Resolving the privacy issue regarding personal data.

The news …

The U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing today on privacy of data collected by data brokers.  Gartner defines data brokers as the following:

“[A] business that aggregates information from a variety of sources; processes it to enrich, cleanse or analyze it; and licenses it to other organizations. Data brokers can also license another company’s data directly, or process another organization’s data to provide them with enhanced results. Data is typically accessed via an application programming interface (API), and frequently involves subscription type contracts. Data typically is not “sold” (i.e., its ownership transferred), but rather it is licensed for particular or limited uses. (A data broker is also sometimes known as an information brokersyndicated data broker, or information product company.)”

The Committee and the hearing witnesses discussed the lack of knowledge most consumers have regarding the amount of personal data collected on them and how the data is used or disposed of.  Not only is sensitive data in the hands of third-parties not known by the consumer but there is the risk that data collected could be incorrect and create a negative impression of the consumer particularly as it concerns decisions regarding employment, access to colleges, or access to credit.

At least one senator is on to something …

One line of questioning I found insightful came from Senator John Kennedy, Republican of Louisiana.  He wanted to know the thoughts of the witnesses on licensing of data by the consumer herself.  What disclosure requirements would both sides have to meet in order to allow the consumer to license her data?

It wasn’t clear whether Senator Kennedy discussed disclosure requirements in anticipation of a transaction model where parties need as much transparency as possible in order to negotiate licensing agreements for the exchange of personal data.  If that is the case, then licensing could help build a platform for a market solution to the privacy issue.

An autonomous market approach would keep government out of negotiating a data exchange between consumer and broker.  The parties could choose to have courts settle any contract disputes or issues arising out of tort where misuse of data resulted in some civil harm. Or, parties could choose arbitration, further minimizing government involvement in settling disputes.

Right now, the political power belongs with Congress …

But we are ahead of ourselves.  We still need to identify where the political power is sitting in this privacy debate.  So far the greatest ability to shape and control the political behavior of stakeholders appears to lie with the government.  Data broker LiveRamp Holdings, Inc., formerly known as Acxiom, acknowledges that the fallout from Cambridge Analytica’s treatment of data it received from Facebook has resulted in increased scrutiny of the “shadow industry.”

Congress may feel further emboldened to implement America’s own version of the European Union’s General Data Protection Regulation as more members of the electorate become familiar with data broker business models and the perception as to how data broker use of private data could negatively impact consumer lives.

 

 

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What should the role of law be in Facebook’s digitally connected world?

The Eye Catcher …

Is it important to human existence that seven billion human beings be digitally connected? Facebook seems to think so.  According to its mission statement, Facebook’s mission is:

” … to give people the power to build community and bring the world closer together.  Our top priority is to build useful and engaging products that enable people to connect and share with friends and family through mobile devices, personal computers, and other surfaces.  We also help people discover and learn about what’s going on in the world around them, enable people to share their opinions, ideas, photos and videos, and other activities with audiences ranging from their closest friends to the public at large, and stay connected everywhere by accessing our products.”

Facebook’s view of the world seems to have gone beyond making sure they provide a platform upon which we can find our seemingly long-lost high school crushes.  Now the company wants to facilitate our abilities to make friends and form more connections by introducing emotion-detecting robotics. Just imagine walking down 7th Avenue in Manhattan, your head hung low.  You feel a tap on your shoulder. You turn, and there is Robby the Robot asking if you need a friend.

Just what should the role of law be in an instance where data is being collected first hand on a public street in any American city? First, what is the role of law?

What is the role of law in the digital age?

In a society where data is being collected sometimes without permission or pursuant to some term and condition that has not been read by a subscriber to digital services, what should be the role of law? In other words, to what extent should the State promulgate a body of rules to regulate the behavior of firms that collect by digital means behavioral data from the State’s citizens?

To answer this question I believe we first have to analyze the State’s role in this political economy.  Then, we need to take a look at the relationship between the State and the business firm in general and the data collecting digital firm in particular. After this analysis, we can provide a more accurate picture of the role of law with the added benefit obtaining some insight on the philosophy underlying the State and the laws it promulgates.

The state as ultimate manager of all resources …

To assess the State’s role in this political economy, I place myself in the role of the original “strong man.” I see land and determine to occupy it and control all its resources for my benefit.  Paraphrasing Murray N. Rothbard from his work, Anatomy of the State, I systemize all my political means of acquisition and control, i.e. law, military to create a mechanism for taking the land, whether occupied or unoccupied and convert it to my property to distribute, again for my benefit, at some point in the future.

At this point of acquisition and conquest I have to decide what is the best method for me to optimize the benefits derived from my new territory. Do I and my small band of conquerors do the work ourselves or do we retain labor to do the job?

Entrepreneurs, privateers, and private firms/trading companies step in, petition for charters giving them license to mine and extract resources which they package in return for a fee from me.  These private “going concerns” may also obtain a license from me, the State, allowing them purchase land and extract and package resources, and convert the resources into goods and services for distribution while making a profit along the way.

In my model of a political economy, I have decided that, while I own and maintain the public rights-of-way through which transportation, energy, and communications networks are deployed, commercial trade, the movement of goods and services, will be managed by the privateers.  As long as the privateers serve the “public interest”, they will be allowed to chase profits.

The definition of “public interest” has always been less than clear, but coming from the perspective of the State, as long as the privateer’s activity creates a taxable event and does not erode the public rights-of-way to the point of maintenance costs exceeding benefit, then the privateer keeps her license and is allowed to continue extracting resources and pursuing a profit.

Is the extraction of digital information in the State’s interest? Yes …

Information is a primary resource. It services all endeavors, from manufacturing, mining, farming, public policy decision-making, baking apple pie, etc.  The State has an interest in how it flows.  In a political economy that rides on a corporate-capitalism platform, the State has an interest in allowing information to flow under the least restrictive conditions so that, like other forms of capital, information can move to its next best use. In the case of digital platforms such as Facebook, the State has made a determination, as manifested in its charter to Facebook, that Facebook meets the public interest by creating a taxable event that involves the efficient and profitable extraction of information.  With over 2 billion users and its dominant position in digital advertising, Facebook is demonstrating that it is meeting the State’s public interest.

So, as to the State’s role in a digital economy, the extent to which the State is expected to promulgate a body of rules to regulate the behavior of firms that collect by digital means behavioral data from citizens should be a minimal one; an extent to where the digital firm can leverage its technology to optimize data collected and the revenue obtained from digital services, while the State maximizes collection of taxes from the digital platform.

So what role should law play in a digital economy?

I see the role of law in a digital political economy as three-fold. First, its role is to “apologize” for the State’s role in exercising jurisdiction over the resource called information.  Second, the role of law is to ensure that information flows freely to its best use by licensing the firms that are best at moving information to its next best use.  Lastly, the role of law is to ensure collection of taxes from entities charted to mine, package, and distribute information while allowing these firms to maximize profits.