Discussion Post: Sustainable Nudging With Blockchain - Ethical and Effectiveness Considerations

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Citation: Blockchain-enabled Personalized Incentives for Sustainable Behavior in Smart Cities | IEEE Conference Publication | IEEE Xplore

In this post, I review an interesting paper that advocates for the use of blockchain technology to promote eco-friendly behavior through a technique known as “nudging.”

In addition to my review, I pose questions about the ethics and potential effectiveness of some of the methods discussed in the paper. I hope that this post will generate discussion about this fascinating topic and I’m looking forward to your responses.

Background

What is “Nudging”?

Nudging is a term that was popularized by Harvard Law professor Cass Sunstein and University of Chicago behavioral economist Richard Thaler.

Nudging refers to the practice of encouraging good behavior by tweaking incentive structures embedded in everyday activities. Some examples of nudging in practice include:

  • Organ donation: Israel has increased organ donation rates through automatically “opting in” driver’s license applicants.
  • Voting: The U.S. state of Georgia allows motorists to register to vote when they receive a new driver’s license.
  • Sustainability: Japan labels goods with information about the carbon footprint of the product.

Nudging With Blockchain

With the idea of interconnected “smart cities” quickly becoming a reality, blockchain developers and local governments in the United States are starting to think about how they can encourage residents to make better decisions.

In the paper cited above, the authors provide a survey of existing blockchain-based monetary and non-monetary nudges that could encourage eco-friendly behavior in the areas of transportation, energy, and recycling.

  • Transportation includes schemes which incentivize more efficient travel and mobility.
  • Recycling includes schemes which provide rewards for recycling or the protection of ecosystems.
  • Energy includes schemes which incentivize solar energy usage and peer-to-peer energy trading.

A General Framework for Nudging with Blockchain

In addition to these examples, the authors provide a more general framework for using blockchain to nudge people toward more sustainable behavior.

This framework has six major components as shown in Figure 1 and can be implemented with the help of smart contracts and Chainlink oracles:

  1. Sustainable action registry: sustainable actions and the metadata associated with them can be maintained off-chain and brought securely on-chain with Chainlink decentralized oracle networks.
  2. Rewarding mechanism: reward scheme for users which links sustainable behaviors to different levels of reward. The rewarding mechanism allocates rewards in the form of tokens on the basis of the recorded sustainable behaviors.
  3. Identity management: a privacy-preserving decentralized identity management system built on a system like Chainlink’s DECO. This system would allow for the verification of behavior and reward distribution.
  4. Token management: a governance system, like a DAO, would provide a means to manage and distribute tokens.
  5. Token economy: services and rewards that can be exchanged for incentivization tokens. For example, the purchase of certain goods and services may be discounted when purchased with tokens.
  6. User application: a wallet app for token storage would be needed to interact with the blockchain.

Key Problem or Topic Area

Assuming that such a system can be created according to the author’s specifications, would this system be both effective in terms of promoting sustainability and also an ethical way of altering behavior?

Approach or Methodology

The authors of this paper list some examples of sustainable nudging using blockchain as an incentive mechanism and then extrapolate a more general framework from these examples.

Here are some questions that I think need to be addressed to better understand whether this approach should be more universally adopted.

Effectiveness Considerations

  • Treatment effect size: What % of people will change their behavior as a result of the nudge? If that % is small, implementation of the nudge may not be worth the effort.

  • Unintended effects: In complex systems, changing one aspect of the system has cascading effects that will result in changes in other aspects of the system. Altering people’s behavior for an intended effect may have corollary effects that can cancel out the intended effect or potentially even make things worse. For example, encouraging ridesharing systems may discourage urban residents from using public transportation, thereby increasing overall pollution and traffic congestion.

Ethical Considerations

  • Pareto improvement: Pareto improvement is a change in which making one person better off does not harm another person. Behavioral nudges should be Pareto improving or should at least aim to be Pareto improving. If nudges make some better off at the expense of others, this is an ethical dilemma that needs to be more deeply explored.

Conclusions or Key Takeaways

As an incentive mechanism, blockchain paired with smart contracts and Chainlink oracles can be an incredibly powerful behavioral nudging tool and, as with any tool, it can be used for good or ill. Improving sustainability is a noble goal and sustainable nudging with blockchain appears to be a great tool for accomplishing it. However, the effectiveness and ethical considerations mentioned above are the minimum that should be considered before implementing a nudge.

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@eleventh would love to hear your thoughts on this if you get a chance, particularly about the effectiveness + ethical considerations.

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The question of the ethics of nudging is an interesting one. The unsatisfying answer is ‘it depends.’ The domains listed (transportation, recycling, energy) are all great examples because the effects of the counter actions aren’t apparent for quite some time. So nudging can definitely help create action where people might not necessarily be acting on their own without some incentive.

A number of concerns come to mind when thinking about this:

  • who gets to decide the nudges
  • how transparent should the proposed intervention be
  • who owns the data / where is it stored
  • is people’s privacy being preserved
  • what checks are in place over the design process / operations

Thaler has a paper called Libertarian Paternalism where he provided some arguments as to how to argue for nudges and maintain personal freedom of choice

  • "First, the libertarian paternalist might select the approach that the majority would choose if explicit choices were required and revealed.
  • "Second, the libertarian paternalist might select the approach that would force people to make the choices explicit.
  • "Third, the libertarian paternalist might select the approach that minimizes the number of opt-outs.

In relation to the first point, I imagine tech will provide more ways to actually get the majority opinion. I wonder what kind of feedback loops can be created to inform those building tools where folks might want to make it easier to perform certain actions. It gets more complicated when we’re talking about actions where people might not be as happy about but is overall good for humanity. I’m unaware of any satisfying heuristic here. Exploring the potential impacts, people’s opinions, and maintaining a high level of transparency personally seem key to me when it comes to nudging.

In terms of effectiveness, I wonder how to accurately get the treatment effect size (realizing this is at least somewhat specific to which treatment is being discussed). And how to measure the unintended effects / plan to measure that effectively.

Personally, I would be happy to see more opportunities to opt-in to nudging for outcomes that I want (climate, health-related, etc).

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Thanks @eleventh this is a really thoughtful response.

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Thank you for this fantastic summary! I have been trying to parse the best line of questioning for this topic, as there is a lot to unpack for various reasons. I will start from my perspective as a psychology and neuroimaging practitioner and then connect it to my experience working as a government consultant; as these experiences are directly connected to the notion of “nudging”.

From the perspective of psychology and social sciences,“Social Engineering” had already been defined as a means of attempting top-down dissemination of behavioral standards or practices. One of the best examples that is easily observable was the movement to make “hand-washing” a standard practice for anyone dealing with surgery or in a situation where an environment needed to be sterile.


The above image comes from a study that discusses various attempts at social engineering that revolved around improving hygiene behavior.

As “nudging” has been framed as somehow being a “new mechanism” when in reality it is recontextualizing “social engineering,” it is very relevant to ensure that the ethics of “who” is deciding the nudges and “who” is being nudged become a main factor in the discussion. This concept has been addressed by other academics in a context that is not specific to blockchain-based reward mechanisms, but the general question of “whose ethical standards are guiding the nudging” become a very important conversation that must take center stage if these systems are to be implemented in an ethical manner.

As others have pointed out, I’m not necessarily sure that “nudging” is different enough from social engineering to constitute its own classification. In that context, it starts to seem as if “nudging” has become a new framing to move away from the regulatory restrictions that come with social engineering to make it seem as if “nudging” is somehow not the same and thus should not be regulated in the same manner. This is not to confuse malicious “social engineering” which in the context of cyber-security specifically is meant to manipulate for nefarious purposes.

I can understand if the purpose of the “nudge” framing is to create a measurable standard by which “nudges” are regulated. On the other hand, if that is the case; the removal of the connection to social engineering becomes questionable and makes it seem as if the nudging framework is either unaware of the previous work in social engineering or actively working to occlude any possible connection to that framework.

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