Property Rights in Personal Information: An Economic Defense of Privacy

This chapter shows that, with respect to privacy in personal information, the skepticism in the economic literature is overstated. It outlines the standard economic critique of personal privacy. The chapter analyzes how the framework plays out for information obtained without consent and information obtained through voluntary transactions. By changing the way people behave with respect to their personal information, privacy rules generate a number of dynamic benefits. Privacy rules permit the satisfaction of private preferences. An activity that may generate embarrassment or reprobation from some sectors of society will not occur if the activity carries with it a significant risk of being disclosed. Statutory privacy legislation has generated considerable criticism from economists, it is viewed as the inefficient enemy of the common law. Much of this criticism is justified, particularly when it is leveled against mandatory nondisclosure. In the attorney-client and physician-patient transactions, a privacy default rule is the obvious choice.