Writing ever more complicated and intrusive regulations rules about data processing and data use has become the new fad in policymaking. Many are lending an ear to tempting yet ill-advised proposals to treat personal data as traditional finite resource. The latest example can be found in an article, A Blueprint for a Better Digital Society, by Glen Weyl, an economist at Microsoft Research, and Jaron Lanier, a computer scientist and writer. Not content with Internet users being able to access many online services like Bing and Twitter for free, they want online users to be paid in cash for the data they provide. To say that this proposal is flawed is an understatement. Its flawed for three main reasons: 1) consumers would lose significant shared value in exchange for minimal cash compensation; 2) higher incomes individuals would benefit at the expense of the poor; and 3) transaction costs would increase substantially, further reducing value for consumers and limiting opportunities for businesses to innovate with the data.
Weyl and Lanier’s argument is motivated by the belief that because Internet users are getting so many valuable services—like search, email, maps, and social networking—for free, they must be paying with their data. Therefore, they argue, if users are paying with their data, they should get something in return. Never mind that they do get something in return: valuable digital services that they do not pay for monetarily. But Weyl and Lanier say this is not enough, and consumers should get more.
While this idea may sound good on paper, in practice, it would be a disaster.
First, users would simply not be paid that much for their data. For example, one estimate suggests that Facebook could pay users a dozen euros a year for their personal data. But this estimate is vastly overstated because it assumes companies can pass on all revenue and ignores all their costs. A more realistic model suggests users would get just a pittance. Google and Facebook, for example, earned about €25 billion in combined profits in 2017 and have around 4.6 billion users globally. If the payments to users were equal to half their profits, each user would get a grand total of €2,7 per year. Who is ready to quit their job and live off the proceeds?
Second, Weyl and Lanier’s proposal would exacerbate inequality between users based on their wealth. Users would be unlikely to all receive the same amount for their data because marketers would pay more for access to high-income users’ data and less for low-income users, including students, the elderly and individuals in low income nations. Moreover, if online services were paying users for their data, they would need new business models. Ironically, the only way to make these payments sustainable, especially for smaller Internet companies, would be to begin charging individuals for access to the exact same services that were once free. Paywalls and monthly subscriptions would be the new norm online, and while most middle and upper-income individuals in developed nations would be able to afford these services, many individuals around the world would not.
Finally, Weyl and Lanier’s proposal would increase transaction costs associated with sharing data, thus substantially reducing consumer value. Not only would this proposal likely require obtaining consent from all users, but it would also require contracts between users and intermediaries, along with financial information for payments, creating an epic quagmire of paperwork. Higher transaction costs would also make it unfeasible for many companies to collect and use consumer data, leading to fewer online services available to consumers.
Weyl and Lanier’s self-declared objective is to ensure digital dignity, but in practice this proposal would disrupt the equal treatment users receive from digital services today by valuing users based on their net worth. In this techno-socialist nirvana, to paraphrase Orwell, some pigs would be more equal than others. The French Data Protection Authority, CNIL, itself raised concerns about treating data as a commodity, warning that doing so would jeopardize society’s humanist values and fundamental rights which are, in essence, priceless.
To ensure “a better digital society,” companies should continue to be allowed to decide the best Internet business models based on what consumers demand. Data is neither cash nor a commodity, and pursuing policies based on this misconception will damage the digital economy and make the lives of digital consumers considerably worse.
Image credit: Pxhere
