Privacy for Sale—Business as Usual in the 21st Century: An Economic and Normative Critique

Abstract

IntroductionAlthough the notion of privacy is not a modern concept,1 it has only been within the last three decades that privacy legislation has actually been drafted in much of the developed world. Similarly, the interest in privacy as an academic discipline is relatively new, tracing its roots to Privacy and Freedom, the seminal book by Alan Westin published in 1967. The relative youth of this area of study is also partly reflected by the panoply of heterogeneous definitions contained within the academic literature; most writers lament the difficulty associated with developing an all-encompassing explication of the concept of privacy (Agre & Rotenberg, 1997; Bennett & Grant, 1999). In fact, in 1995, Alan Westin stated at a conference that no definition of privacy is possible, because privacy issues are fundamentally matters of values, interests, and power (as cited in Gellman, 1997, p. 194). Accordingly, one encounters clarifications of physical and bodily privacy, local privacy, privacy of the home, decisional privacy, and informational privacy. This may, in part, explain the disconnect between opinion polls that increasingly cite abstract concern about privacy and the lack of popular support and movements mobilized in favor of privacy rights (Agre, 1997; Davies, 1997).For the most part, the national privacy legislation of the 1970s and 1980s was generally designed to address concerns about the privacy relationship between the individual and the state. Yet in the interim, transformations in the economic, political, and technological landscape have occasioned the locus of privacy protection to shift toward a sharpened emphasis on concern about commercial exploitation of privacy (Agre & Rotenberg, 1997; Bennett & Grant, 1999; Laudon, 1996). In turn, this has, in part, resulted in a perceived failure of contemporary laws and conceptual frameworks to address such shifts. One interesting response to this situation has been the development of a market model of privacy.2 This model, which arguably has been most comprehensively articulated by Kenneth Laudon, proposes that privacy be treated as a property right. In essence, market-based mechanisms based on individual ownership of personal information, with corresponding entitlements to control the disposition of such information, are premised as the means by which privacy can be safeguarded in the 21st century. As might be expected from a model steeped in economic motivations, it adopts Pigou's notion of externalities and asserts that the true social cost of invading privacy is much higher than the actual cost of invading that privacy. The reason for this is that both the person whose privacy is invaded and society as a whole must bear part of the social cost of the invasion through direct, indirect, tangible, and intangible costs. Direct costs include opening unsolicited mail and responding to unsolicited communication. Indirect costs stem from the need to maintain inordinately large mail and communication facilities to process the unsolicited mail. Tangible costs result in a loss of productive and leisure time, while intangible costs arise from a loss of control over information about oneself, feelings of helplessness, and feelings of mistrust toward large commercial institutions (Laudon, 1996). The consequence is that personal privacy becomes expensive and limited, while the use of personal information is wasteful and results in allocative inefficiency. Therefore, under the market-based privacy model not only would individuals have to give active consent for their information to be used, but they would also receive financial compensation for such use. Indeed, under Laudon's model (1996) a National Information Market would be created to facilitate the purchase and sale of information about individuals at a market-clearing price, where supply equals demand. Thus, the core of this proposed paradigm asserts that individuals should have the right to profit when divulging personal information to organizations that will derive pecuniary benefits from a commercial application of such data. …