the economics of privacy.pptVIP

The Economics of Privacy Alessandro Acquisti Heinz School, CMU acquisti @ andrew.cmu.edu Draft It’s the economy, stupid! Agenda Privacy and the Economy Personal Information as an Economic Good Personal Information as an Economic Good Personal Information as an Economic Good The Two Markets of Privacy Market for personal information Market for privacy What is Privacy, anyway? Definitions and Economics Definitions and Economics Definitions and Economics Definitions and Economics Definitions and Economics Snapshot Snapshot The early days: Stigler Peculiar relation between “ownership” and privacy Information about somebody may have been costly acquired by other people Free exchange of information will lead to desirable results regardless of ownership If I am a good debtor, I want this information to be known; if I am a bad debtor, I want to keep it secret Suppose I am a bad debtor: then, whether I do not reveal information or information about me is reported, I will pay higher rates The early days: Posner Privacy as concealment of information Individuals with bad traits (e.g., poor employees) have interest in hiding them Individuals with good traits have interest in showing them Reducing information available to “buyers” in this market (employers) reduces efficiency Extends argument to non-market behavior E.g., marriage Costs of concealment borne by others E.g., when privacy of sex-offenders is protected Privacy is re-distributive and reduces efficiency The mid 1990s: Noam If no transaction costs in trading or negotiation, initial assignment of privacy rights is arbitrary from viewpoint of economic efficiency Encryption “The existence of encryption may largely determine who has to pay whom, not whether something will happen” Encryption makes other parties pay Redistributes wealth to consumers Difficulties Incomplete information Human right Burden on poor The mid 1990s: Varian Consumers rationally want certain kinds of information to be available to producers, not oth