Regulation, Markets, and Integrity : an Essay on the Framework for Trust in the Protection of Personal Data

The quest for security entails agency relationships, whether protecting ourselves from the rogues and vandals of the Internet, or protecting our personal information in the hands of commercial actors. Firms that provide the technology to provide network security generally do so without significant government regulation. However, the protection of personal information has become increasingly regulated, particularly in Europe. Although in the U.S. private ordering and self-regulation has prevailed, additional regulation may be on the horizon. This essay discusses market forces and legal interventions affecting private ordering and self-regulation, with particular attention to the matter of trust and the role of third-party monitoring in enhancing the trust regime. Using the agency theories of Jensen and Meckling, the essay probes an analogy between consumers and bondholders in a firm, and posits the need for attention to standards and practices for monitoring to enhance the prospects of consumer trust. It concludes with a brief look at integrity as promoted by Jensen and by DeMulder as an additional approach to enhance trust