elb's hovel of thoughts

Wednesday, January 04, 2006

Incentives: MyKad and Israeli parent latecomers

What do MyKad latecomers, Malaysian traffic offenders and young Israeli parent latecomers have in common? As I read about the gaggle and influx of last minute (of free) MyKad applicants, I could not help but to wonder what it was really about the Malaysian mentality that has conditioned it to behave the way it is.

My mind flashed back to a case study of Israeli parents, published in the excellent business book, Freakonomics, by Steven Lewitt. Here is the problem:

Parents are often late picking up their children from day-care centres. As a result, children are anxious and teachers need to stay back to wait for parents.

What would you do? Economists decided to introduce a fine system, and test it at ten day-care centres in Israel for a period of time. For the first few weeks, statistics were gathered and a mean, X was obtained. Then it was announced that any parents more than several minutes late would need to pay a small amount of money, which would be added to the fees.

Now, what would you expect? X should have dropped down, right? Wrong. X increased to 2.5X. A staggering increase of 250%! How is this possible? Shouldn't X have decreased by 40%, or 70%, or whatever?

Basically, incentives could used to explain the situation. It helps to urge people to do more of a good thing and less of a bad thing (bad and good being subjective of course). There exist three different types of incentives - economic, social and moral. Some of the strongest incentives exist to deter crime - business or civil. Don't you think that crime rates would be much higher without such incentives?

Back to the day care centres - people can argue that a small fine of a few dollars is not a powerful deterrent. That's probably true. An excessive fine for something like a day-care centre is not a good idea however. Then again, the fine for MyKad latecomers at RM10 is what, two cheap lunches, for such an important document. It should be even higher. Plus, the people have been given more than sufficient time to renew it.

However the main problem is that the economic incentive (few dollars penalty) had substituted the moral incentive (the guilt for picking the children up late). For a small sum of money, the parents could buy off their guilt for coming late to pick their children up.

How about MyKad applicants? The problem is that I feel there is NO sufficient moral and economic incentive. Late? So what? Malaysians know they can get away with it. It is nothing new; they have gone through similar scenarios before. To compare: For the last part of the day-care centre study, the fine was removed. The number of late parents continued at 2.5X. They could arrive late, pay no fine, and feel no guilt.

How about for traffic offenders? The economic and moral incentive - RM300 + eventual loss of license and the guilt at breaking the law - is virtually non existant - Malaysians know that they can escape guilt-free. After all, it only takes a few red coloured bank notes to substitute both incentives.

And even if the summons are served, most people don't pay up, because there is little economic or moral incentive - the police generally won't go after them, they know that every now and then the police would offer 'discounts', etc. Ditto other Malaysian attitudes and problems.

Ah heck. I'm too lazy and too busy with studies to fully flesh this out. Grab the book if you wish to understand better. But I hope you got the gist of my little post. Also, the government needs to hire more people who know economics, if you ask me. Imposing too low an economic incentive (i.e. the low RM10 fine - unless you are kiasu or something) just contributes into the making of the Malaysian mentality. Wait-lah, no need to hurry one, the gahmen only charge RM10, we can do it when the queue is smaller. Wait-lah, no need to worry la, RM30 can kautim this officer. Etc.

To summarize: The ugly aspects of the Malaysian mentality could be potentially overcome if we understand and apply properly the concept of incentives. Perhaps the salvation of the Malaysian mentality lies in the hands of adept economists, not anthropologists and apologists.

*Disclaimer: These are my personal opinions, not that of an expert.

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