Traditional policy making has its limitations given human unpredictability

Usual policymaking does not always prove successful given inconsistency of human behaviour. Traditional policy making assumes that people make rational decisions that provide them with the greatest benefit and satisfaction. In economics, rational choice theory states that when individuals are presented with multiple options, they would choose the option that maximizes their individual satisfaction by effectively analysing the costs and benefits of each option available. Behavioural science explores the cognitive processes that govern human thinking and can be used to develop policy tools which influence citizen incentives and behaviours, including abiding by rules and regulations.

Two economics approaches can be used to influence the behaviours: Application of Nudges & Providing incentives & rewarding

The theory of nudging has been widely used by governments and companies to influence the behaviour of citizens and employees. These occur via choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing their economic incentives. Common types of nudges include the communication of messages, reminders, and warnings towards a specific direction, and the increase in the ease and convenience of certain choices for example, In Guatemala, the government sent tax reminders to citizens saying that 64.5% of their fellow citizens had declared their income tax on time. This led to 43% increase in payments in 11 days. Similarly, National Grid, the electric utility provider in New York, sends Home Energy Report comparing household energy consumption with the neighbours.

Whiteshield Partners suggests a 5-step framework for designing a reward program

Whiteshield Partners has focused on the second technique for influencing behaviour, that is designing a country-wide framework for rewarding citizens for completing daily activities considered positive by the government, in the ultimate goal of affecting the citizens’ sub-conscious behaviour in the longer run.

  1. Principle alignment: Every country has a different judgment of what is deemed “good.” Hence, it becomes imperative to establish across different government entities what these “good” principles should be. The principles ought to be based not only on national agendas but also on global priorities. Interviews with ministries and other government entities ensure the alignment on these principles. Whiteshield Partners suggests that the program should always be focused on positive rewards than punishment to citizens.
  2. Behaviour selection & measurement: This step begins by identifying the country’s priorities and challenges that need to be addressed, and then by identifying the behaviours that should be exhibited by economic actors to support the priorities and counter the challenges. The behaviours are chosen based on their priority, the time required to implement the behavioural change, and the cost. Behaviours could be then tracked on a continuous basis (e.g. the number of steps taken per day), or on a one-off basis (e.g. one-time events or challenge-based actions) by using multiple tools such as IoT. Thorough assessment of behaviours and measurement techniques will help in finalising the selection of behaviours based on their impact on the national indicators, the ability to track them, and the ease of their implementation in society. This could be done by conducting surveys and interviews with government entities, the private sector, and other economic actors.
  3. Rewards selection: Rewards should be both tangible and intangible and should be provided by both the public and the private sectors. Some of the rewards could include discounts on traffic fines, “citizen of the year” awards, and extra air miles. Reward assessment should be based on the perceived value of the rewards by the population, the ease of operational integration with existing government platforms, and the financial impact. Financial rewards allocation could be in form of digital currency, crypto currency, or any other currency based on the country’s financial policy, however with careful consideration.
  4. Governance and operational features: Once behaviours and rewards are selected, setting a governance model is essential for the continuous enhancement, maintenance, and monitoring of the reward programme. One appointed government entity should be held responsible for overseeing the operations and coordinating with other stakeholders. This governance model ensures a single point of contact and a clear accountability. The reward programme could be implemented in one platform that could take the form of a mobile application and would act as a dashboard for tracking and rewarding citizens.
  5. Monitoring and after assessment: Once the programme is launched, it is important to set up a monitoring framework to assess its impact. Tracking KPIs and opinion surveys are a few of the possible techniques for the evaluation of the programme. Based on the feedback, the platform can be continuously updated for better involvement.

Governments need to implement behaviour programs carefully considering risks involved

Monitoring citizen behavior on continuous basis poses a threat on the privacy of citizens which might lead them disinterested, eventually opting out of the program. Hence, the governance and communication around the program should always focus on rewarding citizens and not punishing. China social credit system focuses on penalizing citizens and has received a lot of critique from across the world.

Some key learnings for policy makers

Policy makers need to consider certain aspects in mind for making policies complementing with behaviour economics:

  • Policies should be designed keeping in mind with behavioural science aspect considering human unpredictability
  • Reward program should be focused on positives and rewarding people instead of punishing them
  • Policy makers can utilize PPP and technology use for behaviour monitoring. Whiteshield partners has developed multiple online platforms to identify economic activities and utilized IoT based systems for activity tracking.

The long-term behavioural change of citizens is a lengthy process and hence requires continuous government intervention to achieve desired results and impact on National KPIs (e.g. family cohesion, health, reduced obesity and smoking, better law abiding). Successful implementation of a reward program could potentially change citizen lives through positive behavioural incentives.