- About CEI
- Support CEI
Mailing-List Chicken Littles
Mailing-List Chicken Littles
Singleton Commentary Published by The Cato Institute
October 04, 1997
Watch out for privacy alarmists who argue that businesses ought to get consumers' permission before trading information about them with other businesses. Consumers do not need cumbersome regulation of the information that businesses use to design and market new products. Junk mail and credit reporting have their drawbacks, but the benefits of easily available credit and shopping at home far outweigh their costs.
If such a proposal were adopted, collections of data about consumers' behavior would become more scarce. That would retard competition: Small businesses that could have used that information to target potential customers and compete with larger and better-established firms would be locked out. Ultimately, that would hurt consumers.
Credit-reporting agencies burdened with red tape would find it harder to collect data on people's buying habits and payment practices. That would again hurt consumers, making more of us bear the costs of others' fraud and making credit harder to get and more expensive.
Indeed, if the privacy restrictions were already law, consumer-credit reporting might never have developed. We still would be stuck in the days when you could get credit only from a local storekeeper in your home town, and poor people could not get credit at all. New Information-processing technologies will produce many unforeseen benefits for consumers-- business offerings tailored to the needs of diverse customers that no one knew existed before. New privacy restrictions would mean that most of those new ventures would never get off the ground.
Under new privacy restrictions, firms that could afford to send direct mail would no longer be able to target it effectively. That would lead to fewer, more expensive options for those who shop at home because their mobility is restricted-- the elderly, the disabled, rural residents and anyone without a car.
Why would we want to rewrite privacy law? One theory is that we should "own" information about ourselves-- so, if a business collects that information, it must ask our permission before it uses it. But if I buy a lawn mower from Sears, at least two entities are involved in the sale-- Sears and I. It makes no sense to say that I "own" information about the sale and Sears doesn't. If Sears collects information about lawn mower sales, creating a valuable database, the value of the list should belong to Sears.
Proposals that would restrict the free flow of information under the guise of privacy have a certain emotional appeal. Spurious concerns about privacy spring up because it is fashionable to fret about the dangers of the Internet or any other new technology.
To feed those fears, privacy alarmists obscure crucial distinctions between different types of information. Customers have a right to expect that medical information will be kept private. And information collected or created by the government (Social Security numbers, drivers' license information, and tax information) should not be sold commercially, because of the danger that government will abuse its unique power to collect or use that information. But there is simply no reason to fear trade in information about the sale of shoes or garden tools.
Privacy advocates frequently rely on myths about how businesses actually use the information they collect. Businesses consider collections of information about their customers very valuable and try to keep the information private. They sell that information only through a third party called a fulfillment house, which uses it to generate mailing labels. The marketer who buys the mailing labels does not see the original information. The fulfillment house must also keep the consumer information secret to protect its reputation.
We should not pass laws rooted in irrational fear of new technology. Businesses always have used information about their customers to provide better services. When people lived in the same small town from birth to death, storekeepers relied on their personal knowledge of their customers' needs to improve their businesses. Today, more and more transactions take place between strangers over electronic networks.
The information about those transactions will naturally be stored on electronic networks, too. In principle, that is nothing new. In practice, access to more information will give businesses extraordinary opportunities to be more responsive to their customers-- if they are permitted to use it.
(This article originally appeared in the Washington Post)