Privacy, Economy – and Cryptography?
There is a lot of concern, by legislators, experts and the general public, about the loss of privacy. In the computer science research community, extensive efforts are dedicated to develop Privacy Enhancing Technologies, mostly based on cryptography; much of these efforts are designed to provide privacy even against (cloud) providers.
However, the reality is that users explicitly agree to share their private data with few providers (Google, FB,...), although these providers explicitly state that they may make commercial use of this private data, and in spite of numerous incidents where such data was exposed to unauthorized third parties, and papers showing design-failures allowing such unauthorized disclosure of private data. This is known as the privacy paradox.
We present simple economical analysis of privacy, explaining the privacy paradox, and showing potential market failure, harming social welfare. We discuss possible solutions, including regulatory and cryptographic controls.