The events of the last few weeks, most recently the US Senate hearing on Facebook and data protection (and lack of it), and of the next few weeks, especially the entry into force of the European Union’s General Data Protection Regulation, illustrate how the protection of personal privacy is one of the most significant public policy issue we face today.

This extended literature review by Acquisti et al. on the economics of privacy offers a solid read for those looking to go beyond the axioms of privacy and its economic value for the individual and society.

It reads in part (p.47):

One of the themes emerging from this review is that both the sharing and the protecting of personal data can have positive and negative consequences at both the individual and the societal levels. On the one hand, personal information has both private and commercial value, and the sharing of data — as highlighted by both theoretical models and empirical studies — may reduce frictions in the market and facilitate transactions. On the other hand, however, the claimed societal benefits of data sharing have not always been vetted and confirmed. For instance, the ability of Google Flu Trends to correctly estimate influenza activity — which has been often heralded as an example of the power of big data (Goel et al., 2010), and which we cited in the Introduction of this review — was later challenged (Butler, 2013). Researchers have mentioned “Big Data Hubris” (Lazer et al., 2014) in reference to the “implicit assumption that big data are a substitute for, rather than a supplement to, traditional data collection and analysis.” In fact, exploiting the commercial value of data can often entail a reduction in private utility, and sometimes even in social welfare overall. Thus, consumers have good reasons to be concerned about unauthorized commercial application of their private information. Use of individual data may subject an individual to a variety of personally costly practices, including price discrimination in retail markets, quantity discrimination in insurance and credit markets, spam, and risk of identity theft, in addition to the disutility inherent in just not knowing who knows what or how they will use it in the future. Personal data — like all information after all — is easily stored, replicated, and transferred, and regulating its acquisition and dissemination is a challenging undertaking for individuals and governments alike.

Acquisti, Alessandro, Curtis Taylor, and Liad Wagman. “The Economics of Privacy.” Journal of Economic Literature 54, No. 2 (2016): 442-92.

Get an open access copy here.