A Behavioral Economics Approach to Digitalisation

Curated on Posted on by Stefaan Verhulst

Paper by Dirk Beerbaum and Julia M. Puaschunder: “A growing body of academic research in the field of behavioural economics, political science and psychology demonstrate how an invisible hand can nudge people’s decisions towards a preferred option. Contrary to the assumptions of the neoclassical economics, supporters of nudging argue that people have problems coping with a complex world, because of their limited knowledge and their restricted rationality. Technological improvement in the age of information has increased the possibilities to control the innocent social media users or penalise private investors and reap the benefits of their existence in hidden persuasion and discrimination. Nudging enables nudgers to plunder the simple uneducated and uninformed citizen and investor, who is neither aware of the nudging strategies nor able to oversee the tactics used by the nudgers (Puaschunder 2017a, b; 2018a, b).

The nudgers are thereby legally protected by democratically assigned positions they hold. The law of motion of the nudging societies holds an unequal concentration of power of those who have access to compiled data and coding rules, relevant for political power and influencing the investor’s decision usefulness (Puaschunder 2017a, b; 2018a, b). This paper takes as a case the “transparency technology XBRL (eXtensible Business Reporting Language)” (Sunstein 2013, 20), which should make data more accessible as well as usable for private investors. It is part of the choice architecture on regulation by governments (Sunstein 2013). However, XBRL is bounded to a taxonomy (Piechocki and Felden 2007).

Considering theoretical literature and field research, a representation issue (Beerbaum, Piechocki and Weber 2017) for principles-based accounting taxonomies exists, which intelligent machines applying Artificial Intelligence (AI) (Mwilu, Prat and Comyn-Wattiau 2015) nudge to facilitate decision usefulness. This paper conceptualizes ethical questions arising from the taxonomy engineering based on machine learning systems: Should the objective of the coding rule be to support or to influence human decision making or rational artificiality? This paper therefore advocates for a democratisation of information, education and transparency about nudges and coding rules (Puaschunder 2017a, b; 2018a, b)…(More)”.

After the flood, the flood map: uncovering values at risk

Curated on Posted on by Stefaan Verhulst

Rebecca Elliott at Work in Progress: “Climate change is making the planet we inhabit a more dangerous place to live. After the devastating 2017 hurricane season in the U.S. and Caribbean, it has become easier, and more frightening, to comprehend what a world of more frequent and severe storms and extreme weather might portend for our families and communities.

When policymakers, officials, and experts talk about such threats, they often do so in a language of “value at risk”: a measurement of the financial worth of assets exposed to potential losses in the face of natural hazards. This language is not only descriptive, expressing the extent of the threat, it is also in some ways prescriptive.

Information about value and risk provides a way for us to exert some control, to “tame uncertainty” and, if not precisely predict, at least to plan and prepare prudently for the future. If we know the value at risk, we can take smart steps to protect it.

This logic can, however, break down in practice.

After Hurricane Sandy in 2012, I went to New York City to find out how residents there, particularly homeowners, were responding to a new landscape of “value at risk.” In the wake of the catastrophe, they had received a new “flood insurance rate map” that expanded the boundaries of the city’s high-risk flood zones.

129 billion dollars of property was now officially “at risk” of flood, an increase of more than 120 percent over the previous map.

And yet, I found that many New Yorkers were less worried about the threat of flooding than they were about the flood map itself. As one Rockaway man put it, the map was “scarier than another storm.”

Far from producing clear strategies of action, the map produced ambivalent actors and outcomes. Even when people took steps to reduce their flood risk, they often did not feel that they were better off or more secure for having done so. How can we understand this?

By examining the social life of the flood insurance rate map, talking to its users (affected residents as well as the experts, officials, and professionals who work with them), I found that the stakes on the ground were bigger than just property values and floods. Other kinds of values were threatened here, and not just from floods, complicating the decision of what to do and when….(More)”.

The Stoplight Battling to End Poverty

Curated on Posted on by Stefaan Verhulst

Nick Dall at OZY: “Over midafternoon coffees and Fantas, Robyn-Lee Abrahams and Joyce Paulse — employees at my local supermarket in Cape Town, South Africa — tell me how their lives have changed in the past 18 months. “I never dreamed my daughter would go to college,” says Paulse. “But yesterday we went online together and started filling in the forms.”

Abrahams notes how she used to live hand to mouth. “But now I’ve got a savings account, which I haven’t ever touched.” The sacrifice? “I eat less chocolate now.”

Paulse and Abrahams are just two of thousands of beneficiaries of the Poverty Stoplight, a self-evaluation tool that’s now redefining poverty in countries as diverse as Argentina and the U.K.; Mexico and Tanzania; Chile and Papua New Guinea. By getting families to rank their own economic condition red, yellow or green based upon 50 indicators, the Poverty Stoplight gives families the agency to pull themselves out of poverty and offers organizations insight into whether their programs are working.

Social entrepreneur Martín Burt, who founded Fundación Paraguaya 33 years ago to promote entrepreneurship and economic empowerment in Paraguay, developed the first, paper-based prototype of the Poverty Stoplight in 2010 to help the organization’s microfinance clients escape the poverty cycle….Because poverty is multidimensional, “you can have a family with a proper toilet but no savings,” points out Burt. Determining questionnaires span six different aspects of people’s lives, including softer indicators such as community involvement, self-confidence and family violence. The survey, a series of 50 multiple-choice questions with visual cues, is aimed at households, not individuals, because “you cannot get a 10-year-old girl out of poverty in isolation,” says Burt. Confidentiality is another critical component….(More)”.

The rush for data risks growing the North-South divide

Curated on Posted on by Stefaan Verhulst

Laura Mann and Gianluca Lazzolino at SciDevNet: “Across the world, tech firms and software developers are embedding digital platforms into humanitarian and commercial infrastructures. There’s Jembi and Hello Doctor for the healthcare sector, for example; SASSA and Tamween for social policy; and M-farm, i-Cow, Esoko among many others for agriculture.

While such systems proliferate, it is time we asked some tough questions about who is controlling this data, and for whose benefit. There is a danger that ‘platformisation’ widens the knowledge gap between firms and scientists in poorer countries and those in more advanced economies.

Digital platforms serve three purposes. They improve interactions between service providers and users; gather transactional data about those users; and nudge them towards behaviours, activities and products considered ‘virtuous’, profitable, or valued — often because they generate more data. This data  can be extremely valuable to policy-makers interested in developing interventions, to researchers exploring socio-economic trends and to businesses seeking new markets.

But the development and use of these platforms are not always benign.

Knowledge and power

Digital technologies are knowledge technologies because they record the personal information, assets, behaviour and networks of the people that use them.

Knowledge has a somewhat gentle image of a global good shared openly and evenly across the world. But in reality, it is competitive.
Simply put, knowledge shapes economic rivalry between rich and poor countries. It influences who has power over the rules of the economic game, and it does this in three key ways.

First, firms can use knowledge and technology to become more efficient and competitive in what they do. For example, a farmer can choose to buy technologically enhanced seeds, inputs such as fertilisers, and tools to process their crop.

This technology transfer is not automatic — the farmer must first invest time to learn how to use these tools.  In this sense, economic competition between nations is partly about how well-equipped their people are in using technology effectively.

The second key way in which knowledge impacts global economic competition depends on looking at development as a shift from cut-throat commodity production towards activities that bring higher profits and wages.

In farming, for example, development means moving out of crop production alone into a position of having more control over agricultural inputs, and more involvement in distributing or marketing agricultural goods and services….(More)”.

Illuminating GDP

Curated on Posted on by Stefaan Verhulst

Money and Banking: “GDP figures are ‘man-made’ and therefore unreliable,” reported remarks of Li Keqiang (then Communist Party secretary of the northeastern Chinese province of Liaoning), March 12, 2007.

Satellites are great. It is hard to imagine living without them. GPS navigation is just the tip of the iceberg. Taking advantage of the immense amounts of information collected over decades, scientists have been using satellite imagery to study a broad array of questions, ranging from agricultural land use to the impact of climate change to the geographic constraints on cities (see here for a recent survey).

One of the most well-known economic applications of satellite imagery is to use night-time illumination to enhance the accuracy of various reported measures of economic activity. For example, national statisticians in countries with poor information collection systems can employ information from satellites to improve the quality of their nationwide economic data (see here). Even where governments have relatively high-quality statistics at a national level, it remains difficult and costly to determine local or regional levels of activity. For example, while production may occur in one jurisdiction, the income generated may be reported in another. At a sufficiently high resolution, satellite tracking of night-time light emissions can help address this question (see here).

But satellite imagery is not just an additional source of information on economic activity, it is also a neutral one that is less prone to manipulation than standard accounting data. This makes it is possible to use information on night-time light to monitor the accuracy of official statistics. And, as we suggest later, the willingness of observers to apply a “satellite correction” could nudge countries to improve their own data reporting systems in line with recognized international standards.

As Luis Martínez inquires in his recent paper, should we trust autocrats’ estimates of GDP? Even in relatively democratic countries, there are prominent examples of statistical manipulation (recall the cases of Greek sovereign debt in 2009 and Argentine inflation in 2014). In the absence of democratic checks on the authorities, Martínez finds even greater tendencies to distort the numbers….(More)”.

The Cost-Benefit Revolution

Curated on Posted on by Stefaan Verhulst

Book by Cass Sunstein: “Why policies should be based on careful consideration of their costs and benefits rather than on intuition, popular opinion, interest groups, and anecdotes.

Opinions on government policies vary widely. Some people feel passionately about the child obesity epidemic and support government regulation of sugary drinks. Others argue that people should be able to eat and drink whatever they like. Some people are alarmed about climate change and favor aggressive government intervention. Others don’t feel the need for any sort of climate regulation. In The Cost-Benefit Revolution, Cass Sunstein argues our major disagreements really involve facts, not values. It follows that government policy should not be based on public opinion, intuitions, or pressure from interest groups, but on numbers—meaning careful consideration of costs and benefits. Will a policy save one life, or one thousand lives? Will it impose costs on consumers, and if so, will the costs be high or negligible? Will it hurt workers and small businesses, and, if so, precisely how much?

As the Obama administration’s “regulatory czar,” Sunstein knows his subject in both theory and practice. Drawing on behavioral economics and his well-known emphasis on “nudging,” he celebrates the cost-benefit revolution in policy making, tracing its defining moments in the Reagan, Clinton, and Obama administrations (and pondering its uncertain future in the Trump administration). He acknowledges that public officials often lack information about costs and benefits, and outlines state-of-the-art techniques for acquiring that information. Policies should make people’s lives better. Quantitative cost-benefit analysis, Sunstein argues, is the best available method for making this happen—even if, in the future, new measures of human well-being, also explored in this book, may be better still…(More)”.

Message and Environment: a framework for nudges and choice architecture

Curated on Posted on by Stefaan Verhulst

Paper by Luca Congiu and Ivan Moscati in Behavioural Public Policy: “We argue that the diverse components of a choice architecture can be classified into two main dimensions – Message and Environment – and that the distinction between them is useful in order to better understand how nudges work. In the first part of this paper, we define what we mean by nudge, explain what Message and Environment are, argue that the distinction between them is conceptually robust and show that it is also orthogonal to other distinctions advanced in the nudge literature. In the second part, we review some common types of nudges and show they target either Message or Environment or both dimensions of the choice architecture. We then apply the Message–Environment framework to discuss some features of Amazon’s website and, finally, we indicate how the proposed framework could help a choice architect to design a new choice architecture….(More)”.

Long Term Info-structure

Curated on Posted on by Stefaan Verhulst

Long Now Foundation Seminar by Juan Benet: “We live in a spectacular time,”…”We’re a century into our computing phase transition. The latest stages have created astonishing powers for individuals, groups, and our species as a whole. We are also faced with accumulating dangers — the capabilities to end the whole humanity experiment are growing and are ever more accessible. In light of the promethean fire that is computing, we must prevent bad outcomes and lock in good ones to build robust foundations for our knowledge, and a safe future. There is much we can do in the short-term to secure the long-term.”

“I come from the front lines of computing platform design to share a number of new super-powers at our disposal, some old challenges that are now soluble, and some new open problems. In this next decade, we’ll need to leverage peer-to-peer networks, crypto-economics, blockchains, Open Source, Open Services, decentralization, incentive-structure engineering, and so much more to ensure short-term safety and the long-term flourishing of humanity.”

Juan Benet is the inventor of the InterPlanetary File System (IPFS)—a new protocol which uses content-addressing to make the web faster, safer, and more open—and the creator of Filecoin, a cryptocurrency-incentivized storage market….(More + Video)”

Farsighted

Curated on Posted on by Stefaan Verhulst

Book by Steven Johnson: “Big, life-altering decisions matter so much more than the decisions we make every day, and they’re also the most difficult: where to live, whom to marry, what to believe, whether to start a company, how to end a war. There’s no one-size-fits-all approach for addressing these kinds of conundrums.

Steven Johnson’s classic Where Good Ideas Come From inspired creative people all over the world with new ways of thinking about innovation. In Farsighted, he uncovers powerful tools for honing the important skill of complex decision-making. While you can’t model a once-in-a-lifetime choice, you can model the deliberative tactics of expert decision-makers. These experts aren’t just the master strategists running major companies or negotiating high-level diplomacy. They’re the novelists who draw out the complexity of their characters’ inner lives, the city officials who secure long-term water supplies, and the scientists who reckon with future challenges most of us haven’t even imagined. The smartest decision-makers don’t go with their guts. Their success relies on having a future-oriented approach and the ability to consider all their options in a creative, productive way.

Through compelling stories that reveal surprising insights, Johnson explains how we can most effectively approach the choices that can chart the course of a life, an organization, or a civilization. Farsighted will help you imagine your possible futures and appreciate the subtle intelligence of the choices that shaped our broader social history….(More)”.

Denialism: what drives people to reject the truth

Curated on Posted on by Stefaan Verhulst

Keith Kahn-Harris at The Guardian: “…Denialism is an expansion, an intensification, of denial. At root, denial and denialism are simply a subset of the many ways humans have developed to use language to deceive others and themselves. Denial can be as simple as refusing to accept that someone else is speaking truthfully. Denial can be as unfathomable as the multiple ways we avoid acknowledging our weaknesses and secret desires.

Denialism is more than just another manifestation of the humdrum intricacies of our deceptions and self-deceptions. It represents the transformation of the everyday practice of denial into a whole new way of seeing the world and – most important – a collective accomplishment. Denial is furtive and routine; denialism is combative and extraordinary. Denial hides from the truth, denialism builds a new and better truth.

In recent years, the term has been used to describe a number of fields of “scholarship”, whose scholars engage in audacious projects to hold back, against seemingly insurmountable odds, the findings of an avalanche of research. They argue that the Holocaust (and other genocides) never happened, that anthropogenic (human-caused) climate change is a myth, that Aids either does not exist or is unrelated to HIV, that evolution is a scientific impossibility, and that all manner of other scientific and historical orthodoxies must be rejected.

In some ways, denialism is a terrible term. No one calls themselves a “denialist”, and no one signs up to all forms of denialism. In fact, denialism is founded on the assertion that it is not denialism. In the wake of Freud (or at least the vulgarisation of Freud), no one wants to be accused of being “in denial”, and labelling people denialists seems to compound the insult by implying that they have taken the private sickness of denial and turned it into public dogma.

But denial and denialism are closely linked; what humans do on a large scale is rooted in what we do on a small scale. While everyday denial can be harmful, it is also just a mundane way for humans to respond to the incredibly difficult challenge of living in a social world in which people lie, make mistakes and have desires that cannot be openly acknowledged. Denialism is rooted in human tendencies that are neither freakish nor pathological.

All that said, there is no doubt that denialism is dangerous. In some cases, we can point to concrete examples of denialism causing actual harm. In South Africa, President Thabo Mbeki, in office between 1999 and 2008, was influenced by Aids denialists such as Peter Duesberg, who deny the link between HIV and Aids (or even HIV’s existence) and cast doubt on the effectiveness of anti-retroviral drugs. Mbeki’s reluctance to implement national treatment programmes using anti-retrovirals has been estimated to have cost the lives of 330,000 people. On a smaller scale, in early 2017 the Somali-American community in Minnesota was struck by a childhood measles outbreak, as a direct result of proponents of the discredited theory that the MMR vaccine causes autism, persuading parents not to vaccinate their children….(More)”.