Bitcoin-style cryptoeconomic incentive design is a new economic design paradigm, that has already achieved incredible results, creating the first widespread digital currency. In recent years, this paradigm has become a “silver bullet”, used in far-reaching ways, promising to build amazing futuristic technology by employing incentives in planning and prediction (e.g. Gnosis, Augur); in social media (Steemit); in reputation, governance and self-organization (Colony, Boardroom, Democracy.Earth); in data collaboration and insights (Ocean, Numerai), and so on. However, in taking methods developed for simple systems and extending them into complex systems, we have taken a principle that was designed to incentivize algorithms to play by the rules, and applied it to people. We implicitly assumed people will make rational decisions, will take the most high-yield actions, and will collectively form an efficient market.
However, behavioral economics argues that the wisdom of the crowd often isn’t all that wise, economically speaking. Behavioral economics teaches us that humans make a vast majority of their decisions based on simple mental shortcuts and rules of thumb, which are “usually correct” in common situations, but often turn out to be catastrophically wrong in edge cases (like when driving, voting, or transacting in complex financial markets); this is a well–documentedphenomenon.
In this post we argue that behavioral factors and psychology are not given enough consideration in cryptoeconomics. We think it imperative that experts in actual human economic behavior, such as public policy experts, behavioral economists and social scientists, be included in the teams designing cryptoeconomic systems, in order to ensure their long-term utility, viability and success.
Source: https://medium.com/berlin-innovation-ventures/behavioral-crypto-economics-6d8befbf2175
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