At a Senate Commerce Committee hearing last week, Federal Trade Commission Chairman Jon Liebowitz indicated that the agency is exploring the idea of a Do Not Track List that would allow consumers to block servers from tracking their online activities. A Do Not Track List sounds like a good idea, because the Do Not Call List for telemarketing calls is popular. Before moving forward with a Do Not Track List, however, the FTC should thoroughly analyze its benefits and costs and determine whether there are more cost-effective ways of achieving the same objective. Here is my back-of- the-envelope assessment.
Benefits:
People who sign up for a Do Not Track List will do so because they derive some utility simply from knowing they are not being tracked. This value is not easily quantifiable, but some people will surely be better off.
However, the more tangible benefits of the Do Not Call List – reducing unwanted marketing solicitations – are not there with a Do Not Track List. Consumers would not necessarily receive fewer ads. (Indeed, it would be difficult for them to know if the list were actually working) They would just receive ads that are less-well-targeted to their interests. There are ways that consumers can block ads on the Internet, but a Do Not Track List is not one of them.
Costs:
First, there are direct costs of implementation. This would be a fairly major undertaking for the FTC, so these costs are probably not trivial.
Second, there are indirect costs in terms of the quantity and quality of services and content on the Internet. These costs would be borne not only by Do Not Track List participants but by other Internet users as well. A Do Not Track List (depending on how many people signed up) would reduce the value of the Internet as an advertising medium, and therefore would reduce the revenues available to support Internet content. A Do Not Track List would also affect the quality of major Internet services, such as search engines, which use data on search histories to update and improve their algorithms, and to protect against threats such as search spam, click-fraud, malware and phishing. If search engines have less data, they can’t do this as well. In sum, there are positive externalities to the information generated by online tracking that support the services that everyone uses. Consumers who signed up for a Do Not Track List would be free-riding off those consumers who allowed their data to be used.
Finally, consumers who signed up for a Do Not Track List would receive ads that were less-well-targeted and therefore less useful. The cost of this would depend on the value these consumers place on advertising.
Cost-Effectiveness:
Even if one were to conclude that the benefits of a Do Not Track List were greater than the costs, there is still a cost-effectiveness question: is this the least costly way for consumers to avoid being tracked? The answer is probably not, because users can already adjust their browser settings to avoid being tracked. Many (perhaps most) users don’t know how to do this, but it’s easy to learn if you want to. It only takes a few clicks. In fact, it would likely be just as easy to learn how to adjust your browser to avoid being tracked as to sign up for a Do Not Track List and it would be totally under the user’s control. Why should the FTC set up a whole new program to do something that consumers can fairly easily do for themselves? A better, more cost-effective alternative would be for the FTC to post an online tutorial showing consumers how to do it.
Of course, the fact that most consumers probably haven’t taken the trouble to learn how to adjust their browser settings may mean that they don’t place a very high value on not being tracked. That suggests the benefits of a Do Not Track list would be small, likely far smaller than the costs.
Thomas Lenard is Senior Fellow and President Emeritus at the Technology Policy Institute. Lenard is the author or coauthor of numerous books and articles on telecommunications, electricity, antitrust, privacy, e-commerce and other regulatory issues. His publications include Net Neutrality or Net Neutering: Should Broadband Internet Services Be Regulated?; The Digital Economy Fact Book; Privacy and the Commercial Use of Personal Information; Competition, Innovation and the Microsoft Monopoly: Antitrust in the Digital Marketplace; and Deregulating Electricity: The Federal Role.
Before joining the Technology Policy Institute, Lenard was acting president, senior vice president for research and senior fellow at The Progress & Freedom Foundation. He has served in senior economics positions at the Office of Management and Budget, the Federal Trade Commission and the Council on Wage and Price Stability, and was a member of the economics faculty at the University of California, Davis. He is a past president and chairman of the board of the National Economists Club.
Lenard is a graduate of the University of Wisconsin and holds a PhD in economics from Brown University. He can be reached at [email protected]
