The Foreign Service Journal - January/February 2018
22 JANUARY-FEBRUARY 2018 | THE FOREIGN SERVICE JOURNAL Applying Behavioral Economics to the State Department BY ROB K I RK Rob Kirk, a Foreign Service specialist since 2002, has served as an informa- tion management specialist in Paris, Doha, Berlin and Malta. He is currently deputy financial management officer in London. As a child, Mr. Kirk and the rest of his family were expelled from Ethiopia, where his father was defense attaché. During the 1990s, he worked in international development in Africa and Latin America, including stints as deputy headmaster of a school in The Gambia and chief executive officer of a furniture factory in Guatemala. F ew organizations employ as many professional economists as the State Department. But sadly, that economic muscle doesn’t seem to be applied to the department’s inter- nal policies. In order to operate more efficiently and economically, the State Department should apply the copays, incentives and free market principles common in American society to our own employment policies and allowances— and even to the Foreign Service bidding system. In the following, I borrow a number of concepts common in private industry and suggest how they could be employed advantageously at the department. Copays Save Money and Discourage Overconsumption Twice I have shipped cars to post that were worth less than the cost of shipping them. Stealing a lesson from the Health Maintenance Organization industry, if I had even a 10 percent copay, I might opt out of the $3,000 shipment of my $800 car, and choose to sell it instead. These 100 percent allowances encourage overconsumption—costing more money and hurting the environment. Copays could be applied to many allowances: household effects (HHE), unaccompa- nied air baggage (UAB), consumables, unclassified pouch, the Diplomatic Post Office, etc. All allowances would still be heavily subsidized, but the employee would share a portion of the cost, reduc- ing both consumption and cost to the organization. The copays could be budget neutral, going into a pot for rewarding and giving incentives to employees for making green and fiscally responsible decisions such as those outlined below. As an aggregate, the copays and incentives could then be budget neutral to employees. Many of our allowances are entitle- ments, meaning it costs the employee nothing to take advantage of them. Why not take all you can if it doesn’t cost you anything? What if, instead, you were rewarded for not taking an allowance? I’d suggest giving 5 percent of the savings to any employee who chooses not to take an allowance. If I choose not to ship a pri- vately owned vehicle, then I get 5 percent of the estimated $3,000 cost of shipping SPEAKING OUT one. If I choose to only ship 1,000 pounds of my allotted 7,200 pounds of HHE, then I get 5 percent of the savings. The money saved could go into a pot earmarked to first pay out as incentives. We already have some incentives for not using allowances: other allowances! For example, taking family members (EFMs) to post is expensive, because the department has to pay for plane tickets, private schools, R&Rs, larger housing, larger cost of living adjustments, etc. In exchange for not taking EFMs to post, employees are eligible for a Separate Maintenance Allowance that, overall, saves the government quite a bit of money. I see SMA as an incentive to save the department the money associated with having EFMs reside at post—an incentive to forgo an allowance. We could develop similar incentives for our other allowances. If the copays and incentives do not equal out and are imbalanced in the government’s favor (we should have such problems!), money can build up in the incentive account until it is needed. If the imbalance is in the employee’s favor and the pot is empty, then instead of fixed percentages of incentives we can give people shares of the total pot proportionate to the government savings created by their choices. A combination of copays and incentives would encour- age employees to spend taxpayer money more like their own money and less like other people’s money.