The Market for Privacy

[Jim Manzi]

MIT’s flagship magazine, Technology Review, produces a an annual list of the year’s 10 most exciting technologies (as with any of these lists, of course it is really more like “the 10 most exciting technologies developed by researchers who are one degree of separation from the editors, are quotable and are, ideally, photogenic”).  Nonetheless, one striking aspect of this year’s list is that two of the ten technologies are algorithmic methods of using the large datasets created by digital transaction records to generate economically valuable insights.

The erosion of historical notions of privacy at the hands of commerce is almost inexorable, ultimately because of Moore’s Law.  You don’t need eavesdropping or other surveillance techniques when the infrastructure by which you communicate, travel, and buy things generates data as a by-product of each of these activities.  This, much more than government spies, is the primary driver of lack of privacy.

It seems to me that the logical method to protect such information is to codify and create a tangible property right in it.  When the choices are (1) opt out of modern life, or (2) implicitly surrender all of this info, pretty much everybody picks door #2.  But what if I had the practical ability to charge commercial entities for access to or use of information of this sort?  It would, first, go from a free good to a scarcer resource, and second, I could protect those parts of my transaction history that I feel to be most sensitive.  In effect, we need a functioning market into which I can sell my transaction history.