Privacy is like your old granny: endearing but a bit… old-fashioned?

When privacy and its purportedly outdated values must be balanced against the cutting-edge imperatives of national security, efficiency, and entrepreneurship, privacy comes up the loser, (Julie Cohen, “What Privacy is For”)

In the era of Big Data and the Quantified Self, the opposition between privacy and innovation is patent. Privacy prevents the unfettered information collection and processing.

Revealing privacy can be understood as a ‘voluntary sacrifice’. A person may volunteer personal details in order to obtain a service or a price discount in return. Nothing new, although the rise of the internet has increased the use of personal data as the default currency for many online services. Many people accept the bargain and they are happy. It is pure convenience. In fact, nobody seems to put a high “monetary” value on his or her privacy:

Even though consumers claimed to want privacy, they didn’t want to pay for it, (Alessandro Acquisti, as quoted in “Letting Down Our Guard With Web Privacy“, New York Times) Kozinski is one of those who has reached some level of comfort, despite his lingering concerns. He mused that if he had to pick a price to protect his privacy — and actually pay for all those proliferating “free” services — he would probably reach a maximum “price point” of $200 a month, as long as it included his entire family, (“Alex Kozinski, Federal Judge, Would Pay A Maximum Of $2,400 A Year For Privacy“) Some people want targeted marketing. They want their data shared. They want catalogs to be mailed totheir homes. They want to be tracked. They want to be profiled. They want companies to use their personal information to recommend products and services. These people should not be dismissed as uninformed or foolish, as it is far from clear that the costs to these people outweigh the benefits. (Daniel Solove, “Privacy Self-Management and the Consent Dilemma“)

Social practices evolve. Therefore, as people cease to be concerned as much about privacy as in the past, society might simply write it off as a lost feature of life, accepting the omnipresent transparency as a necessity for better digital services and more security. Privacy is dead. Full Stop.

But wait. Have you ever asked yourself why privacy existed in the first place? What is the role privacy used to play or should play in our society? What is privacy for? I think it is simple: Privacy protects the “self” from the two main consequences of full social exposure:

A lack of privacy fundamentally alters the (bargaining) power equilibrium between two parties.

A lack of privacy changes people’s behaviour: People behave in a different way under observation/surveillance

Let’s have a look at both in turn to see why they matter and how privacy acts as a sort of “social” sandbox which protects our core self. In fact, contrary to superficial appearance, a society that values innovation will ignore privacy at its own peril.

A Lack of privacy fundamentally alters the balance in power

Surveillance gives the watcher information about the watched, and information gives the watcher increased power over the watched that can be used to persuade, influence, and eventually control them, even if they don’t know they are being watched or persuaded (nudge). It is not difficult to imagine dystopian big-brother like scenarios where this fundamental asymmetry can have deleterious consequences for personal freedom and collective liberties. However, it is not necessary to go that far in order to understand why a lack of information privacy matters.

In a market economy, without private information, consumers would lose a fundamental bargaining advantage, their main competitive advantage. Consumer’s surplus is the monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the highest price (reservation price) that they would be willing to pay. When you participate in a market transaction or a negotiation where your reservation price is known to the other party, you will not be able to retain any surplus. Quite the contrary, the seller will able to extract the entire consumer’s surplus and transform it into a profit. It is what economists call First Degree Price Discrimination, something generally considered infeasible in most practical situations but which information technology is making more commonplace.

Privacy intrusions serve to provide the information that allows sellers to determine buyers’ willingness to pay. In a seminal article first published more than ten years ago, “Privacy, Economics, and Price Discrimination on the Internet”, Andrew Odlyzko argues that the powerful movement to reduce privacy that is coming from the private sector is motivated by the incentives to price discriminate, to charge different prices to various customers for the same goods or services. Erosion of privacy allows for learning more about customers’ willingness to pay, and also to control arbitrage in which somebody who might face a high price from a seller buys instead from an intermediary who manages to get a low price. Price discrimination offers a much higher pay-off to sellers than any targeted marketing campaign.

In other words, the actual reason everyone wants to know what’s inside your head, is not those stupid banners with cars adverts you will start to see everywhere after you have just visited Toyota’s web page. The actual reason is they want to charge you a lot more for the car you are planning to buy, as much as you are ready to pay for it, even if you yourself can’t figure out how much it is yet.

As soon as 2000, Amazon infuriated customers when it sold DVDs to different people for different prices. Amazon said it was merely a test and ultimately refunded the price difference to people who paid more, but since then many other companies are using this kind of technique:

The Journal identified several companies, including Staples, Discover Financial Services, Rosetta Stone Inc. and Home Depot Inc., that were consistently adjusting prices and displaying different product offers based on a range of characteristics that could be discovered about the user, (Wall Street Journal, “Websites Vary Prices, Deals Based on Users’ Information”)

In a working paper, Benjamin Shiller reports that if Netflix used first degree price discrimination some consumers would be charged more than twice as much as others. For years, the Internet, with its promise of quick comparison shopping, has granted people a certain power over retailers, creating the expectation of a truly perfect market, but retailers have retaliated:

… the idea of an unbiased, impersonal Internet is fast giving way to an online world that, in reality, is increasingly tailored and targeted. Websites are adopting techniques to glean information about visitors to their sites, in real time, and then deliver different versions of the Web to different people. Prices change, products get swapped out, wording is modified, and there is little way for the typical website user to spot it when it happens, (Wall Street Journal, “Websites Vary Prices, Deals Based on Users’ Information”)

The incentive to price discriminate for a seller facing a “perfect” market is huge. The only practical problem is how to price discriminate effectively. How does one conceal price discrimination?

The basic way is to avoid simple cash pricing. Make an offer where the price is a combination of cash and frequent flyer miles, say. Make individualized offers that supposedly reflect the prospective purchasers’ past dealings with you, (Andrew Odlyzko, “Privacy, Economics, and Price Discrimination on the Internet”)

In some cases, extra costs are incurred in order to create a version of a product less serviceable and sell the complete version at a higher price. This is known as the “damaged goods” approach, and appears to be used with increasing frequency.

The effects of price discrimination on social efficiency are unclear. Sometimes, total output can be expanded; sometimes, price discrimination contribute to misallocating output among consumers. What we know for sure is that whatever the “economic” efficiency, people do not like being subjected to dynamic pricing. They regard it as unfair. Some 76% of American adults said it would bother them to find out that other people paid a lower price for the same product.

The power to treat people differently is a dangerous one, even in such controlled and regulated environments as markets.

A lack of privacy severely affect people’s behaviour

It is well known that Individuals alter their performance or behaviour due to the awareness that they are being observed. The phenomenon is known as reactivity and it is a kind of social uncertainty principle which could be stated by saying that there is a fundamental limit to the precision with which we can know a person’s true “intended” behaviour, because the observed individual will modify his or her behaviour when noticing that he or she is being watched. In fact, I suspect that this effect does not only apply to human behaviour but also to animals or living organisms in general, very likely due to more or less obvious survival reasons.

There is a broad range of situations where social reactivity has been well documented. The Hawthorne effect is a form of reactivity whereby subjects improve or modify an aspect of their behaviour when being experimentally measured simply in response to the fact that they know they are being studied. When the experimenters subtly communicate their expectations to the participants, they can alter their behaviour to conform to these expectations (experimenter effect). The Pygmalion effect occurs when students alter their behaviour to meet teacher expectations. Both experimenter effects and Pygmalion effects can be caused by bias and stereotyping.

There is a general tendency (social desirability bias) of respondents to answer questions in a manner that will be viewed favourably by others. It can take the form of over-reporting “good behaviour” or under-reporting “bad” or undesirable behaviour. The tendency poses a serious problem with conducting research with self-reports, especially questionnaires. This bias interferes with the interpretation of average tendencies as well as individual differences. The Bradley effect is a theory proposed to explain observed discrepancies between voter opinion polls and election outcomes in some United States government elections.

Groupthink is a psychological phenomenon that occurs when the desire for harmony or conformity in a group results in a sub-par decision-making outcome. Group members try to minimize conflict and reach a consensus decision without critical evaluation of alternative ideas or viewpoints, and by isolating themselves from outside influences.

The overwhelming conclusion is that observation has powerful effects on how people behave. Surveillance may be defined as attention that is purposeful, routine, systematic, and focused. When people know they’re “under surveillance”, they behave differently, with the a net effect of normalizing behaviours and stifling “free” and new behaviours.

The alteration of behaviour under observation is neither good nor bad per se. Children are routinely monitored. They avoid dangerous behaviours when they feel they are under the close scrutiny (surveillance) of a responsible adult. More controversially, a soft form of surveillance is increasingly promoted by “paternalist” modern states to steer citizens in directions that will make their lives go better. In fact, the term “nanny state” is used to liken government to the role that a nanny has in child rearing.

Many people abhor paternalism, and since John Stuart Mil published his famous essay “On Liberty”, it has been a tenet of liberal states that government cannot legitimately coerce people if its only goal is to protect people from themselves. The idea of a surveillance society is habitually linked with totalitarian political systems. However many people today argue that this new form of paternalism preserves freedom of choice, while protecting people from the mistakes and damage that they unintentionally inflict on themselves due to cognitive limitations and biases. Interestingly, it is not only promoted by governments, but also by private companies which are setting high expectations on the exploitation of personal data.

The debate around this watered-down form of surveillance, soft paternalism or libertarian paternalism, is hot with heavy weights on both sides of the argument. And it is worth having it, because as Julie Cohen subtly put it, the unchecked ascendancy of surveillance will eventually suffocate democracy.

In the modulated society, surveillance is not heavy-handed; it is ordinary, and its ordinariness lends it extraordinary power, (Julie Cohen, op. cit.)

A modulated democracy emerge as networked surveillance technologies take root and citizens within modulated democracies increasingly will lack the capacity to form and pursue meaningful agendas for human flourishing.

Privacy as a Sandbox

In computer science jargon, a sandbox is a security mechanism for separating running programs and protecting the operating environment in which they run. It is a technology used to isolate unverified programs which may contain bugs or virus or untested code changes, providing room for outright experimentation. Likewise, ideas are like programmes running on our mind. New ideas may be born as a nearly random process (Blind Variation) but they need a proper environment to germinate and mature before they start to disseminate. Privacy is our own sandbox to test ideas. It is an isolated space which allows us to play with untested ideas, crazy ideas, stupid, old-fashioned ideas, with forbidden ideas, without full exposition to social pressure. Intellectual privacy creates a fundamental screen against surveillance.

Privacy shelters dynamic, emergent subjectivity from the efforts of commercial and government actors to render individuals and communities fixed, transparent, and predictable (Julie Cohen, op. cit.) Privacy is shorthand for breathing room to engage in the processes of boundary management that enable and constitute self-development (Julie Cohen, op. cit.) In order to speak, it is necessary to have something to say, and the development of ideas and beliefs often takes place best in solitary contemplation or collaboration with a few trusted confidants. (Neil Richards, “Intellectual Privacy”) The isolating shield of privacy enables people to develop and exchange ideas, or to foster and share activities, that the presence or even awareness of other people might stifle. For better and for worse, then, privacy is sponsor and guardian to the creative and subversive. (Timothy Macklem as quoted in Neil Richards, “The Dangers of Surveillance”)

Following Julie Cohen, a society that values innovation will ignore privacy at its peril. Privacy shelters the processes of play and experimentation from which innovation emerges. Freedom from surveillance, whether public or private, is foundational to the practice of informed and reflective citizenship, but freedom from surveillance is also foundational to the capacity for innovation.

Innovation does not follow an inevitable, linear path to a predetermined end. Innovation emerges from the interplay between freedom and constraint. Innovation requires room to tinker, and thrives fully in an environment that values and preserves spaces for tinkering. The assumption that innovative activity will persist unchilled under conditions of pervasively distributed surveillance is simply absurd.

In a world of widespread public and private scrutiny, novel but unpopular ideas have little room to breathe. Much could be said, but it would rarely be new, because original ideas have no refuge in which to develop. (Neil Richards, “Intellectual Privacy”)

The freedom to think and to believe as we want is arguably the defining characteristic of a free society and our most cherished civil liberty, and as a TechCrunch reporter wittily put it talking about NSA surveillance efforts:

If we sacrifice the American experiment of radical individual liberty to save the American experiment of radical individual liberty, what have we accomplished? (“Smashed Hard Drives, Shuttered Email Services, And The Slow Leak Of Free Speech”, Techcrunch)

We can change of course “American” for any other suitable adjective that makes us tick.

The lack of walls and the far-reaching, all-watching communications we enjoy today might well mean we are entering an era of lukewarm, close-to-average/dominant ideas and behaviours. This is beginning to be evident at an intellectual level. Diversity is key to ensure adaptation to change (innovation) and ultimately survival in a changing environment. Enough variation in our society’s pool of ideas is fundamental to continue our journey toward progress.

Progress might not need us and might well continue without privacy, but “we” would have been the price paid for it, because:

… the concept of privacy also matters for another, deeper reason. It is intimately connected to what it is to be an autonomous person (…) to the extent we risk the loss of privacy we risk, in a very real sense, the loss of our very status as subjective, autonomous persons, (Michael P. Lynch, “Privacy and the Threat to the Self”)

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Featured Image: The ongoing process (the studio blog of sara pedigo), tiny sandbox painting