US economy

The end of privacy

One of my biggest intellectual efforts these days is trying to understand what the framework for the intangible economy should be. As we shift from industries based on making or servicing things you can touch and see, to one based on leveraging bits and bytes of information, it’s clear that the usual rules of economic gravity stop working (transactions based on barter of data rather than dollars will do that, as my colleague Gillian Tett  has explored).

We need “new rules”, as Bill Maher would say, to ensure robust competition and a fair allocation of the Croesan riches of our new digital world. But what should they be?

I called up economist Paul Romer, who just won the Nobel Prize in economics a couple of weeks ago, to get his take. One of the reasons he won the prize is his work on property rights for “rival goods” (crucial communal resources like air, water, and on so) versus “non-rival goods”. His take has been that property rules around rival goods should be quite strong, so as to guarantee their protection, and for most everything else, rights should be weaker — the idea being that open source sharing of such things would result in more innovation.

Paul Romer of New York University’s Stern School of Business was recognised for work that laid the foundations of endogenous growth theory

But Romer acknowledges that while bits and bytes are non-rival, and data isn’t patent protected, platform tech firms like Google, Facebook and others have nevertheless created monopolies by ringfencing the data accrued via the network effect, and by keeping their algorithms secret. What’s more, he says, “there are tremendous asymmetries in these markets. Do both parties understand enough to know whether the transaction taking place is in their mutual interest?”

Romer (like me) would argue, no, and believes that the complexity of today’s data markets “means that notions like ‘consent’ [to long and complex disclosures about how your data might be used by platform companies] have become meaningless”. The differences in what either party knows simply undermines the fair functioning of the market itself. “I’ve been in these discussions with people like Hal Varian [Google’s chief economist] and I get more and more frustrated. There’s a dishonesty about giving people something that’s 18,000 words long and expecting them to read and understand it,” in exchange for the use of a given product or service.

But what’s the solution? For starters, says Romer, we should stop using the word privacy. “It doesn’t really exist any more,” as he puts it. We should focus more on transparency and clarity. “If nobody — let’s call that fewer than 5 per cent of users — can get an even partial understanding” of the terms of a transaction, then Romer says companies simply shouldn’t be doing them. What’s more, “we should put the burden of proof on the companies themselves” rather than allowing them to circumvent responsibility via “phoney disclosures”.

I couldn’t agree more, and argue in my column this week that regulators may need to force algorithmic transparency on the part of the platform firms to ensure not only our privacy, but the security of liberal democracy. Ed, I’m curious about your take on all this. Perhaps we can discuss it this week during out first Swamp Notes Live event at the FT Banking Conference in New York? 

Recommended reading

  • The Dallas Morning News — the right-leaning newspaper who endorsed Reagan, Bush 41, Dole, Bush 43, McCain, and Romney in their presidential campaigns — has officially endorsed Democrat Beto O’Rourke over Ted Cruz for the US Senate. Its editorial explaining why it did is a bipartisan breath of fresh air. More of this, please.
  • Michael Hirsh had a smart take in the New York Review of Books about how Democrats still haven’t made peace with the bailouts of 2008 and the party’s sellout to its corporatist centre. This ongoing existential crisis is a key reason that we’re still worried about the strength of the “blue wave” as well as progressive prospects in 2020. 
  • I also enjoyed Sue Halpern’s review of the new documentary film Reversing Roe, which told me things I never knew about how and why Republicans become anti-choice.
  • And in the FT’s midterm election coverage, I was fascinated by Courtney Weaver’s entertaining tale of how the partisan politics of the moment are opening up family rifts in America. Kellyanne Conway and her husband George seem to be the couple for whom the term “opposites attract” was invented. Check out that body language . . . yipes!

Edward Luce responds

Rana, I greatly look forward to our first Swamp Notes event this week. The first of many, I hope. Just to warn you, however, I may be obtusely contrarian. Consensus is forbidden. That said, I’m all in favour of algorithmic transparency. We’ve spent the past two years worrying about Facebook’s role in spreading fake news during the 2016 election — to the detriment of Democrats. It should be noted that Facebook only ever takes steps to correct its pro-sensationalist algorithmic biases when forced, or shamed, into doing so. I can’t believe it’s as difficult to accomplish as they claim. When was the last time you saw a nipple on Facebook? If your answer is never, that would echo mine. I’m not complaining about the lack of nipples; merely pointing out that when Facebook wants to do something it can. Now Facebook, Twitter and Google are faced by equal and opposite allegations from the right, including from Trump. To be clear, in my view Big Tech’s only bias is to monetise the hell out of everything. The fault is not in the stars. It’s in us. Algorithmic transparency on their part may go some way towards returning the debate to where it belongs — to we the consumer (and our tendency to click on nonsense). 

Reader event: Swamp Notes Live

Rana and Ed will be speaking at the FT US Banking Forum on November 1 in New York.

Use the code SWAMP40 for a 40 per cent discount when you register to attend.

Find more information here.

Your feedback

We’d love to hear from you. You can email the team on, contact Ed on and Rana on, and follow them on Twitter at @RanaForoohar and @EdwardGLuce


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