Oct 14, 2020 04:07 PM

Opinion: Protect Personal Information As If It Were Property

Xu Chenggang, professor of economics at the Cheung Kong Graduate School of Business.
Xu Chenggang, professor of economics at the Cheung Kong Graduate School of Business.

Xu Chenggang is a professor of economics at Cheung Kong Graduate School of Business. This article, edited for length, was part of a joint paper on entrepreneurs’ legal risk released by Beijing-based Trusmatic Law Firm and Fortune magazine’s Chinese edition.

The concept of “property rights” is something that people are accustomed to and seem to always mistake as common sense. But the concept has deep and debatable connotations.

John Locke, who drafted documents for the Glorious Revolution (1688), was the first person to systematically discuss property rights. At the time, the concept of human rights was put forward under the name of property rights. Locke believed that human rights are the rights for a person to own himself, property and everything that belongs to him. Therefore, human rights and property rights cannot be separated, constituting the most basic and inalienable rights of individuals. Austrian Economist Friedrich Hayek inherited and further elaborated on these basic concepts.

This concept has now become the internationally recognized basis of human rights and property rights. But the concept of property rights is more complicated because it has a lot of practical operations in social and economic fields. For convenience, relatively more technical concepts of property rights are defined in law and economics. To facilitate practical operations, people usually deconstruct property rights into a set of rights related to specific content. They can then trade these deconstructed rights in the market, increasing the trading efficiency, and this has been popular in the field.

The primitive concept of property rights is the basic content of human rights. When we discuss the concept of property rights, its essence is the ultimate right of control. When people deconstruct property rights into a set of rights, the person with the ultimate property rights holds the ultimate right of control. This is the most important concept. On this basis, by deconstructing property rights into many specific rights, these rights can be transferred and leased separately, and the owner of the property rights ultimately has the right to control and decide. Therefore, the core of property rights is the right to control, as stated in the theory of Oliver Hart (winner of the 2016 Nobel Prize in Economics).

Shifting back to the question of personal information, why is the information right indeed a property right? In 2017, European Union legislation stipulated that personal information is part of human rights. Everyone has ultimate control over their own information. Therefore, in any society that protects human rights, individuals must have the right to control personal information directly related to them. Privacy and data rights are all part of human rights.

While it does not affect the basic concept, many controversies are sparked in specific operations. How to define personal information? For example, when a personal photo appears in a collective image, is this still personal information? When property rights are discussed in economics, a similar problem occurs, which is defined as externalities. When the property is huge, generating huge externalities, in other words, it has a huge impact on others. So, how to define the property? Who has the right of control? Society should first clarify the basic concepts of information rights, and then discuss the solution to the problems at the operational level.

At the same time, it is clear that a large amount of personal information is entirely personal and does not involve externalities. An example will be medical records. These surely are a record of the patient’s personal information. Some would argue that in collecting the medical records of millions, or tens of millions, very significant conclusions can be drawn, and those can produce great wealth. As a result, medical records should not be controlled by individuals. This statement is false because if one wants to obtain someone’s personal information, it is the same as wanting to obtain part of someone’s property, so consent is required. The conditions for the consent are the market principles, which require a voluntary transfer showing the value for the exchange. Either the exchange is at a price or voluntary, but it should be based on personal choice and determined by the market.

The big data accumulated from personal information is like oil in the past. The more valuable it is, the more necessary for there to be a clear concept of property rights. The high value generated by the collection of countless personal information cannot be automatically controlled by enterprises and governments with no compensation. A consensus that “personal information is everyone’s property right” laid the foundation for information circulation on a large scale. The lack of awareness that personal information is a property right indulges potential risks for the use of personal information on a large scale and it will explode sooner or later.

People always simply interpret the problem of personal information as the right to privacy, but the right to privacy is only a part of human rights. As a property right, personal information not only includes private content, but also economic value. When property right is clearly defined in the market, everyone can decide on how much privacy they are willing to give up in exchange for a benefit. Benefits can be privately owned or can be a voluntary contribution to society. Even if the benefits are the latter, everyone must voluntarily give up this part of the right of control. Ultimately, when we address the concept of property rights, we are discussing rights of control.

This information is partly reflected in the General Data Protection Regulation passed by the European Union in 2017. However, this law is not conceptually clear enough and has not gone far enough. It addressed the right to privacy and human rights, but I think to solve this problem thoroughly, we must think from the perspective of property rights.

According to EU law, any organization, whether it is a government or a company, must obtain personal permission when it involves anyone’s right to privacy, because this is a basic human right and neither the government nor the enterprise can violate basic human rights. But it is not enough to just get the consent of the people. When we make it clear that information right is a property right, it opens the legal way for large-scale use of personal information through market exchange, with everyone benefiting.

One side can get the consent, and the other side can do the market exchange. In principle, a large amount of information acquisition should be completed via the market. The very important principle of market exchange is voluntary. If it is not voluntary, it is not market exchange. Under voluntary circumstances, the exchange can be free or paid, and the free one can also be conditional. In fact, it sets a contract on information in the market. If the contract is free, it can be conditional. This is the market exchange principle.

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