We consider the problem of determining the optimal accuracy of public statistics when increased accuracy requires a loss of privacy. To formalize this allocation problem, we use tools from statistics and computer science to model the publication technology used by a public statistical agency. We derive the demand for accurate statistics from first principles to generate interdependent preferences that account for the public-good nature of both data accuracy and privacy loss. We first show data accuracy is inefficiently under-supplied by a private provider. Solving the appropriate social planner’s problem produces an implementable publication strategy. We implement the socially optimal publication plan for statistics on income and health status using data from the American Community Survey, National Health Interview Survey, Federal Statistical System Public Opinion Survey and Cornell National Social Survey. Our analysis indicates that welfare losses from providing too much privacy protection and, therefore, too little accuracy can be substantial.
BIO: John M. Abowd is Associate Director for Research and Methodology and Chief Scientist at the Census Bureau and the Edmund Ezra Day Professor of Economics, Professor of Statistics and Information Science at Cornell University. He is also Research Associate at the National Bureau of Economic Research (on leave while serving in the federal government), Research Affiliate at the Centre de Recherche en Economie et Statistique (CREST, Paris, France), Research Fellow at the Institute for Labor Economics (IZA, Bonn, Germany), and Research Fellow at IAB (Institut für Arbeitsmarkt-und Berufsforschung, Nürnberg, Germany). He is the past President (2014-2015) and Fellow of the Society of Labor Economists; past Chair (2013) of the Business and Economic Statistics Section and Fellow of the American Statistical Association; elected member of the International Statistical Institute; and a fellow of the Econometric Society. He has served as Distinguished Senior Research Fellow at the United States Census Bureau (1998-2016) and on the National Academies’ Committee on National Statistics (2010-2016). He currently serves on the American Economic Association’s Committee on Economic Statistics (2013-2018). He was the Director of the Cornell Institute for Social and Economic Research (CISER) from 1999 to 2007. His current research focuses on the creation, dissemination, privacy protection, and use of linked, longitudinal data on employees and employers.