Suboptimal Provision of Privacy and Statistical Accuracy When They are Public Goods

We explain why population statistics are provided by public statistical agencies rather than private firms. To do so, we focus on inefficiencies in how private providers trade off data privacy and accuracy. Increasing the accuracy of published statistical summaries necessarily results in a loss of privacy for the data owners. Data publication is based on differential privacy. Privacy protection and accuracy are public goods We find that private provision results in suboptimally low data accuracy. The external benefit of data accuracy to all consumers is not captured by the willingness-to-pay of the consumer with the greatest private value.The provider buys just enough data-use rights (privacy loss) to sell the data accuracy to the consumer with the highest valuation.