Digital Encryption As Privacy

34 Pages Posted: 30 May 2024 Last revised: 29 Dec 2024

See all articles by Eric Alston

Eric Alston

Finance Division, University of Colorado Boulder

Sofia Cossar

Université Paris II - Panthéon-Assas

Date Written: December 28, 2024

Abstract

Understanding how institutions, technology and social welfare coevolve is essential to understanding economic and social development, and the evolution of privacy alongside institutions and technology sheds valuable light on this question. Privacy has individual and social value, even as privacy rights tradeoff directly with government enforcement capacity. We deem this inherent defect in governmental incentives to protect privacy the “institutional privacy dilemma,” which results in a greater role for technological innovation and individual choice to preserve rights to privacy alongside the public institutions that both protect and infringe it. In the digital age, technological change has led to greater use of encryption to preserve individuals and organizations’ privacy rights. Yet, encryption itself poses a challenge for law enforcement in shielding those with innocent and criminal motives alike. Unsurprisingly then, governments have sought to weaken or eliminate encryption.  Yet, an emerging set of technological solutions supported by zero-knowledge proofs help preserve individuals’ privacy while simultaneously satisfying legitimate enforcement objectives. Our case study of applications of zero-knowledge proofs and privacy institutions illuminates how coevolving polycentric forces govern social welfare in practice and emphasizes how individual demand for rights the government is especially likely to infringe plays an essential governance role.

Keywords: privacy, encryption, polycentricity, zero-knowledge proofs, institutional change, technological change, coevolution, complex systems, governance, institutional analysis, economics of privacy, privacy rights, digital governance

JEL Classification: B52, D63, D89, H40, K38, O14, O33, O35, O43

Suggested Citation

Alston, Eric and Cossar, Sofia, Digital Encryption As Privacy (December 28, 2024). Available at SSRN: https://ssrn.com/abstract=4847953 or http://dx.doi.org/10.2139/ssrn.4847953

Eric Alston (Contact Author)

Finance Division, University of Colorado Boulder ( email )

Campus Box 419
Boulder, CO 80309
United States

Sofia Cossar

Université Paris II - Panthéon-Assas ( email )

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