On Tue, 8 Apr 1997, Greg Broiles wrote:
One of the problems with talking about privacy is that people use the word to mean many different things. Apropos to the current discussion, I see two different uses co-existing in a non-useful way:
1. Privacy as a lack of information 2. Privacy as a right to control the flow of information
where the second usage refers to the ability to decide who ends up with the first usage. I'm assuming that lack of information can be characterized as risk, and that risk can be characterized as negative value. The Coase Theorem would seem to suggest that the second usage is (may be) superfluous, because the [lack of] information/risk will be allocated to the party which values it most. However, the right discussed in (2) is still meaningful, because it is (and will) be used as a bargaining chip to gain or lose other things of value.
What I meant by privacy is somewhat different from your definitions: "the ability of an individual to control the distribution of information about himself". Notice that I said "ability" instead of "right". Part of what makes privacy so interesting is that the Coase Theorem doesn't apply. If you look at the Coase Theorem carefully, it presuposes the lack of transaction costs, which in turn means that all relevant information is distributed symmetrically among interested parties. (Otherwise the cost of inducing some individuals to disclose private information to others becomes part of the transaction cost.) Therefore even to invoke the Coase Theorem implies that either there is no privacy, or for some reason no one chooses to exercise his privacy. In fact, this is exactly what I meant by the inefficiency of privacy: not only does the Coase Theorem not apply to privacy itself, it undermines the Coase Theorem everywhere else by increasing transaction costs. The rest of your article is very interesting, so please keep going. I'll just take this opportunity to point out that the most useful measure of efficiency is a relative one. Even the centrally planned economy is not totally inefficient. Apparently some CPEs seem quite able to keep its citizens from starvation, even for years at a time. The CPE is only inefficient compared to the market economy. If for some reason human beings are inherently unable to organize markets (perhaps because of some deep-seated cultural bias against putting prices on essentials like food and children), then the CPE might very well be the best alternative.