You have to wade through a lot to reach the good news at the end of Time reporter Joel Stein’s article about “data mining”—or at least data collection and use—in the online world. There’s some fog right there: what he calls “data mining” is actually ordinary one-to-one correlation of bits of information, not mining historical data to generate patterns that are predictive of present-day behavior. (See my data mining paper with Jeff Jonas to learn more.) There is some data mining in and among the online advertising industry’s use of the data consumers emit online, of course.

Next, get over Stein’s introductory language about the “vast amount of data that’s being collected both online and off by companies in stealth.” That’s some kind of stealth if a reporter can write a thorough and informative article in Time magazine about it. Does the moon rise “in stealth” if you haven’t gone outside at night and looked at the sky? Perhaps so.

Now take a hard swallow as you read about Senator John Kerry’s (D-Mass.) plans for government regulation of the information economy.

Kerry is about to introduce a bill that would require companies to make sure all the stuff they know about you is secured from hackers and to let you inspect everything they have on you, correct any mistakes and opt out of being tracked. He is doing this because, he argues, “There’s no code of conduct. There’s no standard. There’s nothing that safeguards privacy and establishes rules of the road.”

Securing data from hackers and letting people correct mistakes in data about them are kind of equally opposite things. If you’re going to make data about people available to them, you’re going to create opportunities for other people—it won’t even take hacking skills, really—to impersonate them, gather private data, and scramble data sets.

If Senator Kerry’s argument for government regulation is that there aren’t yet “rules of the road” pointing us off that cliff, I’ll take market regulation. Drivers like you and me are constantly and spontaneously writing the rules through our actions and inactions, clicks and non-clicks, purchases and non-purchases.

There are other quibbles. “Your political donations, home value and address have always been public,” says Stein, “but you used to have to actually go to all these different places — courthouses, libraries, property-tax assessors’ offices — and request documents.”

This is correct insofar as it describes the modern decline in practical obscurity. But your political donations were not public records before the passage of the Federal Election Campaign Act in 1974. That’s when the federal government started subordinating this particular dimension of your privacy to others’ collective values.

But these pesky details can be put aside. The nuggets of wisdom in the article predominate!

“Since targeted ads are so much more effective than nontargeted ones,” Stein writes, “websites can charge much more for them. This is why — compared with the old banners and pop-ups — online ads have become smaller and less invasive, and why websites have been able to provide better content and still be free.”

The Internet is a richer, more congenial place because of ads targeted for relevance.

And the conclusion of the article is a dose of smart, well-placed optimism that contrasts with Senator Kerry’s sloppy FUD.

We’re quickly figuring out how to navigate our trail of data — don’t say anything private on a Facebook wall, keep your secrets out of e-mail, use cash for illicit purchases. The vast majority of it, though, is worthless to us and a pretty good exchange for frequent-flier miles, better search results, a fast system to qualify for credit, finding out if our babysitter has a criminal record and ads we find more useful than annoying. Especially because no human being ever reads your files. As I learned by trying to find out all my data, we’re not all that interesting.

Consumers are learning how to navigate the online environment. They are not menaced or harmed by online tracking. Indeed, commercial tracking is congenial and slightly boring. That’s good news that you rarely hear from media or politicians because good news doesn’t generally sell magazines or legislation.

Jeff Jonas has published an important post: “Your Movements Speak for Themselves: Space-Time Travel Data is Analytic Super-Food!”

More than you probably realize, your mobile device is a digital sensor, creating records of your whereabouts and movements:

Mobile devices in America are generating something like 600 billion geo-spatially tagged transactions per day. Every call, text message, email and data transfer handled by your mobile device creates a transaction with your space-time coordinate (to roughly 60 meters accuracy if there are three cell towers in range), whether you have GPS or not. Got a Blackberry? Every few minutes, it sends a heartbeat, creating a transaction whether you are using the phone or not. If the device is GPS-enabled and you’re using a location-based service your location is accurate to somewhere between 10 and 30 meters. Using Wi-Fi? It is accurate below 10 meters.

The process of deploying this data to markedly improve our lives is underway. A friend of Jonas’ says that space-time travel data used to reveal traffic tie-ups shaves two to four hours off his commute each week. When it is put to full use, “the world we live in will fundamentally change. Organizations and citizens alike will operate with substantially more efficiency. There will be less carbon emissions, increased longevity, and fewer deaths.”

This progress is not without cost:

A government not so keen on free speech could use such data to see a crowd converging towards a protest site and respond before the swarm takes form — detected and preempted, this protest never happens. Or worse, it could be used to understand and then undermine any political opponent.

Very few want government to be able to use this data as Jonas describes, and not everybody wants to participate in the information economy quite so robustly. But the public can’t protect itself against what it can’t see. So Jonas invites holders of space-time data to reveal it:

[O]ne way to enlighten the consumer would involve holders of space-time-travel data [permitting] an owner of a mobile device the ability to also see what they can see:

(a) The top 10 places you spend the most time (e.g., 1. a home address, 2. a work address, 3. a secondary work facility address, 4. your kids school address, 5. your gym address, and so on);

(b) The top three most predictable places you will be at a specific time when on the move (e.g., Vegas on the 215 freeway passing the Rainbow exit on Thursdays 6:07 – 6:21pm — 57% of the time);

(c) The first name and first letter of the last name of the top 20 people that you regularly meet-up with (turns out to be wife, kids, best friends, and co-workers – and hopefully in that order!)

(d) The best three predictions of where you will be for more than one hour (in one place) over the next month, not counting home or work.

Google’s Android and Latitude products are candidates to take the lead, he says, and I agree. Google collectively understands both openness and privacy, and it’s nimble enough still to execute something like this. Other mobile providers would be forced to follow this innovation.

What should we do to reap the benefits while minimizing the costs? The starting point is you: It is your responsibility to deal with your mobile provider as an adult. Have you read your contract? Have you asked them whether they collect this data, how long they keep it, whether they share it, and under what terms?

Think about how you can obscure yourself. Put your phone in airplane mode when you are going someplace unusual – or someplace usual. (You might find that taking a break from being connected opens new vistas in front of your eyes.) Trade phones with others from time to time. There are probably hacks on mobile phone system that could allow people to protect themselves to some degree.

Privacy self-help is important, but obviously it can be costly. And you shouldn’t have to obscure yourself from your mobile communications provider, giving up the benefits of connected living, to maintain your privacy from government.

The emergence of space-time travel data begs for restoration of Fourth Amendment protections in communications data. In my American University Law Review article, “Reforming Fourth Amendment Privacy Doctrine,” I described the sorry state of the Fourth Amendment as to modern communications.

The “reasonable expectation of privacy” doctrine that arose out of the Supreme Court’s 1967 Katz decision is wrong—it isn’t even founded in the majority holding of the case. The “third-party doctrine,” following Katz in a pair of early 1970s Bank Secrecy Act cases, denies individuals Fourth Amendment claims on information held by service providers. Smith v. Maryland brought it home to communications in 1979, holding that people do not have a “reasonable expectation of privacy” in the telephone numbers they dial. (Nevermind that they actually have privacy—the doctrine trumps it.)

Concluding, apropos of Jonas’ post, I wrote:

These holdings were never right, but they grow more wrong with each step forward in modern, connected living. Incredibly deep reservoirs of information are constantly collected by third-party service providers today.

Cellular telephone networks pinpoint customers’ locations throughout the day through the movement of their phones. Internet service providers maintain copies of huge swaths of the information that crosses their networks, tied to customer identifiers. Search engines maintain logs of searches that can be correlated to specific computers and usually the individuals that use them. Payment systems record each instance of commerce, and the time and place it occurred.

The totality of these records are very, very revealing of people’s lives. They are a window onto each individual’s spiritual nature, feelings, and intellect. They reflect each American’s beliefs, thoughts, emotions, and sensations. They ought to be protected, as they are the modern iteration of our “papers and effects.”

Via Jeff Jonas, who oh-so-carefully assessed the treatment he received in Stephen Baker’s book The Numerati, I came across this NPR interview with Baker.

In the latter part of the interview, Baker discusses pretty accurately Jonas’ dissent from the passion for predictive data mining in the national security world. That dissent was given expression in the paper Jeff and I wrote, “Effective Counterterrorism and the Limited Role of Predictive Data Mining.”

The data intelligentsia are an interesting subject for a book, of course – it looks The Numerati may have a lot of similarities to Robert O’Harrow’s No Place to Hide – and the NPR interview is interesting. But what makes it notable is Baker’s economic literacy. Or, more accurately, his lack of economic literacy.

Now, I’m not an economist either, so I’ll stand for correction in the comments (actual economists preferred, not just people with strong opinions, please).

At about minute 5:00, for example, Baker says that retailers “detest” a group of shoppers called “barnacles.” These are the hardcore bargain hunters who don’t buy any luxury items or indulge in impulse buying. Baker says that retailers might discourage barnacles from coming into their stores “by giving them coupons or advertisements for things that the barnacles would never want, things that are incredibly expensive.” The conversation turns to how this discouragement is wrongfully discriminatory against poor people and how it denies them savings.

I think Baker’s premise about false advertising to non-customers is pure economic fantasy. It would be commercial suicide to advertise inaccurately toward non-customers, trying to keep those customers away. I see no case where it would make sense for a retailer to do that. More likely, retailers will treat “barnacles” as future potential customers or, at worst, as subjects of indifference. They may not pursue them very hard because barnacles are not their customer demographic, but they will always (correctly) regard a barnacle as a future potential customer. Retailers want everyone to want what they sell. They will never discourage anyone from being interested in their wares. Baker’s ideas here are just silly, as are the conclusions he draws from them.

Baker’s ideas about health insurance are a closer call, but I still think he’s wrong. A little after 7:30, he describes health insurance as a subsidy from the healthy to the less healthy. As everybody learns more details (about health or the subsidy – it’s not clear), he says, insurers will be able to discriminate against us and we will be able to demand special treatment based on what we know about ourselves. This “breaks the social contract we’ve had through the ages.”

Now, the social contract is our agreement to give up the right to use force and give it to the government because of the better security we get from that arrangement. It doesn’t have anything to do with health insurance.

But on the economics, Baker is confused about what health insurance is. Health insurance is a financial service in which people pay a small amount of money regularly over time in exchange for the right to access a large amount of money should certain contingencies (disease or injury) come to pass. Health insurance works as a business because these contingencies occur rarely. Few enough people exercise their rights under insurance contracts that insurers can profit. But every insured person gets the benefit of the right to access needed money in the event of health problems.

Now, as better health information moves many health events from the “risk” category to “certainty” or “impossibility,” those events will become uninsurable. For example, if it’s a certainty that I’m going to get skin cancer, I can’t insure against it because no insurer would accept a small amount of money knowing it will have to pay me a large amount. I just have to save up for it (while medical science comes up with a cure). Likewise, if it’s a certainty that I’m not going to get skin cancer, I’d be a fool to buy insurance for it. Uninsurable.

It’s too bad when we learn that some illness is more likely or a certainty, and many people would like insurance to continue paying for medical conditions like this, even though they are uninsurable. But that’s not insurance; that’s just health care subsidy. Baker appears to think that health insurance is only the subsidy part, and that when conditions become uninsurable that’s insurers discriminating against people. He’s mistaken.

On the issues with data collection and use, I’m sure it’s a better book. Baker’s treatment of Jeff Jonas gets Jeff’s approval, so that’s one in its favor.