Information Regulation that Hasn’t Worked
When Senator William Proxmire (D-WI) proposed and passed the Fair Credit Reporting Act forty years ago, he almost certainly believed that the law would fix the problems he cited in introducing it. It hasn’t. The bulk of the difficulties he saw in credit reporting still exist today, at least to hear consumer advocates tell it.
Advocates of sweeping privacy legislation and other regulation of the information economy would do well to heed the lessons offered by the FCRA. Top-down federal regulation isn’t up to the task of designing the information society. That’s the upshot of my new Policy Analysis, “Reputation under Regulation: The Fair Credit Reporting Act at 40 and Lessons for the Internet Privacy Debate.” In it, I compare Senator Proxmire’s goals for the credit reporting industry when he introduced the FCRA in 1969 against the results of the law today. Most of the problems that existed then persist today. Some problems with credit reporting have abated and some new problems have emerged.
Credit reporting is a complicated information business. Challenges come from identity issues, judgments about biography, and the many nuances of fairness. But credit reporting is simple compared to today’s expanding and shifting information environment.
“Experience with the Fair Credit Reporting Act counsels caution with respect to regulating information businesses,” I write in the paper. “The federal legislators, regulators, and consumer advocates who echo Senator Proxmire’s earnest desire to help do not necessarily know how to solve these problems any better than he did.”
Management of the information economy should be left to the people who are together building it and using it, not to government authorities. This is not because information collection, processing, and use are free of problems, but because regulation is ill-equipped to solve them.
Good News! Online Tracking is Slightly Boring
You have to wade through a lot to reach the good news at the end of Time reporter Joel Stein’s article about “data mining”—or at least data collection and use—in the online world. There’s some fog right there: what he calls “data mining” is actually ordinary one-to-one correlation of bits of information, not mining historical data to generate patterns that are predictive of present-day behavior. (See my data mining paper with Jeff Jonas to learn more.) There is some data mining in and among the online advertising industry’s use of the data consumers emit online, of course.
Next, get over Stein’s introductory language about the “vast amount of data that’s being collected both online and off by companies in stealth.” That’s some kind of stealth if a reporter can write a thorough and informative article in Time magazine about it. Does the moon rise “in stealth” if you haven’t gone outside at night and looked at the sky? Perhaps so.
Now take a hard swallow as you read about Senator John Kerry’s (D-Mass.) plans for government regulation of the information economy.
Kerry is about to introduce a bill that would require companies to make sure all the stuff they know about you is secured from hackers and to let you inspect everything they have on you, correct any mistakes and opt out of being tracked. He is doing this because, he argues, “There’s no code of conduct. There’s no standard. There’s nothing that safeguards privacy and establishes rules of the road.”
Securing data from hackers and letting people correct mistakes in data about them are kind of equally opposite things. If you’re going to make data about people available to them, you’re going to create opportunities for other people—it won’t even take hacking skills, really—to impersonate them, gather private data, and scramble data sets.
If Senator Kerry’s argument for government regulation is that there aren’t yet “rules of the road” pointing us off that cliff, I’ll take market regulation. Drivers like you and me are constantly and spontaneously writing the rules through our actions and inactions, clicks and non-clicks, purchases and non-purchases.
There are other quibbles. “Your political donations, home value and address have always been public,” says Stein, ”but you used to have to actually go to all these different places — courthouses, libraries, property-tax assessors’ offices — and request documents.”
This is correct insofar as it describes the modern decline in practical obscurity. But your political donations were not public records before the passage of the Federal Election Campaign Act in 1974. That’s when the federal government started subordinating this particular dimension of your privacy to others’ collective values.
But these pesky details can be put aside. The nuggets of wisdom in the article predominate!
“Since targeted ads are so much more effective than nontargeted ones,” Stein writes, ”websites can charge much more for them. This is why — compared with the old banners and pop-ups — online ads have become smaller and less invasive, and why websites have been able to provide better content and still be free.”
The Internet is a richer, more congenial place because of ads targeted for relevance.
And the conclusion of the article is a dose of smart, well-placed optimism that contrasts with Senator Kerry’s sloppy FUD.
We’re quickly figuring out how to navigate our trail of data — don’t say anything private on a Facebook wall, keep your secrets out of e-mail, use cash for illicit purchases. The vast majority of it, though, is worthless to us and a pretty good exchange for frequent-flier miles, better search results, a fast system to qualify for credit, finding out if our babysitter has a criminal record and ads we find more useful than annoying. Especially because no human being ever reads your files. As I learned by trying to find out all my data, we’re not all that interesting.
Consumers are learning how to navigate the online environment. They are not menaced or harmed by online tracking. Indeed, commercial tracking is congenial and slightly boring. That’s good news that you rarely hear from media or politicians because good news doesn’t generally sell magazines or legislation.
The Information Economy Stops Evolving Today
That would be the message if a bill introduced in Congress this week were to pass. H.R. 5777 is the “Building Effective Strategies To Promote Responsibility Accountability Choice Transparency Innovation Consumer Expectations and Safeguards Act” or the “BEST PRACTICES Act.” If acronyms were a basis for judging legislation, it should be widely hailed as a masterwork.
But its substance is concerning, to say the least. The bill’s scope is massive: Just about every person or business that systematically collects information would be subject to a new federal regulatory regime governing information practices. By systematic, I mean: If you get a lot of emails or run a website that collects IP addresses (and they all do), you’re governed by the bill.
There’s one exception to that: The bill specifically exempts the government. What chutzpah our government has to point the finger at us while its sprawling administrative data collection and surveillance infrastructure spiral out of control.
Reviewing the bill, I found it interesting to consider what you get when you take a variety of today’s information “best practices” and put them into law. Basically, you freeze in place how things work today. You radically simplify and channel all kinds of information practices that would otherwise multiply and variegate.
I spoke about this yesterday with CNet News’ Declan McCullagh:
Harper says it reminds him of James C. Scott’s book, “Seeing Like A State.” Governments and big corporations “radically simplify what they oversee to make it governable,” he said. “In things like forestry and agriculture, this has had devastating environmental effects because ecosystems don’t function when you eliminate the thousands of ‘illegible’ relationships and interactions. This is Seeing Like a State for the information economy.”
Give people remedies when they’re harmed by information practices, and then leave well enough alone. There’s no place for a list of “must-do’s” and “can’t-do’s” that choke our nascent information economy—especially not coming from a government that doesn’t practice what it preaches.
The FTC on Steroids: Will the ‘National Nanny’ Take Over the Internet and the New Information Economy?
Writing on the TechLiberationFront blog, Berin Szoka warns of the extensive Internet regulation that could come with huge grants of authority to the Federal Trade Commission in H.R. 4173, the “Wall Street Reform and Consumer Protection Act of 2009.”
Congress is about to reinvent the FTC as the “National Nanny” it was well on its way to becoming back in the 1970s. Today, the FTC is not merely the general overseer of our economy, but the key regulator of the Internet. If the Senate passes Rep. Frank’s bill with its so-called “improvements” to the FTC Act, future generations will look back and wonder why, without even taking the time to consider what it was doing, Congress radically transformed Internet governance as an afterthought to financial regulatory overhaul.
A Federal Takeover of Cyber Security?
One hopes not. But the White House’s 60-day review of cyber security, ongoing now, could set the stage for it.
In a TechKnowledge piece out today, I argue against federal responsibility for private cyber security. A common law liability regime is the best route to discovering and patching security flaws in all the implements of our information economy and society.
The smarties at the Center for Information Technology Policy at Princeton recently sat down to discuss these issues too.

