COE woes: When emotions get in the way of efficiency

SINGAPORE'S policymakers have always had an eye on efficiency. But efficiency may not be a convincing aim for citizens – as seen, for instance, with the perennial hot topic of Certificate of Entitlement (COE) prices.
In a recent interview with local media, Acting Transport Minister Jeffrey Siow disputed the popular narrative that demand from private-hire car (PHC) companies has pushed up COE prices. On the contrary, the PHC market helps to lower demand for private vehicles because it provides an alternative way to access private transport, he said. Without PHCs, there might be many more aspiring car owners competing for COEs. Crucially, the same single COE would serve many more commuters if it is allocated to a PHC, rather than to a privately-owned vehicle, he added.
As with practically any politician's comments on COE prices, Siow's points drew impassioned responses online. Some argued that a COE given to a PHC results in greater congestion, as such drivers are on the road for much longer. Yet, this objection is arguably misaimed. It stems from a lack of clarity over the role of the COE system: as an allocation mechanism for vehicles, or a way to tackle congestion. In his interview, Siow made it clear that he sees the COE system as the former. Congestion, meanwhile, is being tackled by updates to Electronic Road Pricing.
Indeed, the fact that a PHC is more active – and thus serves more Singaporeans – is precisely what Siow cited, in arguing for why it would better deserve a COE. Other objections, however, point to a more fundamental issue: the difficulty of applying cold hard logic in policy areas where decisions are influenced by emotion.
Wants and needs
Given Singapore's policy of zero vehicle population growth, it seems only logical to say that the best allocation of a COE is one that helps more people: that is, to a PHC. The problem is that logic is not the only foundation for policy, particularly in an area as fraught as private transport.
Singapore's civil servants and politicians – not least politicians who used to be civil servants – are well-versed in fundamental concepts of behavioural economics, from nudge theory to moral hazard. Policies are crafted with a careful eye on what sort of behaviour they might incentivise, intended or otherwise.
But beyond objective gain and loss, there are other forces that must be factored in, and which are far less measurable. There are, of course, many commuters who are concerned merely with the convenience of transport, and who will gladly choose not to own a car if there are better alternatives. However, someone who innately aspires to own a car – because of the image associated with this, the social status it conveys, or simply the joy of driving – will not be swayed.
Transport, housing, education, jobs – all of these have been and will likely continue to be hot-button issues because they are tied closely to citizens' aspirations. In this irrational realm of hopes and dreams, objective efficiency is not the metric by which decisions are made. No amount of insisting that every school is a good school, for instance, will stop certain parents from moving house simply to be near brand-name schools.
These impulses cannot be addressed by carefully crafted policies alone. Mindsets themselves must change – and policymakers may have to accept that some irrationality will always remain.

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