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]