# Foreword: Privacy and Information Technology

**Authors:** Rochelle C. Dreyfuss, David W. Leebron
**Citation:** "Foreword: Privacy and Information Technology," 1986 *Ann. Surv. Am. L.* 495 (with David W. Leebron)
**Source:** https://its.law.nyu.edu/faculty/profiles/representiveFiles/dreyfuss -privacy&infotech_6C958F23-1B21-6206-60754AAC411FA55C.pdf

## ROCHELLE COOPER DREYFUSS AND DAVID IV' LEEBRON

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Not the least of the problems with privacy has been its definition. Rather than a coherent concept, privacy appears to be an amalgamation of many different values. In their seminal article, Warren and Brandeis stressed the "right to be let alone." ' Prosser's famous elaboration broke down the developing tort of privacy into four separate interests: intrusion upon seclusion, public disclosure of embarrassing private facts, false light, and commercial appropriation of name or likeness. 2 Philosophers have made the case for a core conception of privacy as an aspect of human dignity or sexuality, 3 and political scientists have tended to view its autonomy aspects as serving political goals of equality and liberty. 4 Some have attempted to trace the sociobiological origins of privacy, 5 and there are courts expounding a "right to privacy" that appear to resort to that cause of action mainly when traditional doctrines fail to provide desired safeguards. 6 More recent writings, legislation and case law have recast the concept of privacy as the right to control information Submitted for publication on March 20, 1987. Rochelle Cooper Dreyfuss is an Associate Professor of Law, New York University. B.A., Wellesley College, 1968 3. See, e.g., Bloustein, Privacy as an Aspect of Human Dignity: An Answer to Dean Prosser, 39 N.Y.U. L. Rev. 962 (1964); Gavison, Privacy and the Limits of Law, 89 Yale L.J. 421 (1980). For collections of essays primarily along these lines, seeJ. Pennock &John Chapman, eds., Privacy (Nomos. XIII) (1971).

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4. See, e.g., A. Westin, Privacy and Freedom (1967); C. Mellors, "Governments and the Individual-their Secrecy and his Privacy." George Orwells antiutopian "1984" has been at the center of our vision of the role of invasion of privacy in political totalitarianism.

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5. See, e.g., Klopfer & Rubenstein, The Concept of Privacy and its Biological Basis, 33J. Soc. Issues 52 (1977); Hirshleifer, Privacy: Its Origin, Function and Future, 9J. Legal Stud. 649 (1980).

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6. See, e.g., NAACP v. Alabama, 357 U.S. 449 (1958) (protecting contributors to civil rights causes through the right of privacy); Griswold v. Connecticut, 381 U.S. 479 (1965) (protecting procreation decisions by protecting privacy). about oneself. 7 The 1986 Developments Issue of Annual Survey of American Law takes this definition as its focal point.

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Even this narrowed conception of privacy, however, does not easily lend itself to agreement. The student articles in this issue examine some of the attempts that the legal system has made to reconcile claims for privacy with demands for information. They explore this tension in such areas as employment, finance, law enforcement, family relationships, and government oversight. In each case, the benefits of acquiring information are easily articulated, for it is a basic tenet of our political and economic systems that more knowledge makes for better decisionmaking. Accordingly, high priorities have been placed on the acquisition of information and on the development of technologies that improve the ability to collect, maintain, disseminate and use it efficiently. 8 The interests against disclosure are more diffuse and perhaps less easily articulated. Indeed, there are those who insist that privacy is a freshly coined idea whose primary purpose is to enable some groups to misrepresent themselves at the expense of others. 9 We will not attempt in this brief foreword to elaborate on the origins or purposes of privacy. Instead, we accept the premise that the demand for legal protection of privacy has accelerated beyond historical levels in numerous areas of the law, and suggest some reasons for such changes. We begin with some preliminary observations regarding the nature of information. Focusing on certain characteristics of personal information, we sketch some of the developments that have accompanied the changing demand for legal control over it. As the availability and significance of information have changed, so too have the intensity and structure of demands for privacy. We conclude that affording expanded legal protection to individual privacy may be warranted in light of the changing role of information in the social order.

## I SOME CHARACTERISTICS OF INFORMATION

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Having defined privacy as the right to control the flow of informa-7. See, e.g., A. Westin, supra note 4; Whalen v. Roe, 429 U. S. 589 (1977) , 34 Int'l Org. 445, 445-48 (1980). 9. Posner, The Right to Privacy, 12 Ga. L. Rev. 393, 399 (1978); Posner, Privacy, Secrecy, and Reputation, 28 Buffalo L. Rev. 1, 5, 11-14 (1979) [hereinafter Posner].

## FOREWORD

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tion about oneself, we briefly examine some of the qualities that make information difficult to regulate. While these characteristics do not themselves explain the accelerating demand for privacy, the unique features of information exacerbate the problems engendered by the changes that we later examine.

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Information is a peculiar commodity for several reasons. First, information does not "add" in the way that the value of both real and personal forms of property tend to. If one owns a farm and a factory, the total value is roughly the sum of the independent values. But, in some circumstances, possession of two separate items of property will together be worth more than the sum. A piece of land together with a piece of wood and metal called a hoe may be worth more than the sum of the land without the hoe or the hoe without the land. Two plus two, rather than equalling four, may equal five.

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With information, this kind of synergy is not unusual. Two separate pieces of information may be worth little, while the combination is worth a fortune. One person, for example, may know that a company with its headquarters in New York City is about to be the subject of a tender offer. Another person may know that an oil company is going to be the subject of the tender offer. Independently, these pieces of information are worthless. Together, they may enable the possessor to identify the target company, and make a fortune, go to jail, or both. Conversely, one piece of information may reveal that another piece of information, apparently valuable itself, is actually worthless. Thus, although in common usage a fact constitutes a piece of information, it is rare that isolated facts are of much use (or even interest). Rather, information is better conceived as a certain conjunction of facts. Thus delineated, new information consists not merely of new facts, but also new conjunctions of previously known facts. To determine the value of information that another possesses, then, one must know both the significance of that piece of information and what other information that person possesses.

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The sequence in which facts are acquired can also be critical. Just as information is not additive in the normal sense, it is also not commutative. Consider, for example, the case of a loan applicant who was convicted of shoplifting ten years ago, but has been a model citizen ever since. The effect of the bank officer's learning of the conviction may be low if the banker knew the individual during his many years of model citizenship; we would not be surprised if he acted favorably upon the application despite hearing of the conviction. If, on the other hand, the banker learns of the conviction first, the impact may be quite different. He may well deny the loan. Some may claim that this is irrational, but if finding out about the applicant's behavior after the conviction is costly, and there are plenty of other potential customers, the banker may de-cide that it is not worth the additional expenditure to discover whether or not the predictions based on the one piece of information are reliable. 10 This hypothetical points to a third peculiarity: the flow of information cannot be reversed. If the farmer were to find that his neighbor borrowed the hoe, return would be a simple matter and both parties would be restored to the position that they were in before the transaction took place. But information cannot be unlearned as easily. Once a person becomes aware of the plan to make a tender offer, he cannot "return" the information and begin to trade in the relevant stocks as if he were ignorant of it. Similarly, once the banker learns of the conviction, there is no effective legal or other remedy to assure that he acts upon the application as if he lacked that knowledge.II These three attributes of information-that it is highly synergistic, non-commutative and irreversible-enable us to understand why the public perceives a need for privacy in certain situations. In the context of privacy, the most important synergy of information lies in the linkage of facts with identity. The ability to link information to an individual's identity is the basic determinant of privacy invasion, and the ability to prevent such linkages the determinant of privacy protection. 12 Thus, anonymity is highly valued by those who attach importance to privacy, 10. It is, for example, a commonly held belief that first impressions are important, if not dispositive.

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For an attempt to deal mathematically with the effect of new information on a factfinder's evaluation of the probability that a certain belief is true, see, e.g., Tribe, Trial by Mathematics: Precision and Ritual in the Legal Process, 84 Harv. L. Rev. 1329, 1350-58 (1971).

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11. There is yet a fourth aspect of information that makes it different from other kinds of property, and that is that it can, as a practical matter, be shared in ways that tangible property cannot be. Only one party can use the hoe at a given time, so the neighbor's possession of it means the farmer cannot be using it. Information, on the other hand, can be jointly possessed; the trader's knowledge of the tender offer is not inconsistent with the ability of others to have, and use, the same information. Such joint possession may, however, diminish the value of the information to both parties. And because the diminution in value may reduce the incentives to generate information in the first instance, special rules such as copyright, trademark, patent and unfair competition law, have been developed.

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While we agree with Judge Posner that the rationale underlying intellectual property rights justifies special rules only for commercial information, Posner, supra note 9, at 9-11. We suggest in this essay that other peculiarities of information largely overlooked by him call for fashioning protected rights in other circumstances, including noncommercial ones.

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12. Thus, it generally is not regarded as an invasion of privacy to collect information for "statistical purposes," that is, without connecting specific items of information to identified individuals. FOREWORD and actions that tend to destroy anonymity are viewed with suspicion. The move to establish a universal identification number has, for instance, met with popular resistance because it is clear that the number would facilitate conjoining pieces of disparate information with identity.

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Similarly, surveillance of even purely public behavior is popularly regarded as more intrusive than courts are willing to admit.' 3 A person may be willing to engage in conduct in public because his identity will not be known to those members of the public who observe his behavior. For example, if a person publicly solicits a prostitute, the fact of solicitation is of little interest to most of us, and indeed of little use even to the police. On the other hand, if the person is being followed, his identity will be linked to the facts that are observed, and those facts may be further linked with others. The conjunction may be of great significance. Thus, it may be of little interest that someone observed "A" soliciting a prostitute. But if "A" is also a religious fundamentalist, the two facts, linked together through identity, result in a new piece of information about the individual, namely that he is a hypocrite. 14 The non-commutativeness of information helps to explain why it may be desirable to implement rules that assure a certain sequencing of information, or at least that certain information be revealed contemporaneously. Criminal records should be complete, for if only an arrest but not an acquittal is disclosed, the decisionmaker may reach a negative decision without engaging in further search activity. Informal recognition of the sequencing problem is found in the rules adopted by some law schools that interviewers must interview all applicants (or those selected by lot when there are too many) and may not request grades until after the interview. The schools apparently think that this change in the sequencing of information will alter decisions-that firms will hire individuals they may not have hired had grades been reviewed before interviews were held.

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The timing of the presentation ofprivacy claims stems, in part, from the irreversibility problem. An order to ignore facts that have been ac- 14. The power of linking identity with other facts has been recognized in the strand of fourth amendment cases dealing with the right of police to inspect garbage without a search warrant. In People v. Krivda, 6 Cal. 3d 357, 366, 486 P.2d 1262, 1268, 96 Cal. Rptr. 62, 68 (1971), for example, the Supreme Court of California found that an expectation of privacy persisted in garbage that had been left out for collection until commingling occurred: "We can readily ascribe many reasons why residents would not want their... trash to be examined by neighbors and others, at least not until the trash had lost its identity and meaning by becoming part of a large conglomeration of trash elsewhere" (emphasis original).

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quired cannot be as effective (or effectively enforced) as an order enjoining collection in the first instance. Accordingly, it is not surprising that groups objecting to the use of information often present their claims at the collection stage rather than at the usage stage.' 5 By the same token, it is no answer to dismiss such claims as premature, 16 for the collection stage may be the only opportunity that the target has to interpose his objection to the use of the information.

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While these characteristics of information flesh out our understanding of certain classes of cases, they alone do not explain the dramatic change in the demand for legal protection. Assuming for the moment that the legal protection afforded privacy in earlier ages was the optimal amount of protection, the demand for more could be defended on one of two bases. First, it might be that we value privacy (whether as a mediate or ultimate value) no more than our forebears, but that less is available without resort to legal protections. Second, we may as a society attach greater value to privacy (or the recognition of privacy rights may produce more value) than in earlier times. This being the case, we may be willing to devote more of our resources to acquiring it. And part of the price paid for increased privacy may take the form of sacrificing some of the benefits produced by the free flow of information.

## II THE CHANGING SUPPLY OF PRIVACY

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Suppose for a moment that personal information was exchanged on a market and that individuals, about whom the information pertained, were the exclusive sellers in that market. In a market such as this, the amount of privacy enjoyed would depend solely on the individual's willingness to forgo sales of personal information. Private information would not be revealed unless the person desiring the information were willing to pay more than the subject of the information valued keeping it secret.

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But the picture is vastly more complicated when we take into ac-15. See, e.g., Laird, 408 U.S. at 2; E.I. DuPont deNemours & Co. v. Christopher, 431 F.2d 1012 (5th Cir.), cert. denied, 400 U.S. 1024 (1970); Anderson v. Sills, 56 N.J. 210, 265 A.2d 678 (1970).

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16. See, e.g., Laird, 408 U.S. at 9 (dismissing challenge to systematic surveillance of demonstrations on the ground that the challenge alleges "the mere existence, without more, of data-gathering activity that is broader in scope than reasonably necessary"); California Bankers Ass'n v. Shultz, 416 U.S. 21 (1974); Cf. Dow Chem. Co. v. United States, 106 S. Ct. 1819, 1827 n. 5 (1986) (objection to overhead photography dismissed on the ground that "we have never held that potential, as opposed to actual, invasions of privacy constitute [prohibited] searches").

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FOREWORD count the peculiarities of information, especially that it may be possessed by more than one person. Because third parties are also potential sources of private information, the level of privacy is actually determined by the costs of concealing information from others and the costs of bribing third parties to withhold the information that they have nonetheless secured. 17 Privacy, then, depends on the costs and benefits of secrecy as well as the size of these bribes (and the transaction costs involved in making them). The magnitude of the required bribe is in turn set by the costs of obtaining private information and the benefits derived from using it. Without any change in the legal protection of privacy, as the costs of obtaining information decrease and the costs of keeping secrets increase, the prevailing level of privacy will decline, even though the relative costs and benefits of the disclosure itself may have remained the same.

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For example, suppose an individual values the right to keep his criminal record secret at $100, but the cost of doing so would be $1,000. Now suppose the person desiring this information values it at $50, but the cost of obtaining it from outside sources is $75. The efficient result' 8 -keeping the information private-is obtained, but only because the cost of obtaining the information outweighs the benefit to the party desiring its disclosure. But if a change in technology allows the information to be obtained for $25, it will be obtained even though this causes a 17. One important difference between a hypothetical market in which the subject has exclusive control over disclosure and a market in which third parties can sell private information about others is that, in the first case, the choice to disclose depends on the price the subject is willing to accept whereas, in the second case, it depends on the subject's ability to pay. In short, the bribe transaction is more sensitive to the subject's wealth. Interestingly, at least some forms of this transaction are forbidden as the crime of blackmail. It is undear why, from an efficiency point of view, blackmail should be illegal.

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18. We assume here that in some sense the reasons for wanting to keep information secret or wanting it disclosed are legitimate. The attempt to keep information secret is not necessarily an attempt to misrepresent, but rather an attempt to efficiently modulate the flow of information to those who do not know us well. Cf. Posner, supra note 9, at 14-15 (discussing the efficiency of wearing clothes or not speaking our minds). That withholding information at one point in time is not necessarily misrepresentation is particularly evident when one takes into account the synergy and noncommutativeness problems. An applicant for a job may fully intend to reveal his criminal record, but only after an interview at which the prospective employer has had a chance to make an independent determination about the applicant's character. Although the person about whom the information obtains has obvious self-interest in modulating the disdosure, he or she is also the person with the most complete set of information and therefore is in the best position to determine what order and form of disclosure will result in the best decisions. net welfare loss of $75.19 If wealth is not to be otherwise reallocated, then the legal system must be used to change these costs or benefits or reassign rights in information in order for the amount of privacy that obtains to remain constant. Thus, in evaluating claims for increased legal protection of privacy, we must consider how societal changes have affected the amount of privacy in the absence of such protections.

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At least in some respects, it is uncontroversial to argue that legal protection is necessary to maintain a particular level of privacy. Long established legal rights, such as rights in property (including intellectual property) 20 and the tort of trespass, served in earlier times to provide a substantial measure of privacy protection. If two people wanted to have a secret conversation, they could simply have it on private property and there was little chance that anyone other than an employee would overhear. Most private records were in the possession of the individual they concerned, and copies were costly to create. Because one's circle of friends was largely limited to one's immediate geographic area, confidential communications were most likely to take place in a personal conversation. The only means of communication subject to potentially easy invasion, namely the sending of letters, was at first carried on by servants and later by governmental services that recognized the confidentiality of such letters. In order to overhear a conversation or see a written document, one would have to be physically present and, if unauthorized, commit the well-recognized tort of trespass.

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Modern developments in information assembly drastically alter the access of third parties to personal information, decrease the costs of obtaining information, and increase the costs of secrecy. Thus they require us to reexamine the amount of legal protection necessary to maintain a desired level of privacy. We briefly consider here two such advances: the high technology collection device (such as the electronic eavesdropper, parabolic microphone, or aerial surveillance and infrared cameras) and the nationwide information collection center (such as those maintained by credit reference services like Equifax and TRW). The availability of the former not only lowers the cost of obtaining information, but also substantially raises the degree of care (and cost) that must be expended to prevent leakage of information. Furthermore, 19. The net welfare loss is calculated as follows: $ 50 (the value to the acquirer of getting the information) -25 (the cost to the acquirer of obtaining the information) -100 (the value to the subject of keeping the information secret) ( 7 5) 20. Interestingly, Warren and Brandeis ground their argument for the legal protection of privacy in the legal rules creating exclusivity for intellectual property. See Warren & Brandeis, supra note 1, at 198-99. FOREWORD these devices increase the likelihood that leaks that do occur will not be detected. Without knowing that a secret has been lost, and to whom the information was passed, it is impossible for the subject to intervene in order to repair or avoid damage.

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The latter development, while less intrusive, is equally problematic. Collection centers could, at least prior to the passage of the Fair Credit Reporting Act, 2 ' collect and sell personal information without notifying the subject that such information existed, without allowing him to check the accuracy of the report, and without even informing the subject that a transfer of information had occurred. 2 2 Thus, like the technological collection device, information centers often eliminate the opportunity of the concerned individual to know of the transfer and to intervene to correct any deficiencies.

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The problems posed by information collection centers have been exacerbated by the evolution of the technology of information systems. Large computerized data bases provide economies of scale that make feasible the collection, storage and dissemination of vast arrays of information that previously would have been unavailable. A landlord, for example, may have been unlikely to spend time poring over court records in order to determine whether a potential tenant, by filing prior lawsuits, has revealed himself to be a "bad tenant risk." 2 3 Once docket data is computerized, however, the cost of retaining the information and distributing it is reduced, and the costs associated with the endeavor can be spread over those who share the same information needs. In addition, computerization makes it possible to review large quantities of data (e.g., the records of filings in all courts in a given region) and retrieve specific items (e.g., the dealings of this applicant) at low cost. Sophisticated matching and profiling techniques further exploit the capabilities of the computer to enable users to obtain the synergistic benefits of combining disparate pieces of information. Thus, even if the landlord discovers that being a bad tenant correlates poorly with being a plaintiff, he may be able to refine the analysis of combining the lawsuit data with other information on the applicant. tion systems, transmitting information to a distant information user is not much more costly than distributing the information locally. A legal dispute that arose in Los Angeles can as easily result in the loss of housing opportunities in New York as in California.

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These new capabilities lead directly to the need to reexamine the current legal regime. In addition to failing to perceive systematic data collection as different from individual attempts to acquire data, 2 5 courts have been unsympathetic to claims that information that is "public" should nonetheless be protected from certain forms of dissemination. 26 Dispositions based on the dichotomy between public and private information worked well when information was easily categorized as available or unavailable, relevant or irrelevant, for they operated on the assumption that, if information was relevant enough to the public interest that someone was willing to devote considerable resources to collecting it, then the information should be freely distributable. In fact, information often falls on a continuum between these categories. Information centers make available material for which there is extremely low marginal demand if there are enough users with some demand. Data management techniques render even data that are irrational to use in isolation highly meaningful when considered with other, also publicly available, material.

## 7

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Changes in the social structure have also contributed to the decline in privacy. In the social structure prevailing in earlier centuries, selfhelp could play a large role in protecting those interests that we now label as privacy. One could avoid dissemination of personal information United States v. Mendenhall, 446 U.S. 544 (1980); Reid v. Georgia, 448 U.S. 438 (1980) (per curiam) (use of criminal profiles as basis for stops). Data analysis techniques also are used by the public sector. See, e.g., Writing Letters to Those Who Care, N.Y. Times, Nov. 2, 1986, at A19, col. 1 (describing software that permits campaign consultants to use "public" information to locate specific voter groups, such as homosexuals). 1982) (purchase price of house). These cases are specific applications of the general rule that, when revealing information to another, one takes the risk that the information will become public. See also United States v. Miller, 425 U.S. 435, 443 (1976) (information revealed to bank); Smith v. Maryland, 442 U.S. 735, 742 (1979) (because "all telephone users realize they must 'convey' phone numbers to the telephone company," pen registers are not an invasion of privacy).

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For example, while it may be irrational to deny an apartment to someone who has filed lawsuits, it may be less irrational to refuse one to a political science Ph.D. who reads MotherJones, belongs to the socialist party and has in the past expressed outrage at the ruling class by filing legal proceedings. by keeping one's business to oneself, or by sharing it only with those one knew to lack access to avenues of dissemination. Even when others found out too much, non-judicial remedies were at hand. Because the distribution of information was more equal in small-town society, one person's violation of another's privacy (by revealing a fact about that person which he obviously would prefer not be revealed) might result in retaliation. The inclination toward a "tit for tat" response led, perhaps, to cooperation and reciprocity in disclosure strategies. Furthermore, the potential extent of an injury (who learned the information, and the use that could be made of it) could often be determined by the subject and the damage readily cured by personal intervention. If things got too out of control, there was always the choice to "go west"-to relocate in an area where one's previous life was unknown.

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Such self-help is no longer an option. Today, information is not distributed equally or symmetrically. If our bank makes disclosures, our sole means of retaliation is to withdraw our business, which may not be a possibility if we are a debtor. With information gathering agencies like TRW or Equifax, virtually no effective self-defense strategies are available. The subject is unlikely to know what information has been collected, or to whom it has been transferred. Without a complete picture of the array of information available to the collection agency or the decisionmaker, the subject cannot even decide whether it is worth allocating significant resources to intervention. And these companies have eliminated the "west" to which escape was possible by gathering, collecting, and reporting personal information on a nationwide basis. Today, legal protection of privacy, in the sense of being able to prevent the distribution of information, is valued more than in the past because traditional avenues for curbing the adverse impact of information are unavailable.

## III THE CHANGING DEMAND FOR PRIVACY

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This leads to the second possibility: that privacy itself, not just the legal protection of it, is in greater demand today. From a larger perspective, it seems unlikely that our level of privacy has diminished in the modem age. The story that is told in support of the view that privacy is too new (or ethnocentric) an interest to be taken seriously, and that it is best understood as a thinly disguised attempt to misrepresent, relies on the virtual absence of privacy in earlier societies. As Judge Posner points out, privacy in the sense of seclusion was probably extremely dangerous in early societies. 2 8 And informational privacy was also likely 28. See L. Stone, The Family, Sex and Marriage in England 1500-1800 86-93, 105-114 (1977).

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nonexistent. Prior to the seventeenth century, little geographic or social mobility existed. Everyone in that society knew most of their potential transaction partners intimately and status, property and employment depended mainly on inheritance. Prying, by servants or others, was taken for granted. 2 9 In seventeenth and eighteenth century United States, the population of most towns was so small that no person could escape the physical surveillance of others. 3 0 Because everybody tended to know everyone else in town, the linkage between identity and observed facts was inescapable. The only way to secure broad informational privacy was to become a hermit or recluse. The price of separating oneself from society in this manner was high, involving a loss of all social and commercial interaction as well as possible dangers from a hostile environment.

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Privacy no longer means forgoing relationships and facing dangers alone. With the large towns and cities that are the creations of the industrial age, we can achieve many of the same goals with anonymity, a concept that consists of two separate aspects. First, there is the traditional idea that no one knows who we are. When we go about our daily business, most of the people observing do not know our identity. A second aspect of anonymity, peculiar to modern times, is that even a person to whom we reveal our identity will generally have access to a very limited set of facts about us. If we charge a good in a store, the clerk will learn our name, possibly our address and telephone number, that we have a charge account, and that our credit balance is sufficient to pay for the good purchased. In this way, modern man tends to develop a number of separate identities, none of which is complete but each of which serves a more specialized function. This possibility of keeping these identities separate, impossible in the small town, in effect creates a new good. Whether the law ought to extend its protections to this new good is, of course, a distinct question.

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Another factor explaining the trend toward increased demand for privacy is that information flows now have greater consequences. In closely knit social structures, where social mobility was almost nonexistent, and jobs depended mostly on familial relationships, receipt of adverse information had little negative effect. But now that social status can shift through, for example, favorable action on a college, job or business loan application, the stakes are much higher. Accordingly, the demand to control the information used in these decisions is much more intense today than in the past.

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Social and geographic mobility also have the effect of raising the marginal utility of third-party information. Information may be understood as altering the risk associated with a decision to be made. As more information is obtained, the confidence of the decisionmaker increases. However, a point ultimately is reached when the decisionmaker acts as if the law of diminishing returns were operating. Once the decisionmaker reaches a certain level of confidence in the accuracy of his predictions and decisions, the expected value of new information declines.31 At that point-when the decisionmaker has made up his or her mind and would stop searching-any new data that are required will have minimal impact. In the past, most third-party information was probably received after confidence levels were quite high. When interactions were personal and occurred mostly among long-term associates, decisions were based predominantly on judgment or experience in dealing with the specific individual. Even in new associations, transaction partners who shared similar social status effectively could translate clues such as clothing, schooling, and public affiliations into fairly predictive data. This being so, the marginal value of new information was small, and thus there was correspondingly little need for the affected individual to have control over it. Third-party information now plays a far larger role in the decisionmaking process. Physical contact is rarely involved in most of the decisionmaking that affects an individual, and this is true even with regard to transactions in which substantial personal information is desirable. Numerous decisions in all spheres of activity-employment, finance, politics-are now made without personal interaction. 3 2 If little information is possessed, the effect of that which is received, such as an adverse credit report from TRW or Equifax, may be quite dramatic, as with the hypothetical banker who learns of the loan applicant's conviction before becoming acquainted with the rest of the applicant's personal history. Depending on the size of the applicant pool and the relative cost of searching for more information, the banker may decide to turn to another customer-and pay the cost of obtaining another credit reportrather than seek further information about one who is already besmirched.

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31. An example of the notion that there are diminishing returns to more information is found in rules of evidence that permit the exclusion of proof on the ground that the evidence is cumulative. See, e.g., Fed. R. Evid. 403.

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Voting is one example. In earlier times, people became familiar with their candidates through campaign tours, which provided opportunities for personal interaction and personalized decisionmaking. As it has become clearer that personal acquaintanceship is unlikely, states have begun to enact laws requiring candidates, or elected officers, to disclose financial and other data to voters. See, e.g., Plante v. Gonzalez, 575 F.2d 1119 (5th Cir. 1978) (upholding Fla. Stat. § 112.3145 (1978)).

*p. 15*
Modem developments also have hampered the accuracy-testing process that is a part of informational flows. When decisionmaking was personalized and based on long-term relationships, the decisionmaker may well have had sufficient access to other sources of information to evaluate the accuracy of new material. In addition, new information could be fit into an already-existing framework of data. This facilitated accurate assessment and made errors caused by contextual inaccuracies unlikely. For example, if the banker heard from one of the townspeople that the applicant for a loan had been convicted of embezzling, the banker first would be surprised not to have already known of such a fact and second would question the allegation if it was inconsistent with what he or she did know of the applicant. Because the modem banker is unlikely to know the applicant personally, he or she is much more likely simply to believe what could be erroneous information. 33 It could be argued that the current market for information will also test for accuracy. Competition among the information services that now provide much of the data used to determine creditworthiness and employment attributes will encourage testing and lead to accurate and complete information. Under this theory, decisionmakers who patronize information bureaus that provide accurate, relevant information will outcompete those who use bureaus that fail to test their information, or impose high charges because they are wasting resources by collecting, storing and reporting irrelevant data. In time, the patrons of the latter centers will switch allegiances, and those centers will either be forced to improve or go out of business. 3 4 While this argument is theoretically sound, it falters in reality. First, it depends on the assumption that information users can discover whether they are making bad decisions by observing the behavior of their competitors. If there are a sufficient number of independent information centers, this assumption might be true. But because of the economies of scale in the operation of these bureaus, the industry has coalesced into a small group of nationwide information centers, which 33. The concern for contextual inaccuracies has apparently fueled judicial interest in expungement of criminal records. See, e.g., Menard v. Mitchell, 430 F.2d 486, 491-93 (D.C. Cir. 1970) (criminal records should be expunged when the assumptions regarding the meaning of those records are erroneous; suggests that the problem is particularly acute for civil rights workers and persons arrested during political demonstrations).

*p. 15*
34. For example, the attack on restricting the use of criminal records by employers says that either ex-cons make good employees or they do not. If they do not, use of criminal records should be encouraged; if, however, ex-cons do make good employees, then the irrational desire to refrain from hiring them will be punished as the hiring employers (who can pay lower wages because of the lower demand) outcompete non-hiring employers. FOREWORD are relied upon by all of the competitors. With everyone relying on the same information to arrive at similar decisions, the accuracy of the centers goes untested by the marketplace. 3 5 Furthermore, even if there were enough competition in the information industry, it is questionable whether a bureau's performance could adequately be monitored by their patrons. Information is not a final good which can be evaluated, but rather only a factor in an ultimate decision to be made. The consumer of private information therefore tends to evaluate an information service on the basis of quantity, rather than accuracy. Indeed, because the value of information depends on the degree to which it alters decisions made in the absence of information, consumers may value negative information about an individual more than positive information. Thus, bureaus that provide more (albeit inaccurate) information may have a competitive advantage over services that provide less (but more accurate) data. 3 6 The inability of the market to test for information reliability may be illustrated by the case of an individual previously convicted of a crime who applies for a loan. Suppose the information service says that "X" never was arrested, when in fact "X" was. Subsequently, "X" defaults on the loan. First, this may bring into question the final credit decision that was made, but it does not directly bring into question the information that "X" never was arrested. Furthermore, once the loan is in default, there is no return from verifying original information, and it is unlikely to be tested. If, on the other hand, the service reports that "X" was arrested and "X" in fact never was arrested, the bank probably will decide not to make the loan. It also is unlikely that the bank will ever find it worthwhile to check this information. And because the bank is likely to use a number of credit reference services, it seems unlikely that its aggregate loan portfolio performance will be regarded as reflecting on a particular service's reliability. 3 7 35. In the process, individual data subjects will be unable to find anyone willing to make decisions in their favor. The effect on individuals (such as the convicted criminals who must suffer lower wages so that the market can learn about the irrationality of using their records) has never, however, been considered a deterrent to relying on this theory. 36. Cf., e.g., Equifax Inc. v. FTC, 678 F.2d 1047 (1 Ith Cir. 1982) (noting that Equifax's procedures encourage its employees to produce adverse information, irrespective of its accuracy).

*p. 16*
37. Cf. Thompson, 682 F.2d at 509 (plaintiff ascribed his denial of credit to a felony conviction; later it was determined that the credit bureau had, in fact, incorporated into his file the bad debts of another party with the same name).

## CONCLUSION

*p. 17*
The developments outlined above-the creation of new possibilities of living anonymously, the increased impact of third party information, and the apparent failure of third party monitoring-have contributed to the escalation of demands for control over information flows. With the explosion in mobility and population, and the specialization in industry and commerce, decisions are now more often based on third party information, which is collected without consent, and disseminated by, and to, parties who lack the ability to verify its accuracy. It is no wonder, then, that demands have been heard to legislatively restrain the collection and dissemination of certain kinds of information, impose upon information centers duties of accuracy, and allow subjects to correct the data that has been collected about them. 3 8 These demands derive both from individual preferences for anonymity in an age where it is possible, and from a belief that efficiency will be served by some legally mandated role of the concerned individual in information flows about him. It has been argued that rules allowing such individual intervention in informational flows effectuate a form of misrepresentation. But given the special aspects of information, particularly its synergistic, irreversible and noncommutative properties, it is far from clear that claims for privacy should be equated with claims for the right to misrepresent. Even so, it may not be that this limited right to misrepresent-to intervene and exercise a role in the information process-is inefficient. Rather, it distributes differently the costs and benefits of information disclosure. In this sense, control over personal information is a kind of wealth, which technological and social changes have redistributed. A claim to legal recognition of privacy is no more than an opportunity to explicitly recognize these changes and to use the law to readjust the costs and benefits by reassigning rights in information.

*p. 17*
As society and technology change, old rights may become less protected and new rights may become possible to recognize and protect. On these grounds, modem demands for legal protection of an individual's right to privacy seem soundly based. This of course does not create a claim to absolute protection. The benefits of new privacy protection must be weighed against the costs. To a very large extent, this balancing will depend on the nature of the information involved and on the affected fields of human activity. The following student articles explore the balances that have been struck in a few such areas. 38. See, e.g., Fair Credit Reporting Act, supra note 7; Privacy Act of 1974, supra note 7.

## Footnotes

> W. Leebron is an Associate Professor of Law, New York University. B.A.,

> University. 1. Warren and Brandeis, The Right to Privacy, 4 Harv. L. Rev. 193 (1890). 2. Prosser, Privacy, 48 Calif. L. Rev. 383 (1960).

> 8. See, e.g., O'Brien & Helleiner, The Political Economy of Information in a Changing International Economic Order