The threat of privacy

http://www.kahnfrance.com/cmk/The%20threat%20of%20privacy%20distribution%20v=
ersion.pdf


The Threat of Privacy=20
By Charles M. Kahn1

Like artists, we academics want to believe that if one of our works doesn=E2=
=80=99t get enough attention it=E2=80=99s because we=E2=80=99re ahead of our=
 time. I=E2=80=99d like to pretend that everything I=E2=80=99ve written is p=
athbreaking, and will eventually be recognized for its true importance. But I=
 have to admit that there are really only a couple of cases where I can say w=
ith hindsight that something I wrote has been ahead of its time.

One of them2 is a paper written with Jamie McAndrews and Will Roberds, publi=
shed in 2005, and titled =E2=80=9CMoney is Privacy.=E2=80=9D We wrote it par=
tly as a response to Narayana Kocherlakota=E2=80=99s famous paper =E2=80=9CM=
oney is Memory,=E2=80=9D which could be taken as arguing that cash is essent=
ially a record=E2=80=90keeping device, tracking who was a net creditor and w=
ho a net debtor to society with respect to resources provided or consumed. T=
he implication was that if it became easy to keep credit records directly, c=
ash could wither away.
In our paper we argued instead that a key role of cash was its ability to pr=
otect the purchaser=E2=80=99s identity. So we predicted that, even while the=
 reductions in costs of record keeping and increases in the speed of data tr=
ansmission were expanding the usage of credit=E2=80=90 and deposit=E2=80=90a=
ccount=E2=80=90 based payments arrangements, cash would survive. Because the=
 desire for privacy would always generate demand for cash, it would be a mis=
take=E2=80=94and ultimately futile=E2=80=94to attempt to abolish it. At the t=
ime, people were attuned to many of the problems of privacy, but there had n=
ot yet been a clear recognized link between the value of privacy and the rol=
e of payments systems. (Remember, bitcoin was only released in 2009).

[...]


1 Keynote address at =E2=80=9CFinancial Market Infrastructure Conference II:=
 New Thinking in a New Era=E2=80=9D at De Nederlandsche Bank, Amsterdam, 7=E2=
=80=908 June 2017.
2 The other was my dissertation, back in 1980. It was on liquidity and the p=
ricing of illiquid assets. At that time, no one thought this was an importan=
t issue in finance: financial markets were liquid; everybody =E2=80=9Cknew=E2=
=80=9D that. So the work went nowhere. Oh well.=