![]() This is an important point, and its impact for online privacy is far more significant than most privacy advocates today realize. An economist would say that the Internet allows buyers to economize (quite handsomely) on transaction costs. It saves me from getting in my car, driving around town, finding a parking spot, looking for a piece of merchandise and then standing in line to pay for it. This fairly boring story illustrates a very important, if rather obvious, fact about electronic commerce: using the Internet saves people not just money, but more importantly, time and effort. The DVDs arrived two days later and I spent the next weekend in front of the television watching Moulder and Sculley solve one baffling case after another. About ten minutes later the clerk came back and informed me that no, unfortunately it was not in stock, but if I wanted to, he could put my name and number on a mailing list and notify me when it arrived.īy then, I had become pretty disillusioned and did what I probably should have done in the first place: I got back in my car, drove home and ordered the X-Files Collectors Edition DVD set from Amazon. After about ten minutes of messing around in the video section without much luck, I asked a clerk if they even had the X-Files Collector's Edition DVD, and if so, could he point me to it. ![]() I jumped in my car, drove to Tower Records, searched around for a small parking spot and went inside to look for the DVDs. So when I heard that all the X-Files episodes from season one had been released on a Collector's Edition DVD, I got pretty excited and decided I had to go out and buy the entire collection. I am a pretty big fan of the X-Files, and I prefer buying DVDs to renting videos since it really annoys me to keep track of what I rented when. ![]() Solutions to the Problem of Social Cost Property Rights over Personal Information Redefining the Market for Privacy Public Concerns Raised by Privacy Rights Clarifications on Personal Information Property Rights Conclusion The Impact of the Internet on Transaction Costs Privacy as a Problem of Social Cost A complementary economic and legal system that recognizes individual property rights over personal information is suggested as a way in which to greatly accelerate the adoption of electronic commerce and to extract inefficiencies from the already existing marketplace for personal information. This article examines how advances in high speed networking and data storage have radically reduced the costs to businesses of collecting, storing, manipulating and exchanging large amounts of personally identifying information on consumers, and the policy implications that these cost reductions have on property rights over personal information. Problems in social cost can be understood by modeling the liabilities, transaction costs and property rights assigned to various economic agents within the system, and can be resolved by reallocating property rights and liability to different agents as needed to achieve economic equilibrium. Transaction Costs and the Social Costs of Online PrivacyĮconomically, privacy can be understood as a problem of social cost, where the actions of one agent (e.g., a mailing list broker) impart a negative externality on another agent (e.g., an end consumer). ![]()
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