Monday, May 12, 2008

Behavioral Economics and Digital Institutions: A View from the Field

The Gruter Institute for Law and Behavioral Research is holding a conference at Lake Tahoe next week. The theme is “Law, Behavior & the Brain.” I have been asked to give a talk on digital institutions. You may be asking, “What is a digital institution and what does it have to do with my brain?” For those answers and more, here is the abstract for my talk.


Digital Institutions allow us to “reframe strategic interactions,”[1] incorporate externalities, and leverage behavioral economic tendencies toward more positive outcomes. Compared to traditional institutions they are relatively quick to establish, cheap to operate, and easy to adapt or discard. They can even be self organizing and in the extreme lead to a vision of “governance by algorithm.”[2]

Today’s most innovative corporations, though founded as traditional institutions, are both witness to and participant in the emergence of their digital counterparts. These same companies will also be deeply changed by the phenomena. This talk provides a first person view from within IBM’s famed T.J. Watson Research Center. With 60 years of history, over 3,000 researchers, and multiple Nobel Prizes, IBM Research provides an exceptional environment for identifying and making sense of change. The discussion covers three topics from the perspective of a Digital Institutions “practitioner.” First, a survey is provided covering several technologies developed at IBM Research that enable Digital Institutions; technologies that include 3D metaverses, real time speech-to-speech translation, and semantic web reasoners. Next, we examine a specific instance of Digital Institution formation involving a volunteer team leading IBM’s World Development Initiative (WDI) to address the needs of those people at the “bottom of the pyramid” living off less than $5 per day. Finally, the talk covers a problem space for future investigation in intellectual property licensing where Digital Institutions might produce better outcomes through overcoming psychological bias in decision making.

[1] Oliver Goodenough and Monika Gruter Cheny, “Is Free Enterprise Values in Action?” Preface to “Moral Markets: The Critical Role of Values in the Economy,” Edited by Paul J. Zak, 2008
[2] John Henry Clippinger, “A Crowd of One: The Future of Individual Identity,” 2007