A Network-Economic Policy Study of Identity Management Systems and Implications for Security and Privacy Policy

Solving the problems associated with identity management in the “virtual” world is proving to be one of the keys to full realization of the economic and social benefits of networked information systems. By definition, the virtual world lacks the rich combination of sensory and contextual cues that permit organizations and individual humans interacting in the physical world to reliably identify people and authorize them to engage in certain transactions or access specific resources. Being able to determine who an online user is and what they are authorized to do thus requires an identity management infrastructure. Some of the most vexing problems associated with the Internet (the deluge of spam, the need to regulate access to certain kinds of content, securing networks from intrusion and disruption, problems of inter-jurisdictional law enforcement related to online activities, impediments to the sharing of distributed computing resources) are fundamentally the problems of identity management. And yet, efforts by organizations and governments to solve those problems by producing and consuming identity systems may create serious risks to freedom and privacy. Thus the implementation and maintenance of identity management systems raises important public policy issues. The identity management systems (the IMS-s) often tend to require more information from the consumers than would otherwise be necessary for the authentication purposes. The typical choice being analyzed in IMS is the one between a completely centralized or integrated system (one ID - one password, and a single sign-on) and the one comprising a plethora of (highly) specialized IMS-s (multiple ID-s and passwords). While the centralized system is the most convenient one, it is also likely to require too much personal information about the users, which may infringe on their rights to privacy and which definitely will result in serious damage should this personal information be stolen and/or abused. When more than two IMS-s interconnect (more of a practical ...