Economics of Privacy in Digital World

Information capture sits at the heart of important parts of the digital economy. The transaction in online services is radically different from what we usually encounter. We voluntarily pay in personal data rather than cash. This unique contract creates several complications as far as privacy goes.

Our relationship with companies like Google, Facebook and Amazon is at once and sour. These services are made irresistible because of their personalized user experience. The algorithms sitting at the heart of these companies guide you to what is most likely to interest you. But the world is now waking up to the harsh fact that the same process also raises privacy concerns as it encroaches into hitherto intimate areas of our lives.

Digital exchange – personal information for free access to platforms often means that privacy comes at a cost. Customers are better off sharing information about themselves with marketers because it makes life easier. Junk email or unsolicited phone calls that are an annoyance to consumers become less so when the company can target consumers better through data analysis.

However, the potential for personal data to be abused – for discrimination, manipulation and censorship is a huge cause for concern. The new world of large server farms plus algorithms that sift through data to seek patterns can sometimes make us the victims of targeted manipulation. So why do people have to share their data with the digital behemoths? The simple answer is that they choose to do so. In some cases, the consent to collect information is presumed, and the degree of privacy the user experiences is a function of self-help; you can disable some surveillance if you can figure out how. In other cases, customers explicitly agree to privacy policies that basically define the control they don’t have.

Since Businesses value the data more, imposing onerous “opt-in” rules is a significant transaction cost. This could jeopardize the ability of digital companies to provide services, and significantly degrade user experience. The efficient solution would be to award the initial ownership of data to the business, but let users opt out if they want to.

If you sell your car, the owner of the car can’t legitimately influence your life after the conclusion of the transaction. Personal data can be used to manipulate people in ways they don’t recognize at the time of sharing their data. This is something that current systems designed to facilitate the one-time transfer of personal information to the digital company and without the individual’s subsequent information to the digital company and involvement in decision making about the use of the collected data, don’t take into account.

Traditionally, private property has been the main barrier to privacy invasion. As monitoring and recording capabilities are embedded in our surroundings, there is a need to redefine private spaces that will not be infringed. The government and businesses should start by adopting privacy-by-design principles in their data accumulation practices. Governments and Supreme courts all over the world will have to rethink their stand in order to secure citizens privacy and control over their data and the meaning of such words as “property” and “consent” in relation to personal data sharing.