Privacy and Markets: A Love Story

Ryan Calo*

In 2014, a former congressional staffer by the name of Matthew Colbert developed a software application he called “BuyPartisan.”¹ The app invites consumers with smart phones to scan the barcodes of just about any product and learn the political leanings of the company that sells it. The display consists of a meter displaying blue or red, depending on the campaign contributions of the company’s leadership. “Wouldn’t it be great,” Colbert asks, “if you could spend how you believed?”²

Occasionally market participants depart from the traditional market criteria of price and quality. A conscientious consumer might strongly prefer her coffee to be “free trade” or a diamond to be “conflict free.” A certain kind of religious flower shop owner might refuse on moral grounds to provide flowers to a wedding with two grooms.³ Economists would chalk these departures up to “exogenous preference”—attributes that the market can take into account.

But imagine if consumers and businesses knew everything. Not just the circumstances under which a product was made or the politics of its seller, but whether each other market participant supports a rival sports team, believes in God, or bakes erotic cakes on the weekend. In other words, imagine a marketplace without privacy. Would such a marketplace be desirable? Would it be efficient? Would the market mechanism work at all if price and quality took a backseat to salient but arguably extraneous information about market participants?

This Article examines the complex relationship between privacy and markets. In so doing, it rejects both law and economics’ skepticism toward privacy and the hostility many privacy law scholars have toward markets. The thesis of this Article is that privacy and markets are in important ways sympathetic. To paraphrase contract theorist Charles Fried, it is not that privacy will help markets work better, but that the market mechanism quietly assumes and relies upon privacy to work in the first place.⁴ And the reverse is true as well.

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© 2016 Ryan Calo. Individuals and nonprofit institutions may reproduce and distribute copies of this Article in any format at or below cost, for educational purposes, so long as each copy identifies the author, provides a citation to the Notre Dame Law Review, and includes this provision in the copyright notice.

*Assistant Professor of Law and Assistant Professor of Information Science (by courtesy), University of Washington. Affiliate Scholar, Stanford Law School Center for Internet and Society and Yale Law School Information Society Project. This draft benefited from comment at the Privacy Law Scholars Conference at the U.C. Berkeley School of Law and the U.C. Hastings School of Law faculty colloquium. Thank you to Meg Young and the Gallagher Law Library for excellent research assistance.

1 BuyPartisan: Voting with Your Wallet, The Economist (Sept. 13, 2014), http:// www.economist.com/news/united-states/21616976-app-brings-partisan-rage-grocery-storevoting-your-wallet.

2 Colby Itkowitz, Is Your Grocery Bill Supporting Your Political Opponents? Now You Can Avoid It, Wash. Post (Aug. 12, 2014), http://www.washingtonpost.com/blogs/in-the-loop/ wp/2014/08/12/is-your-grocery-bill-supporting-your-political-opponents-heres-how-toavoid-it/.

3 E.g., State v. Arlene’s Flowers, Inc., No. 13-2-00871-5, 2015 WL 720213, at *30 (Wash. Super. Ct. Feb. 18, 2015) (finding against flower shop for discriminating against gay couple in contravention of Washington law). What this example shows, of course, is that one person’s ethical consumption can be another’s discrimination. See also infra Section IV.B.

4 Charles Fried, Privacy, 77 Yale L.J. 475, 477 (1968) (“[M]y thesis that privacy is not just one possible means among others to insure some other value, but that it is necessarily related to ends and relations of the most fundamental sort: respect, love, friendship and trust.”).