Summary from “New Directions in Privacy” now available

Posted by on December 3rd, 2010, 9:22 pm

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On Wednesday, December 2, 2010, The Georgetown Center for Business and Public Policy hosted a Business, Economics, and Public Policy seminar entitled “New Directions in Privacy: Disclosure, Unfairness, and Externalities” in Georgetown’s McDonough School of Business Rafik B. Hariri building. Speaking to members of Georgetown’s faculty and student body, Professor Mark MacCarthy discussed his views on the topic of data privacy, the government’s role in its regulation, and the possible externalities that arise from the privacy decisions of others.

Professor MacCarthy began his lecture by examining the history of privacy regulation over the past several decades. He believes that the subject and enforcement of personal privacy is back on the rise and will become an important legislative and social topic again in the near future. He then focused on the two main frameworks for regulating privacy issues: choice vs. unfairness (harm).

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Essentially the choice framework leaves it up to the individual to choose whether to disclose personal information or to “opt-out.” On the other hand, the unfairness framework (which regulators have been using for years as a policy paradigm) sets up three categories of use: impermissible use, public benefit use, and realm of choice. Impermissible uses of data cause harm, such as invidious discrimination, price discrimination, and boxing. Public benefit uses, on the other hand, create enough social good to warrant use. Some examples are public health outbreaks, credit bureaus, and fraud protection. The realm of choice offers the flexibility to opt-in/ out of information disclosure, such as the “Do Not Call” list.

However, the professor posited that even within these frameworks, there exists the danger of what he calls “privacy externalities,” or consequences that arise as information unravels and the disclosure of information by some harms others who choose not to disclose. He gave the example of disclosing smoking habits on an insurance form. By allowing the choice of disclosure, he argued that those who choose not to disclose their smoking habits are harmed by those who do disclose the information because inferences are made based on a lack of response.

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Professor MacCarthy suggested that these harmful externalities will become an even greater concern as new economic and technological advancements continue to widen the privacy gap. Thus he recommends that regulators look to these issues and propose legislative models that more effectively focus on the beneficial or harmful uses of information and protection of individual data privacy.

For more information on privacy, please see the Federal Trade Commission’s report on privacy.

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