The key question for the new economy: who owns the data?
- Recognising and protecting property rights to each individual’s data or all individuals’ data is vital to determining the fate of the new economy
Property rights have been crucial to society since time immemorial, but as technology evolves, rights too are changing, presenting new challenges.
We are in the throes of the fourth industrial revolution, driven by advances in, and the proliferation of, artificial intelligence (AI) and big data. The importance of big data in the new economy is like that of oil in the old one.
But associated with the unprecedented efficiency and convenience of the new economy, one of the biggest challenges we are facing is the aggressive violation of individuals’ rights, including privacy.
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The essence of the issue is property rights, which now extend to rights over individuals’ personal data. Traditionally, property rights referred to control of tangible assets, such as gold or oil, or control of intangible assets like patents and copyrights. In the digital era, technology can create huge amounts of intangible assets from individuals’ data without their knowledge. How the data is used could bring not only great benefits but also, potentially, great harm. This raises a crucial question: who has the right to control over these new assets?
In the old economy, private property rights and institutions protecting property rights were the foundation for development. This is because, with private property rights, individuals are most motivated to use and allocate their assets efficiently, through the market or through democracy in the case of collective decisions.
Now, in the new economy, the question is will private property rights still be as essential? The answer is yes.
Recognising and protecting property rights to each individual’s data or all individuals’ data is vital to determining the fate of the new economy, although how to define these rights precisely poses huge challenges which are yet to be resolved.
Consistent with the basic principles of human rights and private property rights, the GDPR, which recognises each individual’s basic control over his or her data, is the first step in the right direction. Giving large companies the right to control how they use individual data may seem efficient, but is totally inconsistent with the fundamental principles of human rights and property rights. The Cambridge Analytica data scandal is only the start.
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At the same time however, state ownership or control of individuals’ data is much worse than control by large companies in a society with the rule of law.
State ownership of individuals’ data will lead to inefficiency and a lack of innovation as people would lack the motivation they would have if they had control.
But a much deeper worry is that state-controlled big data, together with state AI capabilities, would create a regime that directly damages social welfare by violating human rights. Moreover, if a government had an unconstrained capacity to mobilise resources and silence society, the probability of economic catastrophes would be drastically increased.
One of the key reasons China lagged far behind advanced economies before the post-Mao reform was a complete lack of private property rights. Although such rights are now recognised by China’s constitution after a quarter of a century of reforms, the country, which is without judicial independence, still has a long way to go compared with developed nations. Now, as the new industrial revolution emerges, the country faces severe challenges in protecting the rights of individuals to control their data.
Xu Chenggang is professor of economics at Cheung Kong Graduate School of Business
