The List

The Nudgy State

How five governments are using behavioral economics to encourage citizens to do the right thing.

In the January/February issue of Foreign Policy, behavioral economist Richard Thaler urges governments to "apply behavioral science to find solutions to persistent problems." Here are five places that are already doing just that.

SHIFTING PLATES

United States

U.S. President Barack Obama gave behavioral policymaking its highest profile endorsement yet in 2009 by appointing Harvard legal scholar and Thaler's Nudge coauthor Cass Sunstein to run the White House's Office of Information and Regulatory Affairs. As "regulation czar," Sunstein was given a wide mandate to apply cost-benefit analyses to programs including the new health-care law and the Dodd-Frank financial regulations. Sunstein, who stepped down last summer, was never popular with conservatives, who saw the "libertarian paternalism" of Nudge as nanny-statism in disguise.

From a public point of view, the most visible of the reforms championed by Sunstein may have been the transformation of the FDA's food pyramid, dutifully reviewed and ignored by generations of schoolchildren, into a more intuitive plate design, which shows how much of an average meal should be taken up by fruits, vegetables, grains, protein and dairy. Another program pushed by his office, fueleconomy.gov, allows car buyers to compare fuel costs of a car against an average vehicle -- rather than expressing it in non-intuitive statistics like miles per gallon. Sunstein claims the federal regulations put in place during Obama's first term saved more than $90 billion per year for the U.S. government.

IDEAS IN THE ATTIC

Britain

Prime Minister David Cameron frequently expressed his admiration for Nudge, the ideas of which meshed well with the more state-centric brand of conservatism -- known as "big society" -- that the Tory leader championed on the campaign trail. In 2010, Cameron set up the Behavioural Insights Team -- quickly dubbed the "nudge unit" by the press -- a group of behavioral economists, with Thaler acting as a consultant, given a mandate to "find innovative ways of encouraging, enabling and supporting people to make better choices for themselves."

The unit has undertaken a number of trial programs so far. In one, non-payers of car taxes were sent a letter, including a picture of their car, warning in plain English that their vehicle would be lost if they did not pay up. Including the photo tripled payment rates. The unit has also seen enormous success in informing people by text message that they're late on taxes or fines.

In another intervention, insulation firms set up a service to clean out customers' attics while installing insulation. (It was found that people were much more likely to pay for new energy-saving insulation if they didn't have to go through the trouble of sorting through years worth of junk.) The unit has been an occasional target of ridicule on Fleet Street, but its interventions have been successful enough -- about £300 million ($485 million) in savings so far -- that other governments are looking to copy it.

THE SHAME GAME

New South Wales, Australia

In September 2012, the government of Australia's most populous state announced that it would consult with Britain's nudge unit to formulate new policies over a wide variety of areas. As in other places that have adopted behavioralist ideas, the new plan was decried by some commentators as a "toxic import from Britain" and a "threat ... to democratic public life." But the New South Wales government -- like Britain, controlled by the center-right -- is clearly intrigued by the prospect of increasing government revenue and promoting virtuous behavior in citizens without resorting to direct state interventions.

One program the New South Wales government may copy from Britain is using "peer influence" on citizens. Informing them, for instance, of how much energy their neighbors are using, or how many residents of their town have already paid taxes or fees. By and large, people don't want to be outliers and tend to moderate their behavior if they know that their neighbors are showing them up.

SIGNS POINT TO BETTER

Denmark

In 2010, the behavioral philosopher Pelle Guldborg Hansen set up the Danish Nudging Network, an NGO that partners with governments and companies to develop policies rooted in behavioral theory. Most of its ideas are still in the experimental stage, but some show promise. In one experiment conducted by the network, signs were placed next to light switches at a university saying that 85 percent of students remembered to turn off the light when the left the room. The signs led to a 20-26 percent reduction in lights being left on. In a collaboration with the city of Copenhagen, the nudgers put green footprints leading to trash cans in public spaces, which they found reduced littering by 40 percent.

Sometimes, interventions are not so successful. When the network partnered with the Danish National Railway to put arrows leading to staircases in front of station elevators -- encouraging commuters to take the healthier route of walking up the stairs -- there was almost no effect. Hansen told the Economist, "There are no social norms about taking the stairs but there are about littering."

THE HIV LOTTERY

Western Cape, South Africa

One of the most controversial applications of behavioral economics to public policymaking has been Western Cape Premier Helen Zille's "Get Tested and Win" campaign, launched in 2011, which enters anyone who gets an HIV test into a drawing for cash prizes up to nearly $6,000. The program developed out of a workshop conducted by ideas42, a Harvard-affiliated organization set up to develop psychology- and economics-based strategies for developing social and economic policy. (The name comes from the answer to the meaning of life in The Hitchhiker's Guide to the Galaxy.) The government also worked with ideas42 to develop new strategies to reduce traffic fatalities.

"Get Tested and Win" was blasted by critics, including the South African Medical Association, which called it "inappropriate and medically unethical." It probably doesn't help that Zille, the leader of South Africa's opposition Democratic Alliance party, has also controversially called for HIV-positive men who knowingly have sex without condoms to be charged with murder. But Zille, who criticizes the national government for encouraging a climate of AIDS denialism, is pressing ahead with the initiative. A similar program is also being planned that will enter schoolchildren who attend afterschool programs and pass drug tests into a raffle for shopping vouchers.

ADRIAN DENNIS/AFP/Getty Images

The List

Babies Wanted

A look at the 10 countries with the lowest fertility rates in the world.

A falling total fertility rate, or TFR for short, can be a positive sign -- an indication of better education systems, better health systems, higher incomes, and more job opportunities, especially for women. The countries with the world's top five per capita GDPs all have TFRs, measured as the average number of children that would be born to a woman if she lived to the end of her childbearing years and bore children according to given age-specific fertility rates, below the replacement rate of 2.1. But a low fertility rate, especially coupled with its typically concomitant low mortality rate, can also mean shrinking and aging populations, diminishing numbers of workers, and heavier burdens for taxpayers. And falling economic productivity in just a few countries might affect living standards across the globe. So, should countries welcome a low TFR, or should they fear it?

In "Baby Menace," published in Foreign Policy's January/February 2013 issue, Joshua Keating addresses both sides of the baby debate. On one hand are many prominent leaders, politicians, and pundits who worry that demographic decline is a precursor to economic and cultural ruin; on the other are scholars like Klaus Prettner, a German economist who thinks that a low fertility rate is no reason to panic, as the underappreciated positives of falling fertility will outweigh the better-known negatives.

Here's a look at the 10 countries with the lowest fertility rates in the world -- countries that don't, according to Prettner, have anything to worry about.

1. SINGAPORE

TFR: 0.78 children per woman
Per capita GDP (PPP): $59,700

Singapore's total fertility rate, the world's lowest, has been below replacement and falling since 1976. Young Singaporeans, interested in pursuing careers and not paying for bigger apartments, haven't exactly been rushing to fix the problem. "Other people can have the kids. For me, it's important to have my own money and my own time," one woman told the BBC in November.

But Singapore's leaders are not so relaxed. Former Prime Minister Lee Kuan Yew prophesied in August: "If we go on like [this], this place will fold up, because there'll be no original citizens left to form the majority, and we cannot have new citizens, new PRs to settle our social ethos, our social spirit, our social norms."

The government has been trying to encourage its population to marry earlier and have more babies for years -- sometimes with bizarre results. Some programs make it easier to have kids, such as Marriage and Parenthood Packages offering extended paid maternity leave as well as per-baby cash bonuses and tax breaks. Others make it harder to stay single, such as limiting the construction of single-friendly 500 sq. ft. "shoebox" apartments in certain parts of the city-state. Perhaps fearing the economic repercussions of an aging and immigrant population, the private sector is even joining the cause. A comically sexual rap video meant to raise awareness by poking fun at Singapore's low fertility rate ("I'm a patriotic husband, you my patriotic wife. Lemme book into your camp, and manufacture life") went viral on YouTube in August. Maybe that will work.

2. TAIWAN

TFR: 1.10
Per capita GDP: $37,700

In March 2010, in response to 2009's record low TFR, the Taiwanese government decided it needed a slogan to encourage people to have more babies. The Interior Ministry set up an online poll and offered a cash prize of one million Taiwan dollars ($31,250 U.S.) for the best baby-making catchphrase. The big winner: "Children -- our best heirloom." (Followed by "Happiness is very easy, baby one two three" and -- most inventive -- "It's good to have a child.") But by the end of 2010, Taiwan's TFR had fallen by another 13 percent.

Unfortunately for the Interior Ministry, the chosen slogan, even when bolstered by cash bonuses for each newborn, subsidies for fertility treatments, and funding for babysitters, was no match for the Chinese zodiac, which Taiwan's Council for Economic Planning and Development (CEPD) partly blamed for the baby bust. According to folk belief, 2009 was a "widow's year" and thus unlucky for marriage. And children born in 2010, the Year of the Tiger, were predicted to question authority and cause trouble for themselves, their families, and their employers. The birth rate did increase in 2012 (children born under the dragon will be "not only honest, sensitive and brave, but will also be free from habits like borrowing money or making flowery speeches"), but not enough to solve what Taiwanese President Ma Ying-jeou has dubbed a "national security issue."

The zodiac is just one of several factors at work. According to professor Jack Yue, chairman of the Population Association of Taiwan, the biggest cause of the low fertility rate is the education of women. (In 1950, the average Taiwanese woman had seven children.) And those women, who blame everything from the cost of keeping a child ahead in a competitive society to high housing prices and short maternity leave to Taiwan's uncertain political future and traditional attitudes of men (who is going to do the housework? will he resent my education?), are not as keen on getting married and having children as their mothers were.

Despite the government's efforts at playing matchmaker within Taiwan, many Taiwanese men look abroad for wives  -- Taiwan accounts for the biggest share of foreign marriages worldwide every year. And while the young-and-single trend has been good for pet sales, it doesn't bode well for the future. According to CEPD statistics, if Taiwan's fertility rate continues to fall, over-65s will make up 20 percent of the population in 2020, and 42 percent by 2060.

3. SOUTH KOREA

TFR: 1.23
Per capita GDP: $31,200

In the early 1960s, concerned that high fertility rates would hamper economic growth, South Korea launched a program to encourage couples to have no more than two children. The government offered slogans ("Give Birth Without Thought and Keep Living Like a Beggar"), easy access to contraceptives, and even military exemption for men who had vasectomies. The program was a wild success -- South Korea's TFR fell from above 6 to 2 in a single generation.

But the fertility rate never stopped falling. In 2000, the government tried to reverse the trend, offering early retirement for parents with more than one child, and special mortgages and tuition assistance for families with three children. So much for slogans: In 2010, South Korea's health ministry started turning the lights off early (at 7:30 p.m.) one night a month to encourage employees to go home and "get dedicated to childbirth and upbringing."

Boosting the number of children born each year is a top priority for the government (and of the Catholic Church), and, according to the Korean Institute for Health and Social Affairs, a necessary one if South Korea is to maintain the "social, economic and military power" it has been working hard to gain. But, so far, nothing has worked. This year, single-person homes became Korea's most popular living arrangement. As in Singapore and Taiwan, the younger generation -- pursuing careers and worried about high property prices -- is getting married later.

The problem may be a cultural as well as an economic one. According to Minja Kim Choe, senior research fellow at the East-West Center, most South Korean women don't want to get married until their late twenties, but many men don't want to marry a woman in her thirties -- leaving a very small window for women if they want to start a family.

For those already married, the prohibitive cost of childcare and cram schools, as well as the stress of watching a child go through "exam hell" only to enter a very competitive workplace, are the primary reasons Korean couples don't have more than one child. The South Korean government has been making efforts to reduce the emphasis placed on these after-school "cram schools" -- not only for the sake of fertility rates, but also because it has begun to realize that the education system must foster innovation and creativity rather than simply reward rote learning. Perhaps serious education reform is the only way to stop South Korea's gray tsunami.

4. Bosnia-Herzegovina

TFR: 1.24
Per capita GDP: $8,100

This Balkan country has seen its share of demographic disarray. During the 1992-1995 Bosnian War, an estimated 100,000 Bosnians were killed, and 2.2 million were displaced -- about half the population at the time. While roughly half of those wartime refugees eventually returned home, Bosnia's population never reached prewar levels. Now, the country's net migration rate is zero. Add that to a low fertility rate and you have, according to a 2010 Bloomberg study, the fifth-fastest shrinking country in the world.

Unlike the governments of Singapore and South Korea, the oft-unstable Bosnian government, which was deadlocked for 16 months after inconclusive parliamentary elections in October 2010, has not intervened to increase the TFR. According to one U.N. projection, at this rate, Bosnia-Herzegovina will have the oldest population in the world in 2050.

5. Czech Republic

TFR: 1.27
Per capita GDP: $27,100

When the Czech Republic (then Czechoslovakia) was part of the communist bloc, its total fertility rate lingered comfortably at and above replacement. In Czechoslovakia, as in many of its communist neighbors, the state provided housing, education, and childcare so that mothers could continue to work. In Prague, a young couple could only get an apartment if they were married and had a child. But after the December 1989 Velvet Revolution, such incentives disappeared. The new parliamentary republic shunned the idea of "family policy," perhaps considering it precisely the type of social engineering against which it revolted. In 1990, partly due to the lack of incentives to marry early and have children, partly due to economic instability brought on by the transition to a market economy, and partly due to the same natural societal progression that has been the reason for falling TFRs in so many other countries, Czechoslovakia's rate began to fall.

From 2001-2006, realizing that some family policy was needed to maintain growth (and with a more liberal party in power), the Czech government began enacting policies to encourage women to have children. According to Charles University demographer Jirina Kocourkova, these new policies -- tax breaks for families and seven months paid maternity leave, with additional financial support for a parent wishing to stay at home longer (up to four years) -- contributed to the rise in the Czech Republic's TFR from 2000-2009.

More recently, the republic's fertility rate has decreased again. As Kocourkova points out, ever since government cutbacks in 2008, many of the government's family policies are designed for low-income families, and are not as effective for families in other income brackets. Moreover, at 5.4 percent, the Czech Republic offers one of the lowest percentages of part-time jobs in Europe, a fact that forces women, who are pursuing careers more than in the past, to make an all-or-nothing decision when they chose to return to employment. That makes it less likely for a woman to have a second child.

Luckily for the Czech Republic, a positive net migration rate has kept its population increasing -- setting it apart from many of its Eastern European neighbors, whose populations are on the decline.

6. Lithuania

TFR: 1.27
Per capita GDP: $19,100

In September 2012, Lithuania's population fell to its lowest level in nearly 50 years, due mostly to large numbers of people migrating to Western European countries. According to Vilnius University economist Romas Lazutka, those leaving tend to be young. And more than half immigrate to Britain, one of the few countries to immediately welcome Lithuanian workers after Lithuania joined the European Union in 2004. Now that Lithuanian "colonies" have been established in other countries, it is much easier to start a new life abroad, Lazutka claims. The total number of Lithuania children born abroad has been increasing. (More than 17,000 Lithuanian children were born in Britain over the past decade). In other words, Lithuanians are having babies -- just not in Lithuania.

As in the Czech Republic, and for much the same set of reasons, Lithuania's TFR began to decline after the fall of the Soviet Union. Though the government has tried to remedy the problem, according to a study by the Max Planck Institute of Research, the government has failed to boost the fertility rate significantly because its reforms -- most notably paid maternity leave and childcare financial packages -- have been piecemeal rather than strategic. Due to changing governments every few years, Lithuania has yet to adopt a far-reaching approach that won't shift with the political winds.

If young Lithuanians continue to immigrate in search of better opportunities abroad, the government might be forced to rethink its approach.

7. Ukraine

TFR: 1.29
Per capita GDP: $7,200

Low birth rates often accompany low death rates, but that is not the case in Ukraine, where the death rate is the second highest in the world -- surpassed only by that of South Africa. As a result, Ukraine's old-age dependency ratio (the percentage of people older than 65 per persons aged 15-64) is actually decreasing, which is uncommon in countries with low fertility.

That's not necessarily a good sign, however. Ukraine is one of the fastest-shrinking countries in the world. Though many of its neighbors are also seeing their populations decline, Ukraine is projected to have "the single largest absolute population loss in Europe between 2011 and 2020." Over the next 40 years, the population is expected to shrink by roughly 23 percent. And that old-age dependency ratio is expected to start increasing. All this will happen if Ukraine's fertility rate remains at current levels.

Ukraine's fertility rate has increased since its all-time low of 1.1 in 1999, thanks largely to an improving economy, but most women are still not choosing to have more than one child. According to Brienna Perelli-Harris in her paper published by the Max Planck Institute of Demographic Research, primary reasons for Ukraine's low TFR include inadequate housing, the high cost of childcare, pressure to support aging parents, and general social "anomie" -- a breakdown in social norms that can led to stress, anxiety, and even depression.

In 2006, the Ukrainian government enacted its "Strategy of Demographic Development of Ukraine" in an attempt to improve the living standards for young families, but the "strategy" has not had a significant effect. Despite child allowances and paid maternity leave lasting for up to three years, living standards in the Ukraine remain poor. In addition, according to Perelli-Harris, bureaucratic mismanagement and budget problems mean that, after parents have filled out complicated paperwork and waited in long lines (all with an infant), they often do not receive the financial support they were promised. (In 2012, Ukraine ranked 144th out of 174 countries on Transparency International's 2012 Corruption Perceptions Index.)

8. Romania

TFR: 1.30
Per capita GDP: $12,500

In the mid-1960s, Romanian dictator Nicolae Ceausescu decided that Romania's birth rate, at 1.9, was too low. Any woman who had more than 10 children would be called "Heroine Mother," he said, reserving the less glorious "Maternity Medal" for those who bore only five or six. But the promise of titles and metals did not convince women to forget their poor living conditions, and they did not rise to the occasion. So, Ceausescu tried another tactic: In 1966, he forbade divorces and abortions except in special cases. There were 28 divorces in Romania in 1967; there had been 26,000 the year before. With access to abortions blocked -- essentially the only method of contraception that existed in Romania at the time -- Romania's TFR rose from 1.9 to 3.6 in a single year.

Ceausescu's triumph was short-lived. Although the amount of money the government spent on material incentives to have children rose by 470 percent between 1967 and 1983, in those years the birthrate actually decreased by roughly 40 percent. The government was demanding a TFR that Romanian women, burdened with childcare, full time work, and third-world standards of living, simply would not give. To make matters worse, the maternal mortality rate soared as more and more women died of complications during unsafe and illegal abortions.

Romania has come a long way since Ceausescu's tenure -- its standard of living rose 143 percent just between 1999 and 2008. During its bid for EU membership, Romania worked particularly hard to improve its childcare. Most recently, however, economic problems forced the government to cut its maternity leave to encourage women to return to work earlier.

9. Poland

TFR: 1.31
Per capita GDP: $20,200

As is the case in Lithuania, women in Poland are having fewer children, while Polish women living abroad (especially in Britain) are having more. And according to the Financial Times, the lack of day care, nursery schools, and financial support for new mothers are all to blame.

Women in Poland are also marrying later: Many want to find a good job before they find a husband. And Polish women have also become pickier: When they do marry, they want it to be an equal partnership. "I married when I was 29," one Polish woman told the BBC. "I looked for a husband for a long time. I was looking for somebody who could go to the kitchen and get his own food and find his own socks and underwear."

Women in Catholic and traditional Poland still want to have children, but economic difficulties and the tough job market have made it harder to do that. In 2006, one woman complained to the BBC that Polish women often lost their jobs after they had a child or even because they might get pregnant. Despite reforms starting in 2006, such discrimination has not been totally remedied. Just this year, one woman told the Financial Times that her company prefers to hire young and unmarried women.

In light of these comments, it is no surprise that Poland's low fertility rate has recently become a political problem for center-right premier Donald Tusk, whom the opposition has accused of not doing enough to remedy the problem. In October 2012, Tusk announced a new generous maternity and paternity leave policy as part of a government plan to boost the economy.

10. Slovenia 

TFR: 1.31
Per capita GDP: $28,800

Slovenia has the highest per capita GDP in Eastern Europe, a well-educated work force, and a well-developed family policy. The state has provided one year of parental leave with full compensation since 1986 (unique in the world at the time). Today, benefits include highly subsidized childcare and insurance coverage for multiple fertility treatments. But these measures have had little effect on Slovenia's low fertility rate.

According to Nada Stropnik at Slovenia's Institute for Economic Research and Milivoja Sircelj at Slovenia's Statistical Office, if Slovenia is to reverse the trend, it must revolutionize its approach to gender roles. Women in Slovenia face sex discrimination in the labor market and are expected to assume the primary role in childrearing, they say. Spronik and Sircelj report that having only one child has become a coping mechanism for Slovenian women -- both those who want to continue to work and those who feel burdened at home.

***

Klettner argues that the positive causes of a low TFR -- higher levels of education and more opportunities -- will outweigh its negative results -- a shrinking and aging population. But what if, as in the case of Slovenia and some other countries in this list, the primary causes of low fertility aren't so positive?

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