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«JOURNAL OF LAW, ECONOMICS & POLICY VOLUME 10 SPRING 2014 NUMBER 2 EDITORIAL BOARD 2013-2014 Steve Dunn Editor-in-Chief Crystal Yi Meagan Dziura Sarah ...»

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ers the cost of surveillance, the socially optimal amount of surveillance will likely increase.129 Song completes his economic model of surveillance by suggesting an “economic interpretation of [the] ‘reasonable’ expectation of privacy.”130 He suggests that the classic Learned Hand Formula for negligence liability may be applied to determine when a level of surveillance is in the best interest of society.131 Specifically, the formula may be applied to analyze where probable cause or a reasonable expectation of privacy exist as an economic basis for determining when a search or method of surveillance is in the best interest of society.132 Song believes that the reasonable expectation of privacy “should depend on the degree of harm that the government is trying to prevent or deter [and]... the effectiveness of the method of surveillance in deterring or preventing harm.”133 Rather than have courts make these reasonableness determinations in each case, Song proposes three categories of scrutiny: (1) heightened scrutiny for protected areas; (2) minimal scrutiny for unprotected areas; and (3) intermediate scrutiny for areas in between protected and unprotected.134 To determine the appropriate level of scrutiny, courts should consider three factors to measure the potential social costs and privacy disutility from proposed surveillance action: “[(1)] the number of different activities that take place in the area subject to surveillance, [(2)] the nature of those activities, and [(3)] the social benefits conferred by those activities.”135 Communicative activities should always be given heightened scrutiny since “the social costs from avoidance are likely to be greater due to the external benefits from the dissemination of information and imperfect information when seeking information.”136 In addition to the type of activity, Song differentiates between “‘[g]eneral-purpose forums’... in which many different activities take place... and ‘[s]pecial-purpose forums’... that are limited to a few activities or even designated for a certain kind of activity.”137 General-purpose forums should receive heightened scrutiny since the greater number of activities will likely lead to a higher level of social costs from avoidance due to surveillance.138 129 Song, supra note 6, at 17.

130 Id. at 19–20.

131 Id.

132 Id.; see also Craig S. Lerner, The Reasonableness of Probable Cause, 81 TEX. L. REV. 951, 1019–22 (2003).

133 Song, supra note 6, at 20.

134 Id.

135 Id.

136 Id. at 20–21.

137 Id. at 21–22.

138 Id.

–  –  –

Each level of scrutiny would require the government actor to demonstrate a differing level of interest.139 Heightened scrutiny would require “a compelling state interest,” “intermediate scrutiny would require a ‘substantial’ state interest, and minimal scrutiny would merely require a legitimate government interest.”140 In addition, the heightened and intermediate levels of scrutiny would require documentation that no viable alternative that would be less restrictive on privacy exists.141 By requiring the government to demonstrate a specified level of governmental interest and that no less intrusive alternatives are available, society can be protected from surveillance that is not socially beneficial.142 The next section will specifically apply these economic perspectives of surveillance to domestic drone surveillance.

B. Economic Analysis of Drone Surveillance

Song’s general economic model of surveillance may be applied to analyze domestic drone surveillance. Drones provide a very effective means to accomplish widespread, general, persistent surveillance. The optimal amount of drone surveillance will occur where the marginal social benefit of surveillance equals or exceeds the marginal social cost or disutility of the surveillance.143 Therefore, the costs and benefits resulting from drone surveillance must be identified and analyzed. As a result of the availability of efficient widespread surveillance, increased domestic drone surveillance will generate utility in the form of increased security from crime and terrorism.

Drones may remain airborne for long periods of time without onboard pilots and are very efficient at providing persistent, widespread surveillance. As a result, the societal utility and disutility caused by the drone surveillance may be compounded. The socially optimal amount of surveillance may increase because drones have the ability to significantly reduce the cost of widespread surveillance.144 The benefit of this increased security will come at the cost of individual privacy. Given the widespread and pervasive nature of potential domestic drone surveillance, the marginal cost of uncontrolled drone surveillance will likely exceed the marginal benefit of the surveillance. Therefore, such widespread surveillance will be unproductive and inefficient for society.

139 Song, supra note 6, at 20.

140 Id.

141 Id.

142 See generally id. (proposing three factors courts should consider in determining the correct

–  –  –

The law must strive to allow the optimal amount of drone surveillance.

If drone surveillance is restricted too much, allowing less than the optimal level, then society will not realize the full benefit that the surveillance can provide in the form of prevention, deterrence, and security.145 At the same time, if the limits are not strong enough, too much drone surveillance will lead to significant disutility resulting from the loss of privacy. Therefore, the law should be structured to allow drone surveillance up to the point where the social benefit of the surveillance exceeds or equals the marginal social cost or disutility.

Following the insights gained from Song’s economic model of surveillance, legal rules may be developed to efficiently implement domestic drone surveillance while minimizing disutility and social costs of avoidance. The government should be required to justify the use of domestic drone surveillance to ensure that it is deployed in a manner that benefits society. Drones should only be used when the government is able to satisfy the required levels of scrutiny described in Song’s model.146 Doing so will ensure that the societal benefits to be gained from drone surveillance will outweigh the privacy disutility and social costs that may result from the loss of privacy.

The next section will apply this conclusion to analyze the current legislative and policy recommendations for drone surveillance to determine the optimal course of action.


This section discusses the current policy and legislative recommendations regarding drone surveillance and applies economic analysis to recommend an optimal way forward. Developing new laws and policies to address the privacy threats presented by domestic drone surveillance will involve the difficult balancing of many special interests and the individual privacy rights of U.S. citizens.147 Therefore, in drafting a legal framework for domestic drone surveillance, Congress should consider economic factors and establish a framework which allows the use of drones with constraints to protect the privacy interests of U.S. citizens. As an objective methodology, these economic perspectives should lead lawmakers and polSee generally Song, supra note 6 (offering an economic analysis of privacy with respect to surveillance and searches, and proposing why privacy should be protected).

146 Id. at 20.

147 See generally PRISCILLA M. REGAN, LEGISLATING PRIVACY: TECHNOLOGY, SOCIAL VALUES, AND PUBLIC POLICY (1995) (examining Congressional policy making related to computerized databases, wiretapping, and polygraph testing, and determining that the legislation has an unbalanced stance in favor of benefitting those with a vested interest in new technology).


icymakers to enact rules that will efficiently maximize utility while protecting privacy interests.

The new framework should address the privacy concerns arising out of the domestic use of drones, while still allowing society to realize the technological benefits. Congress must consider many factors when determining how to best integrate drones into U.S. airspace.148 In addition, the proposed policies should be compared with the policies in countries such as the United Kingdom, where general surveillance is more commonplace.149 In July 2012, the Association for Unmanned Vehicle Systems International (AUVSI) issued a code of conduct that attempted to address concerns associated with the deployment of drones.150 Among other elements, the code of conduct requires industry members to “respect the privacy of individuals” and “comply with all federal, state, and local laws, ordinances, covenants, and restrictions.”151 The code of conduct has been viewed as insufficient since it only lists broad topics, does not discuss specific privacy concerns, and does not elaborate on how the provisions will be enforced.152 Current recommendations address a number of concerns regarding the widespread deployment of drones in the United States. Among these are recommendations from the American Civil Liberties Union (ACLU)153 and legislation currently pending in both houses of Congress.154 The first group of recommendations to consider is usage restrictions. It is generally accepted that drones and other means of surveillance may be used when a warrant has been issued because probable cause exists. Therefore, the focus of 148 See generally BART ELIAS, CONG.



IN THE NATIONAL AIRSPACE SYSTEM (2012) (discussing Congress’s response to UAV and challenges faced by the FAA in implementing the FAA Modernization and Reform Act); RICHARD M. THOMPSON II, CONG. RESEARCH SERV., R42701, DRONES IN DOMESTIC SURVEILLANCE OPERATIONS: FOURTH AMENDMENT IMPLICATIONS AND LEGISLATIVE RESPONSES (2013) (assessing drone use and the Fourth Amendment, as well as Congressional measures restricting the use of drones at home).

149 See generally LAURA K. DONOHUE, THE COST OF COUNTERTERRORISM: POWER, POLITICS, AND LIBERTY 182–272 (2008) (comparing United States drone use with that of surveillance in the UK).

150 Drone Group Issues Code of Conduct, WALL ST. J., Jul. 3, 2012, at B4; AUVSI Releases “Code of Conduct” for Unmanned Aircraft Systems Operations, ASS’N FOR UNMANNED VEHICLE SYS. INT’L (July 2, 2012), http://www.auvsi.org/AUVSI/News#COC.

151 Unmanned Aircraft System Operations Industry “Code of Conduct,” ASS’N FOR UNMANNED VEHICLE SYS. INT’L, http://www.auvsi.org/conduct (last visited Oct. 20, 2013).

152 Jaikumar Vijayan, Drone industry's Code of Conduct disappoints, COMPUTERWORLD (July 12, 2012), http://blogs.computerworld.com/privacy/20685/drone-industrys-code-conduct-disappoints.


RECOMMENDATIONS FOR GOVERNMENT USE OF DRONE AIRCRAFT 15–16 (Dec. 2011), available at https://www.aclu.org/files/assets/protectingprivacyfromaerialsurveillance.pdf (the American Civil Liberties Union (ACLU) published recommendations regarding domestic government use of drones, which included usage restrictions, image retention restrictions, public notice, democratic control, and auditing effectiveness tracking).

154 S. 1016, 113th Cong. (2013); H.R. 972, 113th Cong. (2013); H.R. 1262, 113th Cong. (2013).

2014] AN ECONOMIC PERSPECTIVE 459 pending legislation and policy recommendations is on when the use of drones should be allowed without a warrant, if at all. The ACLU proposes that drone use should be limited to three purposes: (1) “where there are specific and articulable grounds to believe that the drone will collect evidence relating to a specific instance of criminal wrongdoing or, if the drone will intrude upon reasonable expectations of privacy, where the government has obtained a warrant based on probable cause;”155 (2) “where there is a geographically confined, time-limited emergency situation in which particular individuals’ lives are at risk;”156 or (3) “for reasonable non-law enforcement purposes... where privacy will not be substantially affected.”157 Similarly, both the House and Senate versions of the Preserving Freedom from Unwanted Surveillance Act of 2013 provide for three exceptions to the warrant requirement: (1) “patrol of borders”; (2) “exigent circumstances”; and (3) “high risk” of terrorist attack, as determined by the Secretary of Homeland Security.158 The definition of exigent circumstances differs in the two bills. The Senate bill defines exigent circumstances to only include action necessary to “prevent imminent danger to life,”159 while the House bill uses a broader definition that also includes “serious damage to property, or to forestall the imminent escape of a suspect, or destruction of evidence.”160 The broader definition of exigent circumstances in the House of Representatives version of the bill161 is appropriate since it will give law enforcement more latitude to protect the American people in addition to providing for civil liability162 as a check against improper use of this authority.

The next recommendation is to consider whether there should be an exclusionary rule that would make any evidence gathered without a warrant or other legal authorization inadmissible in a criminal proceeding. The Senate bill also includes an exclusionary rule that would prohibit evidence collected in violation of the Act from being used in criminal prosecution.163 Exclusionary rules can overdeter criminal investigations.164 Therefore, unless a compelling case can be made as to why it is necessary, it would be more efficient not to include an exclusionary rule in the legislation.

Another consideration is whether drones operating in the United States should be allowed to carry weapons like drones operating overseas which 155 AM. CIVIL LIBERTIES UNION, supra note 154, at 15–16.

156 Id.

157 Id.

158 S. 1016, 113th Cong. § 4 (2013); H.R. 972, 113th Cong. § 3 (2013).

159 S. 1016, 113th Cong. § 4 (2013).

160 H.R. 972, 113th Cong. § 3 (2013).

161 Id.

162 H.R. 972, 113th Cong. § 4 (2013).

163 S. 1016, 113th Cong. § 6 (2013).

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