Introduction

Elsewhere in this book, it has been made clear that privacy is a multidisciplinary field that can and should be viewed through many different lenses – e.g. social, legal, psychological, political, philosophical, ethical, technological, and economic (Hui and Png 2005). If privacy is studied through an economic lens, a multitude of intriguing questions arises. What are the economic tradeoffs when it comes to privacy, both on the individual level and on the policy level? Is there a way to determine the economic value of privacy? Is there a difference between the real and perceived value of privacy? What are the individual, organizational, and societal costs and benefits of maintaining or giving up privacy? In the field of privacy economics, researchers are looking for the answers to these and similar questions, which recent technological and social developments have made more relevant than ever.

This section will introduce some basic terms and concepts in economics that are relevant for this chapter; it will discuss the field of privacy economics; and it will touch upon the social-economic impact of current technological developments.

What is economics?

While most people will have an intuitive understanding of what the longstanding social science of economics is about, Backhouse and Medema (2009) point out that, in fact, the word economics has many definitions and interpretations. To one, it is the study of economies, both at the individual level and for society as a whole (Krugman and Wells 2004); to others, it is the study of how society manages its scarce resources (Mankiw 2001). The definition and interpretation of economics may vary from scholar to scholar. This chapter adopts the Oxford Dictionary's definition: the branch of knowledge concerned with the production, consumption, and transfer of wealth.

Note on terminology: this chapter will follow the economic tradition to distinguish the individual agents in an economic transaction by using terms that clarify their role, such as consumer and merchant. These terms may pertain to individuals or organizations, depending on the context.

Within the field of economics, a distinction is made between macroeconomics and microeconomics.