• The ‘nudge’ theory and policy-making in Malaysia

    (This article can also be read at the Penang Institute in KL Column in the Malaysian Insight, 15th October 2017)

    EARLIER this week, Professor Richard Thaler was awarded the Nobel Prize for Economics for his contribution to the field of behavioural economics. He is probably most well-known for his “Nudge” theories on providing incentives to change people’s behaviours on a number of dimensions, such as one’s propensity to save money or to switch to a healthier lifestyle.

    In 2010, the transition of behavioural economics from a marginal topic in the discipline to mainstream public policy making was formalised with the establishment of a Behavioural Insights Team (BIT) or better known as the “Nudge Unit” within the Cabinet Office in the United Kingdom government. Around the same time, Thaler’s co-author for the best-seller “Nudge: Improving Decisions About Health, Wealth, and Happiness”, Professor Cass Sunstein, worked as a regulatory ‘czar’ in Obama’s White House from 2009 to 2012 and a “Nudge Unit” was formally established in Obama’s White House in 2015 via executive order.

    Some examples of the UK’s Nudge unit achievements include using various telephone messages to encourage greater participation in organ donation drives and personalised messages to increase the percentage of those who pay their government fines on time.

    Such “nudge units” are fashionable among politicians and policy makers, because the positive results arising from such initiatives are usually measurable and yield benefits which far surpass the low-cost implementation methods.

    How likely will such “nudge” ideas find their way to our shores? To answer this question, we must first understand the potential obstacles that lie in the way of implementing such initiatives in Malaysia.

    Firstly, we have scarcely any local experts in the field of behavioural economics in our public and private universities. Whereas places like the UK, the US and Australia have established economists working in this field and full-fledged research centres dedicated to the testing and implementation of ‘nudge’ initiatives, we would be hard pressed to find even one well-trained and experienced Malaysian behavioural economist.

    Secondly, for any ‘idea’ to take root in a government, the politicians in charge must have some basic level of understanding of that ‘idea’. For example, most politicians and senior civil servants in Malaysia are familiar with the “Blue Ocean Strategy” (for better or for worse) through exposure to the authors of the book and various consultants who have formulated ways to weave this marketing theory into our government machinery. By contrast, few of our Malaysian politicians or senior civil servants are familiar with the concepts underlying behavioural economics and how these ‘nudge units’ can potentially work for the benefit of the population.

    Thirdly, many of the initiatives undertaken by these ‘nudge units’ use randomised control trials (RCTs) to evaluate the effectiveness of various ‘tweaks’ in order to find the method with the highest returns. This kind of experimentation, although commonplace in clinical trials, could be terrifying for our civil servants and the wider population. Imagine telling a civil servant to issue different variations of a speeding fine or ‘saman’ notice to registered car owners as a test, to see which would result in the most fines being paid. He or she would find it difficult, to say the least, as it goes against the typical government procedure of standardising such documents. Additionally, car owners may doubt the authenticity of their fines, if they compare their own letter to that of others and find that the wording is different.

    Furthermore, such experimentation may require a ‘control group’ to benchmark the performance of tested subjects. If incentives are given out to the test group, but withheld from the ‘control group, the ministry or government department in question may very well be criticised for unfairly ‘rewarding’ one group and ‘punishing’ the other.

    This being said, I do not think that it is impossible for such ‘nudge’ experiments to be tried out in Malaysia. However, for it to be feasible, the pilot project will need to be conducted using a very limited and carefully selected sample size, using a research design that is well-thought out. Policy makers and politicians also need to be assured that these social experiments won’t come back to haunt them and that the potential benefits could be significant.

    It would be very useful, for example, to identify communities which are especially prone to diabetes and provide incentives for such families to decrease their sugar intake via cash payments or the provision of healthy replacements in lieu of sugar.

    The Ministry of Consumer Affairs can also work with supermarkets and hypermarkets to display healthier foods in more prominent locations and make them more visually appealing. This would be a far more effective strategy to deal with health problems associated with high sugar intake, instead of merely raising sugar prices across the board. Such ‘nudges’ to reduce diabetes rates could well result in a much healthier population and lower health care costs for the government.

    * Dr Ong Kian Ming is the Member of Parliament for Serdang, Selangor and is also the General Manager of Penang Institute in Kuala Lumpur. He holds a PhD in Political Science from Duke University, an MPhil in Economics from the University of Cambridge and a BSc in Economics from the London School of Economics.

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