About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

2 Regulation 19 (1978)
Economic Theory of Privacy

handle is hein.journals/rcatorbg2 and id is 131 raw text is: AN ECONOMIC THEORY OF PRIVACY Richard A Posner MUCH INK has been spilled in trying to clarify the elusive and ill-defined con- cept of privacy. I will sidestep the definitional problem by simply noting that one aspect of privacy is the withholding or concealment of information. This aspect is of particular interest to the economist now that the study of information has become an im- portant field of economics. It is also of interest to the regulator, and those affected by him, be- cause both the right to privacy and the right to know are becoming more and more the sub- ject of regulation. Heretofore the economics of information has been limited to topics relating to the dis- semination and, to a lesser extent, the conceal- ment of information in explicit (mainly labor and consumer-good) markets-that is, to such topics as advertising, fraud, price dispersion, and job search. But it is possible to use eco- nomic analysis to explore the dissemination and withholding of information in personal as well as business contexts, and thus to deal with such matters as prying, eavesdropping, self-adver- tising, and gossip. Moreover, the same analysis may illuminate questions of privacy within or- ganizations, both commercial and noncommer- cial. I shall first attempt to develop a simple economic theory of privacy. I shall then argue from this theory that, while personal privacy seems today to be valued more highly than or- Richard A. Posner is professor of law at The Law School of the University of Chicago. A consider- ably fuller version of this paper appears under the title The Right of Privacy in the University of Georgia Law Review, May 1978. ganizational privacy (if one may judge by cur- rent legislative trends), a reverse ordering would be more consistent with the economics of the problem. Theory People invariably possess information, includ- ing the contents of communications and facts about themselves, that they will incur costs to conceal. Sometimes such information is of value to other people-that is, other people will incur costs to discover it. Thus we have two economic goods, privacy and prying. We could regard them as pure consumption goods, the way turnips or beer are normally regarded in economic analysis, and we would then speak of a taste for privacy or for prying. But this would bring the economic analysis to a grind- ing halt because tastes are unanalyzable from an economic standpoint. An alternative is to regard privacy and prying as intermediate rath- er than final goods-instrumental rather than final values. Under this approach, people are as- sumed not to desire or value privacy or prying in themselves but to use these goods as in- puts into the production of income or some other broad measure of utility or welfare. This is the approach that I take here; the reader will have to decide whether it captures enough of the relevant reality to be enlightening. Not So Idle Curiosity. Now the demand for pri- vate information (viewed, as it is here, as an in- termediate good) is readily understandable where the existence of an actual or potential REGULATION, MAY/JUNE 1978 19

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most