27 May 2017

Ethiopia: What Miracle Can Nudges Do That Carrots and Sticks Cannot?

opinion

Having ruled the country for more than a quarter of a century now, the Ethiopian Peoples' Revolutionary Democratic Front (EPRDF) has faced unprecedented and staggering internal and external challenges that have led to the recent nationwide so-called 'Tilq Tehadso', crudely translated as 'deep reform'. These challenges are rooted partly in the mismatch between the increasing demands for good governance and better socio-economic conditions which, it is claimed, naturally follows the magnificent development track record Ethiopia has seen. Nevertheless, there are also numerous cases where the government literally and admittedly failed. His Excellency, Prime Minister Hailemariam Desalegn and other higher government officials were observed expressing their concern about the fact that power abuse, corruption and rent-seeking behaviour were imminent threats to the ruling party.

These days, the state media are busy telling us, time and again, that EPRDF has looked into its internal problems and undergone deep reformation. As part of this, we have seen series of public conferences at different levels of the governance hierarchy. In many cases, the very officials who are tacitly accused of hampering good governance make promises. I am not sure how these people could be genuine.

It worries me to see that the people complain about the system, and almost everyone in the system concedes that the public outcry is utterly true. One may reasonably fall prey to the hunch that the rhetoric in these campaigns does not solve the problem insofar as either the allegedly corrupt people or their corrupt behaviours change.

It will not be a surprise if things go back to where they started, for it is naivety to expect different results if everything continues as business the usual way. As gloomy as it might appear, this pattern leaves me sceptical, and I start to wonder if discussing problems and making confessions in public conferences will be the right level of analysis.

After all, under normal circumstances, individuals hold positions and pass important decisions as per their mandate at all scales of the government structure. And unfortunately enough, not all individuals are willing to do their job exactly as they are supposed to. Some are inherently greedy and corrupt, some lazy and careless, others incompetent, yet others have other hidden agendas. And the story goes on.

The point is that most often than not, individuals misbehave and jeopardise the democratic ideals of the government and its people. I assume most of you probably know more concrete cases of corruption and rent-seeking behaviour than I can mention. Perhaps, apologies for saying this bluntly, some of you might regrettably have done something along those sorts. So how should we address universal problems like corruption and power abuse? How can we promote morally superior and socially desirable behaviour among civil servants, government officials and even employees of for- and non-profit organisations?

The most conventional policy toolbox to change such malice behaviour consists in mainly carrots and sticks. The former being rewards and incentives to promote good behaviour while the latter uses punishments and other coercive measures to deter spiteful behaviour. Each of these has its own merits and demerits, but I will limit the discussion for today to the 'nudge' - a third option which is more subtle but, when carefully designed, an effective way of getting people to do what you want them to do. The nudge, according to Thaler and Sunstein, is an intervention in the form of 'libertarian paternalism' such that the 'choice architect' such as a social planner does not make the situation significantly different but merely tweaks the environment. Individuals find such an environment compelling to make the socially desirable choice with little or no additional cost.

Suppose you are a top officer at an airport where many people want to sneak in despite long queues or get their luggage checked in despite its being above the stipulated weight restrictions. You want to make sure that your workers do not receive bribes. Either the carrot (e.g. reward those who do not receive bribes) or the stick (punish those who do) would require you to closely monitor them, which needs additional man power. This will not only be too costly, but also likely ineffective for two reasons. One, the workers will just get more sophisticated. Two, the 'watchmen' you just hired will probably need other 'watchmen', for they can also be bribed if the stakes are high and the control system is loose. How would you nudge your workers so that they do not take bribes while you do not affect their working conditions?

An insightful nudge which was tried and worked in Nepal is to make the workers wear trousers without pockets. The absence of a pocket or two from a pair of trousers does not affect the workers' welfare, but it does the magic in reducing bribery as it makes it inconvenient for them to accept money and sneak it in. Can we do the same for our traffic police men and women? It should be examined carefully, but it is not trivial.

Back to another problem in airports. Men, for some reason, miss the urinal in airport bathrooms and spill on the floor, as also it may happen definitely elsewhere and more so in bars! Maddened by this, officials at Amsterdam airport tried a simple nudge which reduced spillage by about a remarkable 80pc. They engraved images of flies near the urinal drains and surprisingly enough, men started aiming! It is possible to give dozens of examples, but the reader can find them at their finger tips now.

Nudges may potentially work well in our country too. Farmers' adoption of modern agricultural inputs such as fertilisers and high-yield seeds is among the top priority areas where the government wants universal participation. The farmers themselves would like to, but they either simply procrastinate or are constrained. Besides or apart from subsidies, which take millions of government budget annually, simple nudges could be used to increase adoption and hence agricultural productivity significantly. Carefully designed simple but insightful nudges can be applied in health care (i.e. nudging health professionals and patients alike), education, transport, tax collection, energy, environmental protection and so many more areas.

It will be worth noting that a nudge is, by no means, limited to getting people to do what the government wants them to do. You can apply it in your business to motivate your employees or induce your customers to take your products and services. How many times were you reminded by the spectacular display in fruit and vegetable shops and ended up being seduced to buy on your way home? Married men and women can use nudges to influence their spouse to do what is of love. Parents may use simple tricks that their children will not notice to be manipulative but will render them more obedient.

It may sound a little too strange at first glance, but ideas like removing drawers from offices where low-level civil servants sit may reduce petty corruption. How about banning hand bags from offices for certain areas of service? It takes an open mind which entertains 'wacko ideas' to get harmless nudges that work, but institutionalising them requires more thorough experimentation. To the extent that nudges work on behavioural foundations, there may be cases where nudges backfire if the subjects feel that they are being manipulated. I should admit that a nudge is not a panacea for all forms of power abuse, corruption and lack of good governance, the same way as neither carrots nor sticks can cure the cancer in the political sphere in general and government and non-government institutions in particular. Yet, I believe that its relative ease and efficacy make the nudge an appealing policy option, and EPRDF may consider introducing some harmless and well-thought out nudges.

Ethiopia

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