An Economic Analysis of Privacy Protection and Statistical Accuracy as Social Choices

65 Pages Posted: 26 Aug 2018

See all articles by John M. Abowd

John M. Abowd

U.S. Census Bureau; Cornell University Department of Economics; Labor Dynamics Institute; School of Industrial and Labor Relations; NBER (on leave); CREST; IZA Institute of Labor Economics

Ian M. Schmutte

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

Date Written: August 15, 2018

Abstract

Statistical agencies face a dual mandate to publish accurate statistics while protecting respondent privacy. Increasing privacy protection requires decreased accuracy. Recognizing this as a resource allocation problem, we propose an economic solution: operate where the marginal cost of increasing privacy equals the marginal benefit. Our model of production, from computer science, assumes data are published using an efficient differentially private algorithm. Optimal choice weighs the demand for accurate statistics against the demand for privacy. Examples from U.S. statistical programs show how our framework can guide decision-making. Further progress requires a better understanding of willingness-to-pay for privacy and statistical accuracy.

Suggested Citation

Abowd, John Maron and Schmutte, Ian M., An Economic Analysis of Privacy Protection and Statistical Accuracy as Social Choices (August 15, 2018). American Economic Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3232398

John Maron Abowd

U.S. Census Bureau ( email )

4600 Silver Hill Road
Washington, DC 20233
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+1.301.763.5880 (Phone)

Cornell University Department of Economics ( email )

261 Ives Hall
Ithaca, NY 14853-3901
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HOME PAGE: http://www.economics.cornell.edu

Labor Dynamics Institute ( email )

Ithaca, NY 14853-3901
United States

HOME PAGE: http://www.ilr.cornell.edu/LDI/

School of Industrial and Labor Relations ( email )

Ithaca, NY 14853-3901
United States

HOME PAGE: http://www.ilr.cornell.edu/LDI/

NBER (on leave) ( email )

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Cambridge, MA 02138
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CREST ( email )

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France

HOME PAGE: http://www.crest.fr/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ian M. Schmutte (Contact Author)

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )

Athens, GA 30602-6254
United States

HOME PAGE: http://people.terry.uga.edu/schmutte/

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