The conventional wisdom in policy circles is that the best way to grow the digital economy is by increasing consumer trust. Privacy regulations, we are told, will boost trust and more trust will lead to more technology adoption — more apps downloaded, more time spent online, more e-commerce. For regulation-inclined lawmakers, this scenario is a win-win: They can regulate online companies as they please and still claim credit for growing the digital economy. Unfortunately, they are wrong: Policies designed to increase trust would likely weaken the U.S. digital ecosystem and lower consumer welfare.
