The Opportunity Cost of Lost Privacy is Lost Innovation

Posted on Feb 13, 2016 by Rick Falkvinge

The opportunity cost of lost privacy is lost innovation, and by extension, a low-happiness society that lags not only in liberty, but in all amenities considered modern. Therefore, privacy is not just a luxury for the individual; it is a collective desirability as it leads to competitiveness and a strong economy. Today’s legislators are blind to this causality.

When we’re making choices, any choices, there’s always some benefit we forego by not choosing the alternative that brings it – we try to maximize utility and happiness, but there’s always something we’re missing out on. This is generally called the opportunity cost – the cost of not realizing a benefit, or the cost of losing a benefit. Wikipedia explains “opportunity cost” as such:

In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone, where a choice needs to be made between several mutually exclusive alternatives given limited resources. Assuming the best choice is made, it is the “cost” incurred by not enjoying the benefit that would be had by taking the second best choice available.

We can note Wikipedia’s important assumption in its definition – “assuming the best choice is made”. This is, of course, entirely subjective. There is also an opportunity cost for foregoing the benefits of the best choice available, if you’re making something else than the best available choice. Generalizing, there is always an opportunity cost for every single option you didn’t choose.

In this case, the question is what the cost is to society of individuals losing their privacy with ever-increasing surveillance. There are many observations to be made from countries and societies that went down this path, which generally shared the feature of slowly turning into low-happiness societies.

To answer this question – what are the traits we associate with privacy? In other words, assuming people can’t be seen, what kind of people behave differently than generally expected?

Let’s ignore for a moment that all people, really everybody, have a real, genuine, and legitimate need for actual privacy – like when going to the bathroom – and focus on the activities that are typically dampened by surveillance. It’s sticking out. It’s deviation. It’s being redflagged. It’s upsetting the status quo. Such things are seen as… undesirable.

The people you suppress, and suppress effectively, by reducing privacy are the rulebenders and the rulebreakers. The square pegs in the round holes. The mavericks. The misfits and troublemakers. The ones who refuse to follow someone else’s lead but insists their own way is better. Given the chance, legislators would happily make life hell for people who don’t fall in line.

But these are the people we collectively call entrepreneurs. They are suppressed and crushed when society decides they can’t do things their own way anymore. When you stomp out privacy, you stomp out innovation with it.

While the causality has not been conclusively studied, it’s easy to see how this would lead to the observed long-term economic disaster in the high-surveillance societies we’ve had in history, places that seemed to freeze in time when they stomped out privacy and other liberties. Innovation just ceased, stopped, and died. You’d see 40-year-old cars on the streets (or design-by-committee disasters like the Trabant car) and a lack of anything considered modern amenities as higher-happiness societies around them continued to innovate, improve, and – importantly – break the rules.

It’s been theorized that this was the actual reason of the downfall of the Berlin Wall and the collapse of Cold War Communism: the lack of economic innovation, the complete and utter inability of Eastern Europe and the Soviet Union to compete. This inability to compete, in turn, came from its brutal and effective suppression of anybody who bent the rules – the people we call entrepreneurs. As a predictable result, Eastern Europe didn’t have any more innovators.

This is the opportunity cost we’re all facing as our legislators are on a crusade against privacy and other liberties today.

Meanwhile, and therefore, privacy remains your own responsibility.

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