Why Governments Suffer Public Backlashes on Personal Data Projects

06/05/2014 15:47 BST | Updated 02/07/2014 10:59 BST

Why is it that policy relating to personal data seems to generate so much controversy? Take the recent huge public outcry over which resulted in massive negative media coverage, questions in Parliament and subsequent delays to what many consider to be an important program for the well-being of the nation's health.

The background to the story starts in 1989 when the NHS started collecting data on hospital stays, known as hospital episode statistics. This proved hugely useful for uncovering systemic failures in the system such as the Bristol heart and Mid-Staffordshire scandals. The idea of was to include in the database information on what happens to patients when they are under GP's care. The plan was that this would assist in the development of new treatments and monitor their subsequent performance.

There was a well-publicized mishandling of the communication resulting in a lack of effective communication but also subsequent reports established that this data could be made available to commercial organisations such as insurance companies. This resulted in further uproar and intervention by the Health Secretary that this would not be allowed after all.

But this is not the only area in which consultation of the use of data has generated a huge public backlash. Smart meters are designed to collect information about energy usage in the household, creating efficiency for both energy companies and the consumer. However, in theory, the smart meters can identify the number of people living in the house, the nature of their daily routines, what types of medical devices are being used and so on. Pressure group Electronic Frontier Foundation noted that "It's not hard to imagine a divorce lawyer subpoenaing this information, an insurance company interpreting the data in a way that allows it to penalize customers, or criminals intercepting the information to plan a burglary,"

The list goes on - the suggestion by UK tax authority, HMRC, that they may investigate the commercial value of their data has met with widespread disapproval. There was a well publicized backlash against the use of WiFi sensors in litter bins in the City of London to monitor the movement of pedestrians. The bins were swiftly removed once it hit the media. E-Tolling systems in South Africa have proved to be disastrous following concerns that they made an individual's movements along the road publicly available.

So why are there such strong responses to these issues? Is it that ordinary citizens have become acutely sensitive to their personal privacy all of a sudden? Hard to believe after years of handing over huge amounts of personal data to the likes of Facebook, Google and Amazon to name a few. We perhaps need to turn to the psychology literature to understand what may be lying behind the vehemence of the responses that we are seeing here.

Behavioural Economics, the psychology of the economic decisions of individuals has a couple of important lessons that may help us to understand the reasons for these responses. First is the distinction between market relationship and a social relationship. As Dan Arialy, a leading light in this field puts it, after a meal at your in-laws for Thanks Giving you would not pull out your wallet and ask what payment you could offer for the meal. That's because this is the warm and fuzzy world of social relationships where a price is not put on something. There is a sense of natural trust and no need for immediate reciprocity. Conversely, when going out to eat at a restaurant, you don't lean back in your chair at the end of the meal, thank the waiter kindly and leave without paying. In a market relationship it is understand that a price has been set and that needs to be honored.

One of the challenges facing governments and perhaps even brands, is that when leveraging value from personal data that they have collected, then social and market norms collide. There are huge social norms implicit in our relationship with our public institutions, a shared understanding of our civic rights and responsibilities. Surely when it appears that these institutions are violating these social norms by embarking on a market enterprise is when trouble begins.

And this is not necessarily a well advised approach as there can hidden costs in moving from a social to a market relationship. A good case of this is illustrated by famous study on an Israeli nursery that started to impose fines on parents that were late picking up their children. The problem was that this actually increased the number of people that were late picking up their children as it went from a social norm where there was real pressure to one which ws simply an additional service. Most of our public institutions rely on the 'good will' of social norms. So not only will citizens fell angry when they are violated but their behaviour is likely to change in ways which create more trouble and expense in the long run.

Another lesson from Behavioural Economics is the Endowment Effect. This is a phenomenon whereby we tend to place a much greater value on the goods that we own more than the identical products that we don't own. Privacy researcher Alessandro Acquistifound just such an effect in relation to personal data - we attach a much greater price on the price we ask from others if they wish to buy our data than we would be willing to spend to ensure it was not released.

When personal data is discussed in the media or in the consultation process, it tends to be emphasized that it is 'your data'. In fact the leaflet emphasizes that it is 'your health records', 'your information' that is being requested. Emphasizing this ownership is probably important but it nevertheless presses the endowment effect button whereby citizens will place greater value on the data and therefore have heightened sensitivity about the way in which it is then used.

These issues are not limited to governments but also affect commercial organisations. Simply because brands are operating in a market context does not mean there are social norms that can easily be transgressed. And it's also no wonder that many companies choose not to give consumers a sense of ownership of their data such as easily checking what data is being held, being able to control easily access and amend it. At the moment the lack of visibility around personal data means that brands avoid that difficult conversation that could mean consumers getting more assertive about their data.

We are living in an increasingly data-centric economy. As such we need to better understand the very real human challenges that this throws up - they are psychological and social in nature and not something that can be resolved by technology considerations alone. Governments and brands alike would do well to give this topic closer attention.