Why privacy activists and economists should be on the same side

Ryan Calo writes, "I argue in a new paper that economists and privacy advocates don't need to hate one another... Here's the abstract:"

Law and economics tends to be skeptical of privacy, finding privacy overrated, inefficient, and perhaps even immoral. Law should not protect privacy because privacy inhibits the market by allowing people to hide useful information.

Privacy law scholars tend to be skeptical of markets. Markets 'unravel' privacy by penalizing consumers who prefer it, degrade privacy by treating it as just another commodity to be traded, and otherwise interfere with the values or processes that privacy exists to preserve.

This mutual and longstanding hostility obscures the significant degree to which privacy and markets assume and reply upon one another in order to achieve their respective ends.

For example, in a world without privacy, traditional market criteria such as price and quality can be overwhelmed by salient but extraneous information such as personal belief. Meanwhile, imagine how much a government must know about its citizens to reject markets and distribute resources according to the maxim 'from each according to his ability, to each according to his need.'

Conceiving of privacy and markets as sympathetic helps justify or explain certain legal puzzles, such as why the Federal Trade Commission -- an agency devoted to free and open markets and replete with economists -- has emerged as the de facto privacy authority in the United States. The account also helps build a normative case for political and other laws that enforce a separation between market and other information.

Privacy and Markets: A Love Story [Ryan Calo/SSRN]

Notable Replies

  1. I sure hope this guy sets up his own institute.

    / Thanks, Cory.
    // In case my lame attempt at humour wasn't clear enough: "The Calo Institute".

  2. jetfx says:

    The beauty of the market mechanism is that you do not need to know that the person you are dealing with voted for a politician you hate or doubts we landed on the moon, or any other basis for distrust or discrimination, only that he is offering the best quality good at the lowest price.

    Critics of capitalist markets usually think this is the worst thing about them. That by making all exchanges about price, it tends to subsume everything else into that logic. That it abstracts real exploitation and environmental destruction into an arbitrary number. That it forces people into behaviors and relationships they would prefer not to have if they had the knowledge or the choice. And markets only distribute through price, which is agnostic to other considerations. That food is only distributed to those who can afford its price, not those who are hungry.

    More fundamentally, markets furnish the theoretical means by which to distribute resources in society without having to know everything about everyone. Think just how much a government must know about its citizens truly to enforce the famous socialist maxim “from each according to his ability, to each according to his need.” From this perspective, privacy never had a friend like markets.

    This paragraph demonstrates a complete misunderstanding of the meaning of that phrase since it refers to a post-scarcity economy where markets would be superfluous. Plus no state socialist planned economy requires total information to distribute resources, since none of them actually had it. He just assumes that only markets can distribute resources in a way that doesn't require huge amounts of information gathering, which is empirically untrue since the entire fucking industry of advertising is built on learning as much as possible about potential customers in ways that don't simply involve price & quality.

    Reading through the rest of this, there is so much wrong with this paper. He doesn't convincingly argue against the idea that markets treat privacy as a commodity, which economists and privacy scholars actually agree on. His conclusion is better understood as not a synthesis, but an argument that capitalist markets are the best defenders of privacy, which is a very dubious claim at best. Especially since his suggestions at the end involve finding ways to blunt markets from invading privacy in the first place.

Continue the discussion bbs.boingboing.net

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