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Time Inconsistency, Behavioural Economics and Privacy

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A question that occupies a lot of our time in the office is why, despite growing research that clearly shows that privacy is important to Canadians, do many of us give out our personal information to anyone who asks? While we know privacy is important to people, they still trade personal information for just about anything – from a “free” service to a chance to win something. Why does what we say is important to us often not translate to our observable behaviour? Where does this disconnect happen?

To cast a bit of light on this conundrum, an offshoot of economics may offer some insight. Behavioural economics integrates psychology into classical economic theory to look at why we make decisions and to better understand and predict our choices. It views the individual not as not just one self but as a collection of selves that have different preferences at different points in time. The notion that humans are rational decision makers running around maximizing their utility flies right out the window with these folks. Instead, our behaviour is seen as more complex and dynamic.

An interesting sub-theory within behavioural economics is time inconsistency, which basically says is that we often exhibit a “present bias” – we place more “value” on the present than on the future. Bringing this into the realm of privacy, parting with some personal information now to sign up for free social networking site is more valuable to us in the moment than the overall state of our privacy in the future – say ten years from now. The result is that even though we believe our privacy to be important and something to be safeguarded, we continue to make choices now that negatively affect the future. We lose sight that what is optimal now, may not be optimal later.

Time inconsistency gained some attention a few months back when Google Labs released a new feature called “Mail Goggles”. Effectively a drunk dialing early warning system, when the feature is turned on you can not send an email late at night on the weekend until you answer some math questions first. In a fun and simple way, Google has capitalized on the concept of time inconsistency – giving us control now over our future (and potentially embarrassing) behaviour. Mail Goggles allows us to “pre-commit” in the present to not doing something detrimental later.

So what does all this have to do with privacy? Well, it can help us think about how we can use time inconsistency to promote privacy-protecting behaviour. Maybe we mandate that an irritating tone be installed in all computers, a tone that goes off each time you seem to compromise your privacy online, for example.

All kidding aside, we figure if Google can help us avoid the humiliation of a drunk dial by incorporating some lessons from behavioural economics, surely the discipline’s potential for privacy protection is worth an extended look.

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