A couple of weeks ago I asked for some arguments in favor of privacy. I pointed out that one person's increased privacy exerts negative externalities on others by reducing their available information. I wanted to know why more privacy might be beneficial to society despite this consideration. I didn't really get the answers I wanted, probably because I wasn't clear about the kind of arguments I had in mind. Anyway, here I give some arguments of my own, which I hope offer new perspectives on this issue. Privacy as Insurance Suppose you are looking for a job. It seems reasonable to argue that if you are a better than average worker, you would be able to get a better offer if you had less privacy because the potential employers would be better able to distinguish your abilities from your past history. On the other hand less privacy would hurt you if you are a worse than average worker. If you don't yet know your own abilities, you would prefer more privacy as an insurance against your own potential deficiencies. If that doesn't seem realistic, consider how the argument might apply to your children. This line of reasoning also explains why people are troubled by genetic screening. Thus privacy might increase social welfare by providing a sort of social insurance. Privacy as Restriction on Signaling "Signaling" is a term used by game theorists to describe the use of publicly observable actions to provide information to others about one's private attributes. The best example comes from biology, where male peacocks grow extravagant tails to signal their genetic fitness to females. Clearly signals must be costly, otherwise they wouldn't be convincing. They are often also wasteful, as in the peacock example. (As a side note, the deposit solution to the junk mail problem I talked about some days ago is an example of non-wasteful signaling.) Privacy reduces the range of actions one can use as signals. This would increase social welfare if the wastefulness of the signals exceed the benefit they provide in the form of useful information. Consider a possible future where every room in every house is wired with a camera that continously broadcasts to the Internet. Life would certainly be very uncomfortable in this future, as every trivial action must be carefully considered in order to preserve one's reputation. Possible Benefit of Non-Privacy Limited This is more of an argument for privacy technology, rather than privacy per se. Suppose that privacy-invading technology becomes much cheaper than privacy-enhancing technology. Given the arguments above it seems inevitible that governments will pass laws to restrict the distribution of certain kinds of information about individuals. But of course this will not keep the information out of the hands of those governments themselves and other resourceful organizations. Thus any possible benefit of decreased privacy in the form of market efficiency would be severely limited since only a few market players would have improved information. This benefit would be easily outweighted by the harm in the form of governments' increased coercive power.