Singapore is headed to the Singapore General Election 2015 polls this Friday. For the first time since independence, we will see every single constituency contested.
Parties and politics have suddenly become the hottest conversation topic. Over a meetup with friends recently, we chatted about the PAP and the opposition candidates and who would be better option for Singapore. Friends whom I have always known to be apolitical are now taking an extremely keen interest in the hustling.
Despite differences in opinion, we have established some common ground. The PAP has done Singapore good over the past half century, we all grudgingly agreed. Out of all the parties, they have the most complete slate of candidates.
Interestingly, despite having no doubt about the ability of the ruling party, most of us at the supper table were reluctant about giving them our votes outright.
A couple of my friends went as far as to say that they are not going to vote for the PAP because they do not feel like it.
It gnawed at me. Is it not true that a General Election is about voting in the best people to run the country? And since we have more or less already established that the ‘best’ people to run the country are in fact the PAP why are we not giving them our votes without reservation?
To complicate things even more, my friends at supper are highly educated professionals who are counted on to make high level decisions for their companies and organisations. They are deemed to be rational citizens who ought to vote in the best interest of self and country. Is there something seriously wrong somewhere?
Thaler and Behavioural Finance
I found my answer in the works of Richard Thaler.
Thaler is a American economist and Professor at the University of Chicago Booth Graduate School of Business. He specialises in behavourial finance – using psychological principles to understand how people makes money decisions.
While especially important for finance, the applications are not limited to investing and money. At its core, behavioural finance examines how people makes decisions.
In his book – Misbehaving, The Making of Behavoural Economics, Thaler introduces two kinds of utility – Acquisition Utility and Transaction Utility. He explains them via the following experiment.
When is a beer more than a beer?
He asked participants to imagine that they are on a beach on a hot and sunny day. They have been longing for an ice cold beer for the past hour. Just then, they received a call from a friend saying he is able to bring back a beer from either a fancy resort hotel or a small rundown grocery stall down the road. The participants were then asked how much they were willing to pay for the beer.
Interestingly, participants who were told that the beer was from a resort hotel were willing to pay up to $7.25. Those who were told that the beer is from a street side stall were only willing to part with $4.10.
Now, a beer is a beer. If you are hot and thirsty, there should be no difference between how much you are willing to pay for a beer to be consumed on the beach. The origins of the beer should have no bearing on the ‘value’ you place on it
That is how rational people should think – they should be willing to give up in monetary terms up to what the perceived value of the beer is, no more and no less. That is in essence the Acquisition Utility of the beer.
Unfortunately, human beings do not always think that way. In making many decisions, human beings tend to stray away from the path of rationality. In this case, they also tend to weigh another aspect of the purchase – the perceived quality of the deal. This, according to Thaler, is what Transaction Utility is all about.
Paying seven bucks for a beer at a resort is annoying but expected. Paying that at anywhere else is an outrage!
He brings up another example – that of paying three times more for a sandwich at a sporting event versus what you would pay for the sandwich at lunch. The sandwich is fine, but the deal stinks.
Negative Transaction Utility
Based on Richard Thaler’s theory, I gained some insight into my friends’ thinking process.
From the ruling party, we get good (enough) clean (enough) governance. There is little doubt that policies are made with the country’s interest at heart. It is difficult to find another party that will do as well. The Acquisition Utility of voting for the ruling party is high.
On the other hand, it seems that the transaction utility of voting for the ruling party is highly negative. The deal is so bad that they are willing to forgo the better party for a lesser one because voting for the opposition makes them feel so much better. I suggest three reasons why this could be so.
In the 2011 General Elections, Workers Party candidate Yee Jenn Jong lost the Joo Chiat SMC by 388 votes to incumbent Charles Chong. Since then, he has done some good work on the ground and is poised to put up another good fight. That is, until the entire Joo Chiat SMC is to be merged with Marine Parade GRC in the coming GE. In one fell swoop, the effort Yee has put in over the past four years is now amounting to almost nothing.
The formation of Moulmein Kallang GRC in 2011 and the subsequent dissolution in 2015 seems baffling at first. It becomes less so when we realized that in 2011, Lui Tuck Yew is a rising political star without a GRC to helm and in 2015, an outgoing transport minister who will not be contesting in the coming GE.
I remembered in the previous two GEs the topic of gerrymandering is still a keenly debated one. Opposition candidates questioned the boundary changes furiously. In this latest GE, save for a few jibes here and there, there is little mention to this issue. The electorate had either grown more accepting or they have become resigned. I am going for the latter.
And it is this uneven playing field and the perceived unfairness that could lead to negative transaction utility when voting for the ruling party. Backing the ruling party becomes akin to backing the schoolyard bully – deemed a pariah if he loses and unsatisfying if he wins.
High Ministerial Salary
This issue has been flogged to death in parliament and in the online spaces, and I am not here to discuss the merits or demerits of it.
I understand the very practical considerations the government has in trying to attract and retain capable men and women to serve.
However, this does not detract from the fact that we have the highest paid politicians in the world. No one likes to pay the highest price in the world. You will want the cheapest and best, not the most expensive and ‘perhaps’ the best.
The very act of paying for the most expensive ‘something’ makes the transaction utility highly negative.
When I was in secondary three my English teacher made a remark about our press. She told us to take a closer look whenever we see pictures of opposition politicians in the Straits Times. They would always look combative and they would always have their mouths open, she said.
Till today, I would always do a double take at the photos. I cannot help but be amazed by how right she still is (it has gotten somewhat better though) after all these years. Many pictures are selected for opposition politicians to look anything but flattering.
What she did then was to expose me to the power of the media.
The implicit statement is this – to vote for the PAP means that we are compliant with the propaganda that the mainstream media is pushing out. It means that we cannot see through the veiled political messages disguised as news.
Voting for a party that has to resort to such ‘trickery’ only goes to show how much respect it has for the electorate as informed and intelligent thinking adults.
No one likes to be taken for a ride. In this instance, the transaction utility of voting for the ruling party goes into negative territory once again.
My friends could not explain why they are reluctant to vote the ruling party. They know that something is not right and that they do not feel good in voting a certain way, but they were unable to place it.
Through the principles of behavioural science, a simple explanation emerges. As much as we think we are voting with our heads, scrutinizing manifestos and weighing the candidates put forward meticulously, more often than not we are voting with our hearts. (We are exactly like that when it comes to investing!)
In the case of the ruling party, our heads tell us that the sandwich is fine, but our hearts says that the deal stinks.