Re:Coase's Law (Score 1)

In general, I don't totally agree w/ everything the author says, for a number of reasons (one probably being that I'm not a libertarian!) But I think its interesting b/c this is one of the few articles that notes the connection between transaction costs and privacy.

Transaction costs lie at the very heart of privacy economics. In the offline world, it's too expensive to express preferences over the use of personal information. You'd have to call up every company you do business with and talk to a customer service rep. That call costs the company like $7-8, and that's too much cost for too little value (if all you're doing is trying to express preferences, check audit trails, etc)

On the Internet, the cost of that transaction plummets to sub-pennies. Per the Coase Theorem, when transaction costs plummet, a corresponding reassignment of property rights is usually required. In this case, the property right over personal information would shift from the company collecting the personal info to the consumer to whom it belongs. This shift in property (privacy) rights would reestablish a "happy" economic equilibrium that got jolted out of place when the Internet (and corresponding massive drops in transaction costs) hit..

So that's why I've always been a fan of the Larry Lessig-style "property rights" over personal information.. I also disagree that you can't assert property rights over info shared w/ a Web site, and then not assert them when talking to a journalist or walking around in public.

I think you can do that (have property rights over Web site info but not over reporters or general public behavior) That's b/c I think you're talking about two entirely different forms of privacy. The journalist, or the form of monitoring that goes on when I'm in public, serve to regulate my behavior.. it's kinda the *government* angle on privacy and its an enforcement of social norms.

On the other hand, when info is shared w/ a Web site, it winds up (often) getting sold on down the value chain where at some point it winds up on some list brokers phone list and I get a call on my cell phone. That call costs me money to answer and reject and if the info was being sold in the first place, I should have gotten a cut of the sale to start with. In this (economic) context of privacy, the assignment of property (privacy) rights to consumers is necessary to reestablish economic equilibrium, per the Coase Theorem..

In 1998, I co-founded a company called PrivacyRight (www.privacyright.com) that is helping deliver on this concept of property rights over personal information.. Check out the Web site sometime..

I've also written papers on the topic of property rights over personal information..

Paul Sholtz
PrivacyRight, Inc. - www.privacyright.com