example, the detailed financial information from prospective buyers allows banks to determine what kind of mortgage they will offer, which, in turn, allows prospective buyers to know what they can afford. In this case, as in many others, high-quality information reduces transaction and other costs, which in turn results in lower prices for consumers. Instant access to personal financial data and streamlined credit-reporting systems have not only enhanced the ability of lenders to assess risk quickly, but also increased competition among lending institutions with the result that mortgage rates have been reduced significantly—by some estimates, as much as 2 percentage points—saving American consumers billions of dollars a year (see McCullagh, 2004). In other sectors, mechanisms such as frequent shopper cards and on-line credit applications have reduced the prices of groceries and Internet purchases.
In the market context, people seem generally willing to accept the underlying rationale for surrendering a degree of privacy and confidentiality—and running the risk that their data will be misused—because the financial and other benefits are personal, immediate, and clear. The benefits of data requested by governments are often less recognizable: they accrue to society as a whole, not just the data providers; they may take years to be realized in the form of new laws or programs; and they may be used in indirect and complex ways that are not obvious. The benefits of supplying information to a grocery store to save 50 cents on a can of tuna fish are transparent; the benefits of supplying data to a statistical agency that may contribute to improved research on retirement decisions that could, in turn, improve the functioning of pension or social security systems are not. The lack of transparency in the value of personal data for societal purposes has two consequences: people may be reluctant to support (through taxes) government data collection, and there is evidence that people are increasingly reluctant to respond to government requests for information (see Chapter 4).
The United States has not only a decentralized federal statistical and data collection system (see National Research Council, 2005), but also a decentralized, pluralistic structure for basic and applied social science research and policy analysis (as well as other kinds of research). Most of that research, supported by federal grants and contracts, is carried out at universities, nonprofit research institutions, and for-profit research companies, although some federal agencies conduct considerable in-house research. State and local governments, private foundations, and corporate and individual donations are also sources of social science research support at universities and private research organizations, including advocacy and public interest groups with a variety of policy preferences and perspectives.
Federal statistical and other data collection agencies also carry out