Review of "The Digital Person: Technology and Privacy in the Information Age" by Daniel J. Solove

In 1945 F.A. Hayek characterized the market economy as a process of transmitting knowledge between individuals.  His insight has been used to explain the functionality of the market system over centrally-planned systems.  Through the mechanism of prices, information about individuals’ tastes and preferences (as they relate to the quantities and qualities of goods, services, capital, and labor) are communicated across apparently insurmountable obstacles.  Knowledge, or lack thereof, in addition to physical scarcity, stand as problems which inhibit individuals from completing their plans and satisfying their wants.  Markets, armed with functioning price systems, serve as solutions to this knowledge problem.  Since 1945, the role which Hayek placed upon knowledge in society has been a beneficial one; the literature which has developed out of his scholarship has been successful at defeating notions that centrally-planned economies can overcome such knowledge problems by intense calculations.

Computer technology has had an interesting part in this socialist calculation debate.  Originally, planners made the claim that technology would solve the knowledge problem by providing planners with supercomputers capable of computing the long and intricate calculations of where, when, to whom, and how much goods and services to make and ship. In regards to the application of computer technology in solving the calculation problems of a planned economy, the planners’ hopes fell short.  Further theoretical claims have been explained to present socialism as completely infeasible; in regards to the computational capacity of technology, the planners’ prophecy was more accurate.  We have seen the benefits of computers to facilitate the calculation and communication process.  This streamlining has opened doors to the potential of trade and wealth creation, diligently noted throughout the book. In summary, telecommunications as applied to marketing, production, and distribution works, allowing companies to thrive to higher levels of production and profitability.

Find the article at Daniel D'Amico's website or the Journal of Law, Economics & Policy.