Markets and Information

1
Markets and Information

• Richard Warner

2
Three Types of Privacy

• Spatial rights define a physical zone of control
  over intrusions by others.
• Decisional rights protect an individuals freedom
  of choice.
• Informational rights demarcate an ability to
  determine what others know about us and what they
  do with that knowledge.

3
Privacy and the Market

• When considering business threats to privacy, it
  is easy, in the eagerness to protect privacy, to
  overlook the critical role that information plays
  in making it possible for market exchanges to
  efficiently provide us with goods and services

4
Coordination Example

• During the morning a number of people step into
  a Milan café for an espresso. They do not doubt
  that it will be available. What justifies their
  confidence? Making the coffee available rests on
  a great deal of cooperation, specifically the
  assignment to many people of performances that
  together accomplish a feat far beyond the
  capacity of any one person alone.

5
Coordination Example

• It is accomplished by market transactions that
  assign and link both multiple performances and
  multiple chains of them. Farmers cooperate in
  growing and harvesting the coffee beans. Truck
  drivers or locomotive engineers transport the
  beans to a seaport on highways or railroads that
  have been constructed by many kinds of
  cooperating laborers.

6
Coordination Example

• At the seaport, longshoremen and ships crews
  join the chain. At a dock in Genoa, shipping the
  beans on to Milan calls again on performances
  from longshoremen, warehousers, and truckers.
  Somewhere along the chain, some people roast the
  beans, and others fabricate bags for carrying
  them.

7
Coordination Example

• Think of other participating cooperators
  insurers and inspectors wholesalers and
  retailers. . . . However great their distance
  from Milan, innumerable people play their roles
  in cooperation, no less so than the surly or
  obliging waiter in the café.
• Charles E. Lindblom, The Market System What It
  Is, How It Works, and What To Make of It 36 - 37
  (2001).

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Informations Role

• The coordination of these individual efforts
  occurs without centralized planning or direction
  information is the thread that ties the efforts
  together.
• The farmers growing coffee beans estimate, based
  on a variety of factors, the volume buyers will
  want to purchase, and so on.

9
Efficiency

• Market economies depend on a flow of information
  between buyers and sellers.
• The more accurate and less costly the
  information, the more efficient the economy.
• We spend less to achieve the same results, and
  the savings can be use for other
  purposes--education, relief of poverty, improved
  health insurance, and so on.

10
Business Uses of Information

• Product development and design
• Financial planning
• Customer service
• Advertising
• Price discrimination

11
Targeted Advertising

• Advertising plays a critical role in informing
  buyers about what is available where at what
  price.
• This is true despite advertisings manipulative
  purpose.
• The more targeted advertising is, the more
  efficient it is.
• The more targeted advertising is the more likely
  its message is relevant to its recipient.
• Targeting requires information about buyers.

12
Privacy Versus Efficiency

• To the extent that privacy protections reduce a
  businesses ability to target advertising, privacy
  protections decrease efficiency.
• How much privacy, if any, should we sacrifice for
  the sake of efficiency?
• Current U. S. law is heavily biased in favor of
  efficiency.