C. Warren Axelrod

Orwellian Behavioral Economics and Privacy Risk

Recently, I have been looking into behavioral economics. I strongly believe that conclusions from research in this area might well be applicable and contribute significantly to our understanding of cybersecurity risk management.

The underlying premise of behavioral economics, which arose from the merging of psychology and economics, is that individuals do not always behave rationally as claimed by traditional economists. The behavioral-economics field was opened up by Daniel Kahneman and Amos Tversky, and expanded upon by Richard Thaler and others. Kahneman and Thaler received Nobel Prizes in Economics for their work in this area. Unfortunately, Tversky died before his work was recognized by the Nobel committee and the Nobel Prize is not awarded posthumously. The book “Nudge” by Richard Thaler and Cass Sunstein became a best seller after it was announced that Thaler would be receiving a 2017 Nobel Prize in Economics. The authors of “Nudge” demonstrate how people can be persuaded or “nudged” into certain financial decisions based on knowledge of how they react psychologically. They give examples of how the behavioral-economics model can be used to encourage folks to save more for retirement, etc.

But for every new thing, there are usually unintended dark consequences. Einstein’s theories led to the benefits of nuclear power plants and nuclear medicine—but also to nuclear bombs. The dark side of behavioral economics is that the power to nudge individuals into anticipated actions can also be used by corporations and governments to guide citizens in directions in which these organizations and agencies want them to go, but which can lead to loss of privacy, discrimination, and the like.

In an article in the January 2018 issue of Wired magazine, with the title “You Are a Number,” Mara Hvistendahl describes how, on returning to China after three years, she found that the use of mobile payment systems (particularly those of Alipay and WeChat) by the citizenry had exploded to $5.5 trillion today versus a mere $112 billon in the U.S. in 2016.

However, the main point of the article is the impact on people’s lives of credit scoring by organizations, such as Zhima Credit, which greatly affects the credit benefits that individuals can assume, and the government-sponsored “social credit” system which, by 2020, will track its citizens using data from public and private sources. According to Hvistendahl, “… social credit is an attempt at a softer, more invisible authoritarianism …” whose objective is “… to NUDGE people toward behaviors ranging from energy conservation to obedience to the party.” [emphasis added] So, here’s the link to behavioral economics and the Thaler-Sunstein book. The article quotes Susan Hoffman of the International Institute for Strategic Studies, who says that “… social credit ideally requires both coercive aspects and nicer aspects, like providing social services and solving real problems. It’s all under the same Orwellian umbrella.”

So, there you have it. On one side you have the convenience of mobile payments and the benefits of high credit scores and, on the other hand, there is the risk of government intervention and control per Orwell’s “1984.” The main difference between China and the U.S. seems to be that, in the U.S., we are willing to give up scads of personal information voluntarily and allow big corporations (Google, Facebook, Amazon, Uber, etc.), rather than government, to take on the subliminal coercive role. But that could change. Either way, we are all heading in the same direction, where privacy and secrecy are being decimated. And for what? You decide whether the trade-off is worth it. But don’t expect to be able to change anything—the Force is not with you and the Dark Side is winning.

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