From DEF CON 23: If supply and demand make a market, where is the market for privacy?

Everyone talks about privacy, but nobody does anything about it, to mangle Mark Twain’s witticism regarding the weather.

Economists at Princeton are launching a study to explain why there’s not a more robust market for privacy products and services, given our growing understanding that our most private matters are routinely plundered from online sources.

“There’s a demand for privacy,” economist Rene Mahieu told me earlier this month at DEF CON 23. “Also, I’ve been here at DEF CON and I’ve heard a lot of talk about the technical possibility for creating privacy. So there is a potential supply.”

It follows, therefore, that there should be a market. “A vibrant market,” he says.

Mahieu and Princeton research colleagues are starting with some theories, but it seems to me this question can be answered from the gut. Digital privacy is inconvenient, complicated, and expensive.

Economists have names for these obstacles, Mahieu informs me.

“Information asymmetry” may dampen the inclination to purchase, even from consumers with a clear interest in the product. In a technology transaction, the potential buyer may not understand the product, and becomes doubtful that it will deliver on its promise. Mahieu likens it to buying a used car. The seller has more information than the buyer about the vehicle, and holds the cards when it comes to contract terms. It feels better to walk away than to spend money one something when you’re not convinced it will meet your needs.

“Network effects” describes the lonely experience of adopting a privacy-enhancing messaging service, for instance, and discovering that none of your friends use it, and therefore you can’t talk with your friends. Do you undertake a massive recruitment project or continue to expose yourself to privacy invasion? Most likely, you resign yourself to the latter. Life’s too short.

There’s also the abstract nature of privacy invasion, stacked up against the convenience and pleasure of connection.

“The problems are uncertain and in the future,” Mahieu says, “while the gratification is now, and direct.”

As part of their research, the team wants to talk with business people who’ve had first-hand experience developing privacy products, successful or not. They’re interested in entrepreneurs as well as folks who’ve toiled in big data. Mahieu encountered some of them at DEF CON. One entrepreneur described his innovation, which had been well-received by everyone who tried it. But it didn’t sell, and was ultimately offered for free.

“That’s the starting point for our question,” Mahieu says. “Why, given the immense interest, and the growing interest in privacy, and our technical capabilities, is the market not functioning as we expect it to be?”

If you can help explore the question, he’d like to hear from you. The research project is at the Center for Information Technology Policy at Princeton, but you can contact him directly.