Benefits and Costs Of Online Privacy Legislation, The

Privacy and Security

Article Snapshot


Robert W. Hahn and Anne Layne-Farrar


AEI-Brookings Joint Center Working Paper No. 01-14, 2001


This paper asks if legislators should pass online privacy legislation.

Policy Relevance

The authors caution that a broad approach to regulating how online businesses use consumer information could hurt technology and growth, with few gains.

Main Points

  • The authors favor evaluating the need for privacy regulation online on a case by case basis, considering the costs to privacy and benefits to consumers.


  • The European Union’s Data Protection Directive Network regulates consumer information across the board, and slows the growth of new technology and business methods like outsourcing.


  • Policymakers should
    • Consider legislative proposals’ economic effects for dynamic technology.
    • Target laws to specific concerns.
    • Treat online and offline businesses the same.
    • Recognize that businesses have reasons to provide suitable online privacy notices without regulation.
    • Be very cautious about requiring opt-in, the rule that consumers must explicitly agree to a site’s information use or sharing.
    • Give consumers a right to access their information, which would have few benefits and add many costs.
    • Limit lawsuits and other enforcement mechanisms.

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