Thursday, June 10, 2004

40.000 unique copies of Reason magazine

Big time attention was given to the June edition of Reason, the monthly print magazine of “free minds and free markets.” The magazine that covers politics, culture, and ideas through a provocative mix of news, analysis, commentary, and reviews, personified all the copies to the subscribers.

Quote from the editor's note:
In collaboration with a direct marketing firm, printer maker Xeikon, image provider AirPhotoUSA, and Cal Poly San Luis Obispo, utilizing bleeding-edge technologies allowed the editors to tailor each copy of this month’s run to virtually all subscribers.

This issue hints at a future of hyper-individualized publications that will be assembled for an audience of one: you. Articles, news, commentary -- even ads and catalogs -- could be targeted so you get only the information and offers in which you’re clearly interested.

The magazine featured an article titled Database Nation, The upside of "zero privacy", written by Declan McCullagh, chief political correspondent for News.com.

When your address is linked to databases like those used by Yahoo! People Search, your phone number may be readily accessible. Pay-as-you-go databases like Lexis-Nexis’ P-TRAK, P-FIND, and P-SEEK tie together mortgage records, vehicle registrations, court judgments, bankruptcy histories, and any other public information they can gather.
Credit card companies know what you buy, frequent shopper programs know what you eat, and your insurance company knows what medical procedures you’ve undergone.

Is it any wonder that public concern about privacy has risen dramatically during the last decade? That view was summed up with cynical certitude by Sun Microsystems CEO Scott McNealy. "You have zero privacy anyway," he said a few years ago. "Get over it."

What McNealy didn’t mention, and polls and politicians don’t recognize, is the unsung benefits that have accompanied the databasification of American society. More precisely, they’re unacknowledged or invisible benefits.

Today, not only can you get a loan nearly instantly; you’ll pay less for it than in countries that prevent the free flow of information. The cost of credit in the United States is also lower [than in most places in the world] because the information that credit decisions depend on is assembled routinely and efficiently, rather than at the time the consumer desires credit."

All this was made possible by the convergence of several trends half a century ago. The most crucial change was the invention of the computer, which permitted more-efficient information storage and retrieval. The invention of high-capacity hard drives, fatter memory chips, and ever-speedier integrated circuits completed the databasification of American life.

The U.S. Department of Commerce summed up the issue in a 2000 letter to the European Commission: "The right to recover damages for invasion of personal privacy is well established under U.S. common law." Courts have found privacy violations when an insurance company used information about an actual accident in an advertising campaign, when an employer tried to snoop through workers’ credit card records to verify sick day absences, and when a college tested students for HIV without their knowledge.

In addition to ignoring existing protections, privacy advocates usually do not acknowledge the downside to impeding the flow of information. As Klein, the Santa Clara economist, observes, "There is a collision between privacy and social accountability mechanisms generally. You see this real clearly in social accountability mechanisms like the press, courtroom, or gossip. There the violations of privacy are so much worse than in credit reporting. They’re more invasive, less reliable, less discreet. The thing is, people don’t appreciate the social accountability aspect of things like credit reporting."

A cornerstone of the American approach to informa-tion flows in the private sector is that in general they strongly favor free speech over privacy. With a few exceptions, the default assumption for data exchanges is an "opt-out" standard, under which information you provide to a company is theirs to use unless you say otherwise. Under an "opt-in" standard, by contrast, the data are to be kept private unless you explicitly give your permission. Defaults are important: Research from the Columbia Business School suggests that people tend not to change the options they have been presented.

The European Union has adopted a general opt-in rule aimed at damming the flow of information. Known as the European Data Directive, the European rule says personal information generally may not be "processed" without the subject’s unambiguous consent.

As you might expect, the European rule has run head on into the law of unintended consequences, and the results have hurt activists as well as consumers. Jacob Palme, a professor of computer science at Stockholm University, has documented how Sweden’s implementation of the European directive has imperiled free speech. "Looking at the way the law is used," Palme concludes, "one can see that unpopular or controversial opinions are suppressed."

"Companies are increasingly finding that if consumer data is not readily available for business use, the negative impact on sales could severely stunt company growth," warns Jennifer Barrett, chief privacy officer at Acxiom, a database marketing firm in Little Rock, Arkansas. "Moreover, increased marketing costs could force retailers to substantially raise the price of their merchandise to maintain effective margins. The result would be higher prices, fewer customers, and fewer jobs."

An approach to data handling that works for businesses may not be appropriate for governments trying to monitor their citizens. When dealing with private corporations, you generally can choose whether to give them your information. That choice disappears when the government demands data.

Focusing on government power would keep intact the undeniable advantages of databasification -- lower prices, cheaper mortgages, and more-efficient uses of information -- while limiting possible abuses by law enforcement. The aim should be to retain the tremendous benefits of living in a database nation while preventing it from devolving into a police state.

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