[Politech] Dan Solove, Eric Grimm debate privacy laws with Cato's Jim Harper [priv]

From: Declan McCullagh (declan@private)
Date: Mon Mar 21 2005 - 20:11:04 PST


Previous Politech messages:
http://www.politechbot.com/2005/03/18/catos-jim-harper/
http://www.politechbot.com/2005/03/11/request-for-critique/



-------- Original Message --------
Subject: Privacy proposal.
Date: Sun, 20 Mar 2005 16:48:05 -0500
From: Eric C. Grimm <eric.c.grimm@private>
Reply-To: Eric C. Grimm <eric.c.grimm@private>
To: jharper@private, declan@private, hoofnagle@private, 
dsolove@private,        dave@private

Declan, I think all three gentlemen make very good points.  And it is
pleasantly surprising to see Jim Harper take the view that some modest
form of government intervention (through courts and the tort liability
system, rather than by legislatures or regulatory agencies) can have a
net welfare-beneficial effect, in the area of personal data
protection.

Indeed, there is good reason to be skeptical of legislative and
regulatory intervention -- precisely because of the risk of "capture"
by the very entities that are supposed to be regulated.  Most of the
bills introduced in Congress to regulate private information brokers,
over the last several years, contain "pre-emption" clauses that
essentially eliminate the ability of states (including the state
courts in New Hampshire that Jim mentions favorably) to develop their
own rules (either through legislation or through organic evolution of
the common law).

Based on occasional experience with the court system, however, I do
not share Jim's optimism that we can rely on state courts to "evolve"
fast enough to solve the problem.  Rather, courts have been profoundly
reluctant, in most cases, to empower ordinary individuals to police
their own privacy.  It has taken an extreme, horribly tragic case in
New Hampshire, in order for the first glimmers of hope to be seen,
from the standpoint of development of the common law.

So, based on practical experience (and cognizant of the hundreds of
cases that have not led to rapid developments in negligence law for
entities like ChoicePoint), I think there is good reason to be
skeptical as to whether the courts will really solve the problem.

As you know, I'm a late-comer when it comes to opining about
protecting individuals' privacy.  Hoofnagle and Solove were way ahead
of me, in seeing the big picture, so I have to give them credit for
any modest insights I may have.  When I first started bloviating (even
occasionally on your list) on the topic, some years ago, it seemed
obvious that a third-party insurance approach (liability insurance for
the information brokers), would likely work better than an approach
that attempted to address the problem like first-party health or
disability insurance (that pays benefits to the victim after bad
things happen).

If consumers can sue for misuse of their personal information, and
collect money damages, then Jim is right -- the brokers and collectors
will sit up and take notice, and things will improve quite rapidly.
Both people and businesses respond rationally, and quickly, to
economic incentives.

I'd just like to expand on Jim's point a little bit by pointing out
how the rest of the process plays out.  The next thing that happens,
once ChoicePoint, Bank of America, and other entities, can be held
liable in court by individuals, is that the insurance industry steps
in.  Liability lawsuits create demand for insurance and the insurance
industry is always looking for new business opportunities to supply
products and services.

The insurance industry steps in with two related lines of
products/services -- (1) risk management services (to reduce the risk
of loss in the first place, by establishing robust levels of
protection), and (2) liability insurance (to protect against the
damages paid out when errors occur, and costs of suit).

Yes, insurance costs money.

But it makes a lot more sense to handle the risk through the mechanism
of private insurance markets than just to leave customers with the
loss (i.e., the people who are not in the best position to do much
about data collection, and subsequent handling and dissemination of
data, in the first place), and say "tough for you."  It makes more
sense because leaving the victims to suffer the loss (in classic
economic "externality" speak) means that the information brokers
essentially receive a subsidy, and do not internalize the full social
costs of their activities.

Does this mean that prices of information brokers' services may
change?  Perhaps.  Of course, in a competitive marketplace, there will
be natural constraints on how much prices can change.  But they will
have to adjust prices to reflect the cost of insurance (which, in
turn, reflects in part the pay-out to victims, in the form of
successfully-proven liability claims).

But is that such a bad thing?  Probably not -- and especially not if
you are an incumbent information broker (already possessing a vast
database).  The more the law changes, the more that your
inexpensively-gathered (relative to any new competitors' cost of
replicating it) database asset, increases in market value.

Incidentally, at about the time that Congress was bandying about a
bunch of proposed legislation that contained federal "pre-emption"
clauses, that would effectively shut down the very common-law
evolution that Jim champions, CitiBank and Travelers (since merged),
and (presumably) other credit card issuers, started peddling
first-party "identity theft" insurance.

They started collecting premiums from consumers, in exchange for a
promise to pay to help straighten out the consequences of identity
theft, when it occurred.

I leave it to your readers to ask whether that approach is the best
way to stop identity theft and other harms from happening in the first
place.  IMHO, that approach is fundamentally inferior to an approach
based on tort liability and empowerring individuals to police their
own privacy.

-- 
Eric C. Grimm
Calligaro & Meyering, P.C.
20600 Eureka Road, Ste 900
Taylor, MI  48180
734.283.2727






-------- Original Message --------
Subject: RE: Privacy proposal.
Date: Mon, 21 Mar 2005 15:59:13 -0500
From: Jim Harper <jharper@private>
To: Eric C. Grimm <eric.c.grimm@private>, <declan@private>, 
<hoofnagle@private>, <dsolove@private>, <dave@private>

Thanks for the note, Eric.

I often find myself debating people who are debating the cartoon version 
of The Cato Institute or libertarianism. In the cartoon version, there's 
no role for government at all and libertarians are wild-eyed fanatics. 
In the real version, the role of government is to prevent people from 
harming each other, leaving them otherwise free to act as they wish. 
(Perhaps still wild-eyed, but with a darn good point.)

The common law meets (or at least should meet) every harm with a remedy. 
That follows the libertarian vision because it allows the maximum 
freedom of action while addressing harmful behavior.

Regulation at its best proscribes a set of actions in order to prevent 
harm. This means that regulation often proscribes non-harmful (even 
beneficial and productive) actions to get at the harmful subset of the 
proscribed actions.

When it's not at its best, regulation is not even premised on a theory 
of harm. Rather, whatever interest has captured the legislative and 
regulatory processes just uses them to tell the rest of the society how 
it can behave - or it installs regulation that allows harmful behavior.

You've referred to "hundreds" of cases where the common law has not 
"empowered ordinary individuals to police their own privacy." That loose 
phraseology obscures the most important question: Were people harmed?

I know of few cases where people have been harmed in legally cognizable 
ways by data practices. I mean really harmed, not mildly inconvenienced, 
disconcerted, or nonplussed. I'm talking about monetary loss, property 
loss, or mental distress that causes physical symptoms, loss of work, or 
destruction of family and professional relationships. This might reflect 
my ignorance or it might reflect the fact that people are rarely 
actually harmed by mainstream information practices.

Perhaps, though, we should adopt new theories of harm. (If Declan posts, 
I make this suggestion specifically to anyone aching to flame about the 
last paragraph. Get out of your own head and speak in general terms 
about what data practices injure people and how they do that - not just 
what pisses you off.) Solove and Hoofnagle would do wonders if they 
articulated and defended a general theory of privacy - to underlie 
either common law development or regulation. Most folks propose a suite 
of rules, insist that they represent what is "fair," and call for their 
adoption based on that assertion. These are appealing in a free-lunch 
sort of way - "You can live in the Information Age and have low prices, 
easy credit, low mortgage interest rates, cheap insurance, free online 
content, and good customer service, without sharing 'your' personal 
information."

I wouldn't want a new theory of harm to be adopted quickly, by the way. 
  It should be adopted slowly so that we can be sure it really works and 
really nests with our society's values and functioning. Because it 
develops by accreting case after real-world case, common law is much 
better than regulation for discovering rules that actually work, on 
every level.

You're exactly right that a liability regime is taken into account by 
market actors, including insurance companies which require their clients 
to undertake protective measures. This accounts for the objection that 
tort liability is retrospective. It's not really about the right to sue, 
but the protections installed in light of the right to sue. These 
protections are at least equal to the protections required by regulation 
because regulations consistently miss the new threats while 
over-responding to the old ones. (See ChoicePoint and the response 
thereto, now playing out before us.)

Again, thanks Eric.

Jim



Jim Harper
Director of Information Policy Studies
The Cato Institute
and
Editor
Privacilla.org


-------- Original Message --------
Subject: A Taxonomy of Privacy
Date: Mon, 21 Mar 2005 17:05:25 -0500
From: Daniel Solove <dsolove@private>
To: 'Jim Harper' <jharper@private>,        'Eric C. Grimm' 
<eric.c.grimm@private>, <declan@private>, 
<hoofnagle@private>, <dave@private>

Jim,

Thanks for your continued commentary about our proposal.  Thank you Eric as
well.

Jim writes: "Solove and Hoofnagle would do wonders if they articulated and
defended a general theory of privacy -- to underlie either common law
development or regulation."

I recently attempted such a project, posting a paper on SSRN called "A
Taxonomy of Privacy."  In that paper, I develop a taxonomy of different
activities that present privacy harms or problems and articulate why.

The paper, A Taxonomy of Privacy, is available here:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=667622

ABSTRACT: Privacy is a concept in disarray. Nobody can articulate what it
means. As one commentator has observed, privacy suffers from "an
embarrassment of meanings." Privacy is far too vague a concept to guide
adjudication and lawmaking, as abstract incantations of the importance of
"privacy" do not fare well when pitted against more concretely-stated
countervailing interests. In 1960, the famous torts scholar William Prosser
attempted to make sense of the landscape of privacy law by identifying four
different interests. But Prosser focused only on tort law, and the law of
information privacy is significantly more vast and complex, extending to
Fourth Amendment law, the constitutional right to information privacy,
evidentiary privileges, dozens of federal privacy statutes, and hundreds of
state statutes. Moreover, Prosser wrote over 40 years ago, and new
technologies have given rise to a panoply of new privacy harms. A new
taxonomy to understand privacy violations is thus sorely needed. This
article develops a taxonomy to identify privacy problems in a comprehensive
and concrete manner. It endeavors to guide the law toward a more coherent
understanding of privacy and to serve as a framework for the future
development of the field of privacy law

I hope that this paper at least in part answers the challenge you posed
above.

Regards,

Dan

Daniel J. Solove
Associate Professor of Law
George Washington University Law School
2000 H Street, NW
Washington, DC 20052
(202) 994-9514

Website: http://www.law.gwu.edu/facweb/dsolove/







-------- Original Message --------
Subject: RE: A Taxonomy of Privacy
Date: Mon, 21 Mar 2005 17:57:12 -0500
From: Jim Harper <jharper@private>
To: Daniel Solove <dsolove@private>,        Eric C. Grimm 
<eric.c.grimm@private>, <declan@private>, 
<hoofnagle@private>, <dave@private>

I read your paper. It's good - and spot-on for what it does, which is to 
describe the different (and conflicting, in my opinion) strains of 
"privacy."

What's needed is your normative / prescriptive view of privacy. That is 
what *should* privacy be as a concept. The best job I've done with mine 
is in the first section of my Cato paper from last fall, Understanding 
Privacy -- and the Real Threats to It.

http://www.cato.org/pub_display.php?pub_id=1652

"Privacy is the subjective condition that people experience when they 
have power to control information about themselves and when they 
exercise that power consistent with their interests and values."

That isn't simple because privacy's not simple, but the pages that 
follow this definition parse it.

People are using the word privacy to reach a number of different 
interests, which is a mistake. The word privacy should be used to 
describe one specific concept (described in my paper), while "fairness"; 
"anonymity"; "security"; "crime control"; "freedom from marketing" and 
so on should be used each in the circumstances relevant to those 
different concepts. All in my "normative" opinion.

(The only thing keeping me from taking poison for my academic, obtuse 
language is that I didn't use the word "heuristic" or "deconstruction" 
just now. If I'd a had more time, I'd a written a shorter letter.)

Jim







-------- Original Message --------
Subject: RE: A Taxonomy of Privacy
Date: Mon, 21 Mar 2005 21:01:17 -0500
From: Daniel J. Solove <dsolove@private>
To: Jim Harper <jharper@private>, Eric C. Grimm 
<eric.c.grimm@private>,        <declan@private>, 
<hoofnagle@private>, <dave@private>

Jim,

I look forward to reading your paper with interest, but I doubt I'll agree
with you.  I've written about why I believe attempts to conceptualize
privacy as a unitary concept fail in my paper, Conceptualizing Privacy:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=313103

I believe that my taxonomy piece is discussing my view of what privacy
should be as a concept.  I don't see why one has to choose between different
dimensions of privacy (unless there's an irreconcilable conflict, which in
many cases there need not be).

I also don't believe that privacy is a purely subjective individualistic
condition.  My paper explains this in much greater detail; I won't attempt
to engage in a longer discussion because I haven't read your paper (you
might just convince me) and because it took me 60 pages in the other paper
to explain why I disagree with the kind of conception that you propose (as
well as the method of conceptualizing you are using) -- and I doubt I could
make a convincing case in a short email.  I look forward to your thoughts;
it's always fun to engage in a philosophical discussion!

Dan


Daniel J. Solove
Associate Professor of Law
George Washington University Law School
2000 H Street, NW
Washington, DC 20052
(202) 994-9514

Website: http://www.law.gwu.edu/facweb/dsolove/







-------- Original Message --------
Subject: 	[Politech] Cato's Jim Harper replies to Solove-Hoofnagle
privacy regulation proposal [priv]
Date: 	Fri, 18 Mar 2005 10:47:03 -0800
From: 	Hancock, John, ISD
To: 	<declan@private>



Declan,

Jim Harper's thoughtful piece misses two important points.

1.  Jim proposes the simple and attractive rule that companies owe a
duty to those whose data they collect and use, and should be liable in
damages when they mess up and injure the (as the Europeans say) data
subjects.  This assumes perfect knowledge, perfect efficiency and zero
transaction costs.  Remsburg was a great case, but it is probably
atypical.  Proving causation in an identity theft case may be all but
impossible.  Suppose I am normally quite careful in privacy matters.  If
ChoicePoint loses my data, and one month later all sorts of bogus
charges and accounts in my name start to show up, most of us would have
little doubt that ChoicePoint's carelessness caused all the loss,
irritation and aggravation I will now go through.  But convincing a jury
of a cause-effect relationship -- not to mention the cost of convincing
that jury, with the expense of lawyers and evidence and witnesses and
investigations -- may be rather tricky.  Especially now that Bush has
made class actions more difficult to maintain, using the courts to
address losses of a few hundred to a few thousand dollars per person by
hundreds or thousands of people is grossly inefficient and ineffective.
Leaving "ChoicePoint" type injuries to the courts is, in effect, denying
anyone a remedy.  A statutory regime is much more effective, overlaid of
course on private liability actions where a given individual has
significant enough losses or fortitude to pursue his own claim in court.

2.  Jim points out that people choose other things over privacy all the
time -- convenience, even a T-shirt -- and says government should not
intervene to disallow people's choices.  This is the same view that
would allow people to arrange for their own retirement by privatizing
social security.  Again, this assumes perfect knowledge, which few
people I know -- even really smart ones -- have.  Companies routinely
violate their privacy policies.  To make an enlightened and appropriate
choice over whether to give a company my information, I need perfect
knowledge of the company's history and culture (do they do what they
say?), its future (will new management take over and decide to sell my
data for a quick profit?) and the implications of all this for me (do I
really know what it will be like to deal with the identity theft I'm all
but inviting?  Have I even heard of identity theft?).  This kind of
exhaustive research before each of the dozens or hundreds of
transactions we do each day is -- well, it would be idiotic to assume
that anyone can or will do this, even a privacy nut.

In short, Jim assumes markets and people who participate in them are
perfect, knowledge is total and transactions are free.  In my
experience, that is false. These errors are consistent with the Cato
Institute's general bias, but they lead to conclusions that are simply
wrong.


John Hancock
(please omit email address if you post this.)






-------- Original Message --------
Subject: RE: [Fwd: [Politech] Cato's Jim Harper replies to 
Solove-Hoofnagle privacy    regulation proposal [priv]]
Date: Fri, 18 Mar 2005 20:09:36 -0500
From: Jim Harper <jharper@private>
To: JHancock
CC: <declan@private>

Thanks for your thoughts, JH - and I appreciate your role in the 
founding of the nation - but I don't think the "perfect knowledge" 
critique is viable.  A company subject to liability for a data breach 
could gamble that it's responsibility would never be discovered and 
compound its liability in doing so.  Or it could come forward early and 
aggressively to fix what it's done.  I'm sure some companies might 
choose the former (just as some companies might hide breaches from 
regulators), but not mature companies with an eye on building and 
preserving shareholder value.  Liability incentivizes disclosure and - 
more important - prevention of harm to consumers through responses that 
are precisely proportionate to the nature of breaches.

Rather than nakedly assert that a statutory regime is "much more 
effective," try to describe why.  You'll find that you run right up 
against your own "perfect knowledge" argument.  To protect the public 
through regulation, don't bureaucrats and politicians need that same 
"perfect knowledge" you've thrown up against liability?  Hold regulation 
to the same standard you've just held liability to and you'll find the 
answer is Yes.  (And overlaying regulation with liability isn't 
consistent - you just tried to debunk liability.)

It's true that I believe in freedom and responsibility with respect to 
privacy, retirement savings, and everything else, but I don't see how 
"perfect knowledge" is required to make real-world privacy choices, to 
save and invest for retirement, or to do anything else.  We do take 
risks (of privacy loss, of poor investments, and so on) but usually 
choose well and succeed in living fruitful lives.  Lack of "perfect 
knowledge" doesn't keep us from doing that.

I think your assertion of my bias and Cato's reveals your own.  And I 
think you've fixated on "perfect knowledge" because you're thinking 
about these problems as if you were working on a machine rather than a 
social system.

Jim







-------- Original Message --------
Subject: RE: [Fwd: [Politech] Cato's Jim Harper replies to 
Solove-Hoofnagle    privacy  regulation proposal [priv]]
Date: Mon, 21 Mar 2005 16:21:23 -0800
From: Hancock, John, ISD <JHancock360@private>
To: Jim Harper <jharper@private>
CC: <declan@private>

Jim,

Actually I'm pleased to have heard back from you directly.  Let's deal
with your points separately.

1.  Perfect knowledge, perfect efficiency and zero transaction costs.
Knowledge isn't free.  There is a cost to developing information about
what a company (or person or governmental unit) does, what it plans,
what it has done in the past and indeed any factual, technical or other
information at all.  In a given case where a person's loss may be modest
-- say, one or two thousand dollars -- the cost of developing that
knowledge may, and often does, deny any fair resolution of that loss.
It is this problem that underlies the efficacy of class actions:  the
costs of developing information can be amortized over many modest
losses, so that the information cost becomes tractable.  Unfortunately,
court processes necessarily ignore many externalities and may
effectively become a vehicle for enriching the attorneys rather than
compensating losses.  (Of course, as long as the wrongdoer is out the
cash, even enriching the attorneys may act to deter future wrongful
acts.)

Moreover, through arbitration clauses, various waivers including class
action waivers, forum and venue selection clauses and the like,
businesses have learned to gut many of the court processes which have
traditionally redressed wrongs in the U.S..  Obviously, we could spend
many days discussing the comparative merits of arbitration and
litigation, the notion that consumers "agree" to the the teeny-tiny
light-gray print on the back of documents they sign, and the like, but
perhaps we should forego that for the moment.

So, accepting your invitation to identify the advantage of
regulatory/statutory approaches, those are the key advantages.
Factfinding costs can be amortized, externalities can be assessed,
technical expertise can be more efficiently tapped, parties not directly
affected can provide additional information, and in general social
values can be more effectively applied to the situation.  Joe Blow is in
no position to negotiate with Blue Cross over the use of his personal
information, nor is it efficient to expect that.  Government has both
the power and the reach to determine an approach that reasonably
approximates social norms.  The time and money used to determine that
approach are spread across all transactions, and become manageable.

Regrettably, nothing is perfect.  Politicians grandstand, regulators are
captured by the industries they regulate.  Moreover, people have
different choices (see below) and the common social approach will be too
much for some, too little for others.  But government can get closer, at
a reasonable per-transaction cost, than take-it-or-leave-it offerings
from large organizations.

Which supports a continuing role for liability and a private right of
action.  Additionally, the litigation process which you say I've
debunked is just dandy for addressing the problem of A damaging B big
time, so that it's worth B's time and money to recover directly from A.
Liability is great for addressing sizeable losses.

In short:  In the real world, with limited time, knowledge and
resources, governmental efforts are more effective in certain areas than
case-by-case efforts.


2.  Freedom and choices.
Freedom and choices are certainly what we would like to see in all
matters.  However, we rarely have the time or ability to evaluate all
factors of our transactions, and certainly not to separately negotiate
each aspect of everyday transactions.  If I buy a car, I may evaluate
price, performance, color, "luxury", handling, fuel economy, and a host
of other factors.  Information sources are available on these matters,
and the car's price is so high that I can readily invest the time and
money to choose wisely.  Or maybe I just think a Trans Am is a hot car,
and buy it.  It is certainly true that government should minimize
interfering with these choices and these approaches.

However, there are many factors (for example, what the auto company will
do with my personal information) which just aren't on the radar.  There
are other more important considerations.  That doesn't mean that car
companies (or hospitals in medical situations, or banks in financial
situations) should just do whatever they please with my information.
The most efficient way to honor social norms for these factors is simply
to impose them, governmentally, at least on a "lowest common
denominator" basis.  Toyota will not negotiate over this with me.  Or
Sears, or Citibank.  Or, for that matter, ChoicePoint, with which I had
no opportunity at all to negotiate.

Sure, there are solid companies that take the long view and try to do
the right thing.  There's also Enron, Tyco, Arthur Andersen and
Adelphia.  Investors trying to make informed, free choices were hurt
badly by those companies.  Californians trying to keep their houses warm
in winter lost singificantly to energy companies in the deregulated
"free" market.  Choice simply does not always work for everything,
because markets are highly imperfect, transaction costs are significant,
knowledge is limited and some market participants are bad guys.  For
secondary factors, and privacy often is one, choice is rarely germane.

In short:  In the real world, with limited time and knowledge,
governmental action to establish a "floor" of social norms is sometimes
more efficient and effective than choice, especially for secondary
factors in transactions.
_________

Jim, I suspect you haven't had an epiphany and decided to adopt my
views.  Nevertheless, I've enjoyed the exchange.  If you're inclined to
respond, please do so.  By the way, of course I have biases, we all do.
It's a shorthand way of capturing learning, right?


John Hancock
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