NCPA - National Center for Policy Analysis

Privacy And Internet Commerce

April 11, 2001

Higher productivity and rising living standards are products of businesses' ability to compile and manipulate data. And while everyone wants privacy, there is little consensus on what the term means or what can be done to ensure privacy without undermining free speech rights, consumer convenience or economic growth.

  • The percentage of citizens very concerned about privacy has increased from 20 percent in the early 1990s to about 30 percent.
  • However, polls also indicate that about 20 percent simply do not care about privacy, while 50 percent are willing to trade some personal privacy for benefits such as convenience.

Many online retailers collect information so their customers do not have to reenter it each time, but the retailers also want to know their customers' individual tastes to provide individually tailored products. Government privacy regulations could eliminate these convenience features.

Technology allows privacy to be compromised in many ways. For example,

  • Identity theft crimes are on the rise, partly because thieves can easily obtain the data to falsely acquire credit cards, bank loans and other valuables online.
  • Wireless phone operators will soon be able to track users' locations, creating opportunities for advertisers and others who want to track a person's movements.
  • Market research corporations monitor radio stations listened to by drivers through billboard- and building-mounted devices, making drivers unwitting survey participants.

Because potential privacy controls threaten to stifle growth and hurt profits, society must find the right balance between privacy and economic efficiency. Early efforts to reward individuals who make the trade-off have shown promise. For example, California-based has registered 300,000 online customers who provided a profile of their buying interests. The company sells this information to advertisers and shares the proceeds with its customers, who earned $205,000 in the first seven months of 2000.

Source: Neil Munro, "Privacy's Price," and Bruce Stokes, "What's Your Privacy Worth?" both National Journal, September 2, 2000.


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