WASHINGTON -- Opponents of privacy laws released two reports on Tuesday that they hope will shift the debate over Internet regulation from rhetoric to facts.
The studies represent the latest efforts by free-market groups, who until recently have been nearly absent from discussions about how websites should collect and use personal data, to convince Congress to take a more cautious approach to enacting privacy laws.
Robert Hahn, director of the American Enterprise Institute-Brookings center, says his research indicates that Internet privacy laws could cost U.S. firms up to $36 billion to comply. If correct, that means more struggling tech companies would be driven to bankruptcy.
"As far as I can tell, this is an area characterized by more heat than light," Hahn said about his 51-page cost estimate. "There are relatively few estimates on the cost side and virtually none on the benefits side."
Pro-regulation groups immediately panned the work, noting that Hahn's study was funded and publicized by the Association for Competitive Technology, a libertarian-leaning trade association that is funded by technology firms.
"All rights have economic consequences on society," says Chris Hoofnagle, staff counsel at the Electronic Privacy Information Center. "We could bring back child labor if the market were king. Instead we need to create a society where the market can function and still recognize our values."
There couldn't be less agreement on this point: To economists such as Hahn, laws are only appropriate if their benefits outweigh their costs. Many liberal groups, on the other hand, believe that privacy is a human right that should be enshrined in law -- even if that could mean layoffs and bankruptcies.
"You have to ask two things when you're talking about any piece of legislation," says Hahn, who specializes in studying the costs of regulation. "One is, will it do anything to address the concerns of groups like EPIC, and if so, does it do it in a cost-effective way? Do you get the most bang for your buck?"
When asked whether privacy costs could become too excessive, EPIC's Hoofnagle replied: "I couldn't say what would be reasonable. It might be difficult to specify a number because there are other factors at work here, including the amount of e-commerce that is lost because of concerns over privacy. I could never put a number on it."
"There was a lot of talk around the ending of slavery about the economic consequences of that," Hoofnagle said. "Two-hundred years ago, we would have tolerated such ideas as slavery, unhealthy working conditions and child labor."
AEI's Hahn says that privacy violations by a miscreant website are not the same as indentured servitude: "I don't see this as akin to slavery. People have, at least since the time of the republic, given up some degree of privacy (in exchange for benefits)."
Hahn estimated the number of companies that would be regulated by the bills debated on Capitol Hill, then surveyed consulting companies to learn how much it would cost for an average website to comply with the rules. Depending on the assumptions used in the estimates, Hahn concluded the cost would range between $9 billion and $36 billion.
The other study released on Tuesday is a preliminary draft of a "Survey Madness" paper by Solveig Singleton, a lawyer of the Competitive Enterprise Institute and Jim Harper of Privacilla.org.
It also tries to influence the debate in Congress -- a House panel convened a hearing on the topic Tuesday afternoon -- by arguing that legislators should not lend too much credence to surveys regarding privacy.
They argue that because privacy is a concept that's difficult to define, survey questions could be misleading or conflate privacy with other concepts such as spam, identity fraud and security. The study adds: "Also, trade-offs between privacy and other consumer desires are rarely offered."
Privacy surveys have become increasingly popular. One Business Week survey says that 57 percent of Americans hope the federal government will pass federal privacy laws for the Internet. But a Jupiter Consumer Survey reports that only 14 percent of consumers say that new laws will make them more likely to trust websites.
Singleton and Harper say that polls don't take into account the costs of privacy laws, the indirect benefits of information sharing, and the cost to taxpayers if a new federal agency were created.
