Consumer Data: Who Owns It?

May 7, 2011

by Mario Rizzo

Richard Thaler is one of those academics with an excess of nervous energy. He is constantly on the look-out for ways that he and his soft-paternalist sympathizers can tinker around improving our welfare, suitably defined.

The latest scheme is to force companies who have gathered data about product usage from particular individuals to share it with those individuals so that they can use it to improve their future purchases. Thus your cell phone company will reveal to you in convenient form everything it “knows” about “how much you use services like texting, social media, music streaming and sending photos.” (This, of course, is a kind of anthropomorphism because no human mind knows this stuff – it is all computerized!) Then you can use this information, with the help of other websites, to get your optimal phone plan.

Thaler argues, “After all, it is our data.” Dare I make a logical distinction between data about us and our data? This reminds me of the people who believe that when you take someone’s photograph you now own that person’s soul.

Thaler argues – how generous I am to use this word – “[Y]ou have lent the company your data and you’d like a copy for your own use.” I have lent them? Clearly, this is a metaphor of some kind. But it is worse than a simple metaphor. It is designed to claim, by linguistic suggestion, that consumers already have some innate property right to that information. However, if he believes that, then let him make an argument with reasons and maybe evidence.

He also says that shoppers who use a store’s club card to get discounts also should have access to this data. Thaler understands that people can opt out of the information gathering by not using the card, but then they do not get the discounts. Okay. Yet he then goes on to say inexplicably, “So let’s level the playing field. Why not give you, the consumer, something in return for participating? Require that the supermarket make your purchase history available to you.” I thought you already got something in return: the discounts!

Let’s get to the bottom line. Would compulsory sharing of data make the consumer better off? There is a simple, but important, principle in economics. It is this: When you force a seller to agree to terms of exchange which are costly he will change other terms in the relationship to compensate.

Thus, if compulsory sharing of information with consumers generates direct costs of data distribution and indirect costs of making it more likely that a consumer will go to a competitor, the price of the transacted good or service will have to be higher in order to continue as before. Furthermore, the regulation would reduce the value to the firm of producing and gathering information and thus less of it will be produced, making it harder to track the characteristics of consumers. Each of these effects reduces consumer wellbeing. The first is through higher prices; the second is through less finely-tuned product or service offerings.

Of course, competition will eliminate any “excess” profits companies might earn from withholding data and some companies already voluntarily share data with consumers. But the forces of competition reflect the preferences of consumers – and not Professor Thaler’s preferences.

I await Thaler’s next scheme.

7 Responses to “Consumer Data: Who Owns It?”


  1. There is a prevelent view among economists that information is a public good and hence should be available at no cost. The problem, however, is that it is costly to produce public goods. Demsetz showed how public goods could be priced (so long as exclusion is possible).

    Bottom line: if consumers want data (costly to produce) describing their behavior, they should pay for it. Mario’s analogy to a photo is on the mark. A photo of me is not mine.

  2. Richard Ebeling Says:

    To continue Mario’s analogy. If someone asks me if they can take my photo for free (or for a fee), and I then “demand” a copy of the photo (when that was not in the original agreement) I’m insisting upon something more than the photographer agreed to.

    If there is considered to be a consumer interest in such information about themselves, it would seem that there would be an entrepreneurial profit opportunity for some collectors of such data to offer to sell or otherwise provide it to individuals under some agreement.

    It is like the compulsory labeling of restaurant menus (such as in fast-food restaurants) with the nutritional content of the food.

    If people really cared enough, the restaurant chains would see the benefit of supply it offering it to those interested.

    When, a few years ago, the “no-carb” diet became a nation-wide fad, McDonald’s and Burger King told on the board menu that a burger could be ordered without a bun (and even supplied information about the calories and carbs with and without the bun. Because the consumer wanted it.

    Richard Thaler and those like him are what used to be called in the “old days” busy-bodies, and “do-gooders” who just could not keep their noses out of other people’s business. Who constantly wanted to tell others “how to live their lives.”

    Often people left small towns (where “everybody” seemed to know your business) to escape to the “big city,” where you had a greater degree of anonymity. Where you could live your own life, without people knowing every detail of your business, and putting their nose in it.

    Thaler is one of those irritating “old-maid” busy-bodies. But where do we go to escape from him, when he and others like him try to use the power of the state to go about their busy-body, do-gooder intruding?

    Richard Ebeling


  3. This entire debate seems to accept the intellectual property-based premise that knowledge (data, information) can be owned. But this is literally impossible. Knowledge is not ownable at all. Attempts to make it so–statist patent and copyright law–only end up transferring ownership of scarce means from current owners to idea-generators. Saying IP is owned is just a disguised way of transferring wealth from owners to the state’s favored supplicants.

  4. Tom Dougherty Says:

    Stephan,

    You say “knowledge is not ownable at all”. Well, I have exclusive command over all sort of data and information about my life that no one else in this world has. This knowledge is owned by me and no one else. This is not to claim that ALL information and data about me is exclusively at my command but some is. I own this knowledge.


  5. Tom, I think it’s problematic and misleading to say you own even that knowledge. You own your body. If you have certain information that no one else does, then because you own your body this gives you the ability to refrain from teaching this to other people. The ability to not teach others is not ownership, I think. It’s basically double-counting to say you own information since this ability to keep it secret is simply a consequence of your ownership of your body. This is similar to Rothbard’s explanation about how all rights are property rights, so that there is really no independent right, say, to free speech or freedom of the press; such rights are really just implications or consequences of body-ownership. (This is in his chapter on human rights as property rights in EThics of Liberty, online at mises.org). If you call things that are not rights, but merely consequences of rights, rights in themselves, it’s double counting, and it’s potentially misleading. For example if you think there is a separate, independent right to free speech or to bear arms, this means you can speak even on others’ property and you have the rihgt to carry a weapon onto others’ property, even if the owner objects. Obviously this is unlibertarian; the owner gets to decide, which shows that these in fact are not independent or even real rights. In the case of konwledge if you say knowledge is ownable, then it leads to the IP idea itself, which is insidious and extremely unlibertarian.


  6. Stephan Kinsella;

    You can’t have it both way, either double-counting is OK, consistently with the idea of “owning your body” (ie there’s a me owning me), or double-counting is not OK, and then you don’t own your body. And by “not owning your body” I don’t really mean that it’s not true, I mean that it’s a wrong way of wording it and it shouldn’t be used as the basis of a discussion to develop further arguments.

    I’m sympathetic to your views on IP, but honestly I don’t see the parallel here. In any case I don’t think it’s a really convincing objection.


  7. Mathieu,

    “You can’t have it both way, either double-counting is OK, consistently with the idea of “owning your body” (ie there’s a me owning me)”

    Me owning my body is not double counting since “me” indicages me as a person; which is distinct from my body. My body is a scarce resource over which there can be conflict; any given political system will specify who has the right to control my body: either me, or someone else (which is a type of slavery). Libertarians say each person owns his body. It’s not double counting at all.

    “And by “not owning your body” I don’t really mean that it’s not true, I mean that it’s a wrong way of wording it and it shouldn’t be used as the basis of a discussion to develop further arguments.”

    Someone has to be assigned the ownership of my body: either me, or some third person(s). Of coure we al agree it should be “me”. I don’t really care what label you attach to this but it’s not double counting, it’s single counting.

    “I’m sympathetic to your views on IP, but honestly I don’t see the parallel here.”

    Think of it this way. IF I own my body–i.e. have the right to control it, to permit or exclude others from touching or using it–then that gives me the ability to speak or publish (publishing requires also property rights in external things, but the right to freedom of press is a consequence of my body-ownership and property ownership). This is why it’s double counting to call these independent rights; because they are alreayd implied in body ownership.

    But saying I own my body is not double counting, because it is not itself a consequence of any more basic of fundamental property right. It is in fact the most fundamental one.


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