Introduction

 

Information policy will become one of the most important aspects of public policy in the next century.

The advances in information technology have made the collection, processing and dissemination of data on individuals very inexpensive. In order to more efficiently market their products, corporations are creating databases of their customers using the transactions histories of their customers combined with other information such as warranty registration information and public information such as home ownership and marriages. These files make markets much more efficient by reducing the cost of matching supply and demand. But, at the same time they raise questions about privacy of individuals.

A question of increasing importance is who is responsible for the accuracy of such datafiles. Currently, numerous individuals have been denied credit because of mistakes in their credit files. Moreover, such individuals have frequently had difficulty in correcting the mistakes in their files. Also, much better control is needed for sensitive data such as medical files. Nydia M Velazquez in her Congressional campaign had to deal with the problem that someone leaked from her medical records the fact that she had once attempted suicide.

If the collection of these files had no useful purpose, information policy would be simple-stop such collection of data. But, the collection of data on individuals makes markets much more efficient. For example, our credit based economy could not operate without TRW, Equifax, Tans Union and other firms collecting data enabling retailers to judge credit worthiness of customers. Also, quality medical care requires the medical practitioner administering care, in most cases, have access to the medical history.

What makes information policy difficult is that information needed for decisions is frequently in the possession of another party. An important aspect of information policy is when an individual, firm or government agency must disclose information. One of Reagan's many battles with Congress was whether companies had to give 60 days notice before closing a plant. From the perspective of the firm, giving 60 days notice would be an invitation for political meddling into economic decisions. For the workers and local business people, 60 days notice would give them time to adapt. This is just one example of a growing body of required private disclosures created in the 20th century. Another example, is the new labeling requirements for food which clearly spell out the fat content. To the extent that consumers use the fat-content information to reduce the amount of fat in their diets, they should lead healthier lives requiring less medical expenses.

Finally, collection of data on all aspects of the political economy is necessary to formulate innovations in public policy. The legislature and bureaucracy have the power to collect information to formulate public policy. However, with few exceptions there is no public policy to collect data for scientific purposes to understand the behavior of the political economy. What this means is that private and public innovation is restricted to very crude learning strategies.

The construction of a socially desirable information policy requires balancing the conflicts among privacy, accuracy, efficiency and knowledge accumulation. And with the advance of technology in the next century these conflicts will intensify. To balance the conflicts, we shall consider two components of information policy. The first will be called operational information policy consists of the acquisition and use of data for market and administrative decision-making. For many decisions the data needed by the decision-maker is in the possession of at the very least concerns another person. This means that operational information policy must resolve the conflict between privacy and economic efficiency. The second component will be called scientific information policy. Likewise scientific information policy must resolve the conflict between science and privacy.

The goal of operational information policy is to create more efficient markets and provide decision-makers with the requisite information to make good decisions. The goal of scientific information policy is to create a more rapid rate of public and private innovation, which is necessary to compete in the global economy. In the construction of operational and scientific information policy must balance these concerns with the need for privacy.

A good starting point to create a framework to resolve these conflicts is to review the past developments of information policy.