Privatising personal identity – part one – the Value of Data

Eben WilsonPosted by

In a series of short articles, our guest author economist Eben Wilson (St Andrews) explores how emerging law and regulations that apply to how data is used can be integrated with economic principle to ensure both the protection of individuals and commercial advantage.  

The Value of Data

The extent to which social media companies are able to look into our lifestyles, personalities and patterns of being is becoming ever more apparent. Revelations about their errors in handling our data are disturbing. A dissonance about how “social” this is has developed, which even the tech companies are recognising is not helpful to their commercial future and public image.  Can anything be done?

I am a political economist, that’s an economist that can do the numbers and understands economic principles, but with a slant towards the incentives and interests that govern human behaviours and how economic rules can be arranged to best effect for the common welfare. The role of good law in this context is central; political economists recognise that jurisprudence has a major impact on how institutions and rules are constituted for the common good. 

As a Scot, I should also admit to a particular heritage. I am imbued with the classical liberal tradition of the enlightenment in which that jurisprudence emerges from moral sentiments about the Rule of Law being a protector of individual liberty.  That Rule of Law (capitals necessary) is not legislation, but a discovered set of legal and contractual principles that create and allow the common good. As an historical aside, it should come as no surprise that James Wilson of Ceres in Fife, a lawyer and student of the Scottish enlightenment, should become the Chair of the Committee of Detail of the 1787 US Constitutional Convention bringing this world view on the Rule of Law to that difficult debate. We Scots are tuned to affairs of governance in this regard. 

Access to who we are is valuable

The astonishing equity value of the social media companies tells us how valuable access to customers to generate selling opportunities has become across commerce. 

Today, however, that value lies entirely with these tech corporates.  Why?  Because they own access to that data.  Let me make that clearer, they own access-to-that-data. It’s not the data itself that is all important, it is that if you want to sell to a constituency of commercial interest it is possible to have them carpet bomb vast, and often pre-qualified, audiences at very low cost. This resolves a specific economic problem in a competitive economic world – marketing costs. Today, we can make goods very quickly and cheaply, but selling them and getting paid for them involves a huge expensive effort. That’s why our services industries are growing so fast.  

Through digital media it is possible to play a lower cost numbers game; you can “touch” tens of millions of potential customers, bring them into an on-line purchasing eco-system and watch them buy more than they would wandering around a Glasgow shopping precinct with a squalling bairn in one hand. 

Data mining

But this access value is being delivered by near monopoly players; and its modus operandi is bombardment involving repeated touching based on more and more exacting “data mining” aimed at learning more about us as individuals. In the nomenclature of marketing science; segmenting and targeting is mechanised through the plural digital platforms of the tech corporates.  Your email inbox and web browsers become cluttered intrusively. 

There is growing disquiet about this. Along with being intrusive and so causing some anxiety, there is great scope for upset and calumny through errors by the tech companies. This is what many found wrong about the Cambridge Analytica revelations; not so much what was done, but the fact that they managed to do it with what appeared to be rolling abandon by grabbing data about us. 

In terms of the Rule of Law informed by jurisprudence, it seems to be a moral wrong as well as an operational one if we are powerless to stop these people moving their tanks around our lawns.  We need to discover some rules to protect the individual. 

Read the next in the series – Privatising personal identity – part two – Who Owns Personal Data

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  1. Eben – I look forward to seeing more of your thoughts on this vitally important topic. I wonder if you could, as part of that, share some reactions about the remarks made Giovanni Buttarelli, the European Data Protection Supervisor, earlier this year on the central role of antitrust and merger control – with the support of DPAs – in addressing structural issues of concentrated digital markets. See link below.

  2. The concerns expressed, at least in the press release, give an insight into the scale of the issue. Eben speaks of “Access to who we are is valuable.” The EDPS expresses “concern that people’s minds are being manipulated”. No wonder data about individuals is valuable if it can be used to manipulate. This seems to me to be a good example of the technology moving very quickly and the law slowly getting to grips with the issue. The Data Protection Act was essentially about securing data that was gathered. When it was “just” postal addresses or email addresses then it was spam rather than manipulation that was the problem. With manipulation comes a much bigger policy issue with the regulators suggesting a much more interventionist approach. GDPR is only the first step I suspect!

    1. While the description of the issue is similar, the solution proposed is typically state-centric – essentially proposing that to combat a perceived monopoly power an opposite state-sponsored monopoly should be created; somehow to improve matters.
      The economist Bastiat tells us that such intervention has a component that is seen, and a component that is unseen – benefits from controlling marketing considered to be coercive are often outweighed by the damage caused by prohibitions that amount to state coercion.
      The segmenting and targeting of consumer markets has been the tool of commercial marketing science from before the digital age. It’s not necessarily true that all consumers lose from being targeted; indeed cheaper access to customers and understanding their preferences allows commerce to increase sales, gain from large volume production and so serve consumers with better products and services at lower prices.
      As I shall explain in my later pieces, what we need to find are liberal solutions that work with markets and increase consumer power; the sentence “greater collaboration between data protection authorities” is a rather worrying alternative!
      As for the democratic disruption potentially caused by “fake news”, are we suggesting that the state can somehow manage digital information flow, acting as some sort of nanny-state censor? Free speech matters, and if the prattling of the on-line masses is somehow thought to be persuasive I would have thought the answer lies in our schools and the teaching of critical faculty rather than some sort of bureaucratic regulation attempting to protect the less able from nonsense.

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