Consumer welfare has been a north star of the Federal Trade Commission (FTC), providing an organizing principle for diverse issues under the Commission’s dual competition and consumer protection missions and, specifically, a uniform ground for the law and economics of privacy matters and the tradeoffs that privacy policies entail. That organizing principle is relevant to broader policy debates about privacy, as legislative initiatives at the state and federal level continue apace, as do regulatory initiatives in foreign jurisdictions. Many such initiatives appear lacking in their economic foundations and over-simple in their attention to institutional design. This paper provides the first contemporary literature synthesis by former FTC staff that brings together the legal and economics literatures on privacy. Application of economic learning through the lens of the FTC’s jurisdiction sharpens the sense of the tradeoffs inherent in privacy policy ranging from policy goals to institutional design. We observe the following: (a) privacy is a complex subject, not a simple attribute of goods and services or a simple state of affairs; (b) privacy policies entail complex tradeoffs for and across individuals; (c) the economic literature finds diverse effects, both intended and unintended, of privacy policies, including on competition and innovation; (d) while there is diverse and growing evidence of the costs of privacy policies, countervailing benefits have been understudied and, as of yet, empirical evidence of such benefits remains slight; and (e) observed costs associated with omnibus policies suggest caution regarding one-size-fitsall regulation.
