenues and opportunities to use, for instance social norms, to change individual behaviour.

Key Areas of Impact for Policymakers

Although a BI approach has the potential to be applied widely, in the context of many developed countries where issues of ageing, integration and sustainability are pertinent, policymakers could yield significant payoffs by focusing on the following areas:

Retirement planning: Many people are not well prepared for retirement. Using BI, we could educate people to adopt a long-term perspective for savings, perhaps as soon as an individual starts his or her working life.

Active ageing: Ageing is a global phenomenon. To delay premature ageing, we could use BI to promote healthy eating and more exercise to stay fit.

Social integration: Many large cities have diverse populations. BI could be used to educate people to be more tolerant of one another, so that there will be less conflict and greater inclusiveness in the society we live in.

Environmental sustainability: Climate change will be a central challenge in the century ahead. We could frame key messages using BI-based principles, educating people to be more environ-mentally responsible by consuming less energy and by adopting behaviours that protect the environment.

The Future of BI — Scalable, Customised and Sustainable

Despite being a developing field, the potential of BI to strengthen public polices has already been demonstrated in a broad range of domains. Going forward, researchers should delve deeper into studying three types of nudges:

1. Scalable nudges that can easily be scaled up and rolled out to a large population at reasonable cost.
2. Customised nudges to account for heterogeneity in individuals, who may respond to behavioural interventions in different ways.
3. Long-term nudges which achieve intervention effects not only when the nudges are first introduced, but are also sustainable over the long-term.

BI-based approaches hold great promise to bring about large-scale changes in behaviour, while allowing for customised solutions and sustainable longer term effects — all at a low cost. By unlocking human potential, these behavioural changes could make people wealthier and happier, society more integrated and the environment cleaner and more sustainable.

NOTES

1. Ho T. H. and Yeung C., “How a One-time Incentive Can Induce Long-Term Commitment to Training”, California Management Review 57(2015): 113–28.
2. For more details, see: SMiLE: Self-Management in Lifestyle Enhancement https://www.youtube.com/channel/UCcpCPBcahOVLB6pb7VKdpyw/videos.
3. From https://opower.com/. As this data is updated continuously, the figures would have changed since this piece was written.
4. From https://www.bi.team/.