Tristan recently blogged about privacy as a currency. His point:
Privacy is a currency for which we don’t know the [ex]change rate. It’s something we’re giving to online services without knowing what it’s worth.
I started to apply basic economics to that idea. It seems to me that a key point is that the exchange rate of the currency is not only unknown, but it is also different for different people. You may value your privacy much more highly than I do. By contrast, for people in the same socio-economic group, the value of the information to the company is (approximately) the same. For most of the readers of this blog, it’s worth about the same to (e.g.) Google to know X amount about you as it is to know X amount about me.
A mutually beneficial exchange is one in which both parties receive something of greater value than what they lost. Is our loss of privacy mutually beneficial? It depends. I may decide to put a $50 value on the privacy of my list of friends. If that list is worth $100 to Google or Facebook, and they will provide me with $70 worth of services in return for it, then clearly the exchange is a beneficial one. However, if you value your list of friends at $500, then it would not be a good exchange for you, if all else was the same.
Another important economic attribute of exchanges is that they should be ‘fair’. A fair exchange is one which is uncoerced, and in which both parties understand what they are giving away and receiving. Do people understand what they are giving away when they give away their privacy? Perhaps not. Or it could be just that they put a low value on it. In which case, it’s entirely reasonable for them to make the trade.
Conclusion: privacy advocacy is not about persuading people not to use particular privacy-reducing services, it’s about persuading people to understand the value they personally put on their privacy and perhaps, secondarily, to increase that number. But if people, once they understand, choose not to increase that number and to make privacy-reducing deals, we should respect their free choice.