Can You Create A Market For Privacy? Would Anyone Care If You Did?

from the artificial-scarcity-isn't-a-business-model dept

Fri, Feb 29th 2008 7:29am — Mike Masnick

David writes in to point us to Jim Manzi's guest post at Andrew Sullivan's Daily Dish suggesting that a way to deal with privacy issues is to create a market for private info. This is not a new idea, though it's not clear if Manzi knows about those who have tried it before. Root Markets has been trying to do this for years without getting that much traction. Manzi's idea is that right now people are lax with transaction data because they really have no choice: "When the choices are (1) opt out of modern life, or (2) implicitly surrender all of this info, pretty much everybody picks door #2." His description of the solution, however, should immediately ring some bells on an analogy that shows why his plan will almost certainly never work:

"But what if I had the practical ability to charge commercial entities for access to or use of information of this sort? It would, first, go from a free good to a scarcer resource, and second, I could protect those parts of my transaction history that I feel to be most sensitive. In effect, we need a functioning market into which I can sell my transaction history."

Yes, he's basically saying that we should take an infinite resource (data about our transactions) and forcibly create artificial scarcity, and then create a market around that artificial scarcity. It sounds nice in theory, but given how just about every market that's based on artificial scarcity is disintegrating as we speak, it seems unlikely to get very far. If there's one lesson that we've learned from watching the entertainment industry implode over the last decade, it should be that artificial scarcity doesn't last. Basing a business model on artificial scarcity is incredibly risky.

Given how little attention Root Markets has received from users, Manzi may not be correct in estimating where consumers' feelings lie on this matter. As they've shown time and time again, it's not that people want to keep their transaction data private and just don't have the means to do so -- it's that very few really seem to care at all.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: abundance, markets, privacy, scarcity

11 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

4-80-sicks, 29 Feb 2008 @ 7:43am

There are so many companies out there who will sell your data already--how will charging for your own personal information stop them from doing that? If anything, it will exacerbate that. I don't think Mr Sullivan really thought this through.
[ link to this | view in chronology ]
- SomeGuy, 29 Feb 2008 @ 9:06am
  
  Re:
  Well, we'd just have to develope some kind of mechanism to stop these big companies from illegally sharing our data files. You know, a way that would let the company we sell out data to use it, but not copy it or trasfer it to any of it's associate companies...
  [ link to this | view in chronology ]
  - Anonymous Coward, 29 Feb 2008 @ 9:10am
    
    Re: Re:
    Ooh, and we can sue them in (all in one group for our convenience) for sums of money far in excess of the damage caused for stealing my private info! Sounds like win to me :)
    [ link to this | view in chronology ]
    - SomeGuy, 29 Feb 2008 @ 9:29am
      
      Re: Re: Re:
      Depending on what assets you control, your personal data could be worth a lot! And just IMAGINE what sort of trumped-up awards we could claim for "potential" damages. I mean, identity theft alone, nevermind "lost sales" of your data, could be a significant weight.
      
      I love this idea! I may never have to work again!
      [ link to this | view in chronology ]
Chuck Norris' Enemy (deceased), 29 Feb 2008 @ 9:26am

It will all come around
If we start charging marketing companies to use our personal info, then they will charge Wal-Mart more for the info who, in turn, will charge us more for our products. An artificial market of this sort make other people rich and increases your cost, just so you think they haven't given out your transaction history.
[ link to this | view in chronology ]
comboman, 29 Feb 2008 @ 9:43am

DRM for personal information
That's why I use false data anytime I'm asked to fill in customer surveys, etc. It's like DRM for my personal information.
[ link to this | view in chronology ]
- 4-80-sicks, 29 Feb 2008 @ 1:35pm
  
  Re: DRM for personal information
  That's why I use false data anytime I'm asked to fill in customer surveys, etc. It's like DRM for my personal information.
  Temporary Inbox is great for this, if you use Firefox.
  [ link to this | view in chronology ]
KaBoom, 29 Feb 2008 @ 9:43am

artificial scarcity disintegrating??
Diamonds anyone? You just have to be willing to kill anyone outright that dares get in your way.
[ link to this | view in chronology ]
Danny, 29 Feb 2008 @ 10:44am

Between convenient loopholes that lawyers will find for the companies they represent, inevitable exemptions for whoever pays off the right politicians and what comment #5 said this plan is doomed to fail.

And KaBoom diamonds aren't totally artificially scarce. Yes there hoarders that like to keep a tight grip on the diamond market but there is actually only a limited number of diamonds in the world.
[ link to this | view in chronology ]
Eric Goldman (profile), 29 Feb 2008 @ 11:16am

The pricing problem
Among other defects in a privacy marketplace, setting the price can be problematic because in some cases consumers should be paying for the surplus-enhancing information that they receive. See http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID960181_code332758.pdf?abstractid=912524 Eric.
[ link to this | view in chronology ]
anonymous, 2 Mar 2008 @ 11:56am

To say that artificial scarcity doesn't work is false; the diamond brokers have made a great living from this for decades and continue to do so.
[ link to this | view in chronology ]