Polls consistently place privacy among Internet users' foremost concerns. Users fear that web sites abuse their power to collect and distribute personal information. Policy makers, once content to wait for the private sector to regulate itself, are now pushing proposals that would impose uniform privacy practices on commercial web sites.

Several bills have been introduced to this end, and more are pending. Among the outspoken advocates of these measures is the Federal Trade Commission. According to the FTC, self-regulation has failed, and government intervention is necessary because profit motives contradict privacy interests. This argument runs contrary to Internet realities.

Online businesses know they must alleviate privacy concerns or watch customers migrate to competitors. Consequently, the profit motive is driving them to protect privacy. Privacy policies are the most obvious indicators of this process.

Posted on web sites, privacy policies disclose the information a site collects and how that information is used. This informs users' decisions about when to trade personal information for access to a site. It also helps users hold sites accountable: when Internet users relinquish information to a site with a privacy policy, that policy becomes a contract. Sites must abide by it or face legal consequences.

Regulators claim profit motives discourage sites from posting their policies, but the opposite is true. Private companies are making privacy policies an Internet standard. Leading the charge is TRUST-e, a firm that invites sites to adopt a standardized privacy policy.

In addition to policing its members, TRUST-e rewards them with a "trustmark" seal of approval, which signals consumers that their privacy is respected. The program's popularity -- according to TRUST-e, its more than 500 members attract over 90% of Web traffic -- illustrates how companies are using privacy policies to respond to consumer concerns. And these policies are only one of many promising responses.

A variety of emerging technologies are helping consumers protect their information. One such technology is the Platform for Privacy Preferences (P3P). Software based on the P3P template lets users specify when they are willing to give their information to web sites. The software then automatically analyzes privacy policies and alerts users if those policies violate their preferences.

Private firms are working to popularize this technology. Microsoft and the Electronic Frontier Foundation are jointly developing the "Privacy Wizard." When installed on web sites, this product allows P3P-compatible browsers and search engines to instantly evaluate sites' privacy policies. Other companies are handing similar technology to web surfers.

For example, Lumeria Incorporated recently released a product called Superprofile, which lets users control when their information is given to sites and helps consumers remove their names from direct marketing lists. And this product is only Lumeria's first step.

The company's stated goal is to create products that allow consumers, not businesses, to profit from the sale of personal information. These products would deflate the information resale industry, upend the relationship between consumers and direct marketers, and alleviate many privacy concerns in the process. Thus, contrary to what regulators maintain, profit incentives are driving businesses to help consumers protect their privacy.

Lumeria and TRUST-e are symbols of a dynamic economic process that is only just beginning and could eventually quell privacy concerns altogether. If they are allowed to flourish, these firms and their competitors will continue to devise creative, flexible mechanisms that protect privacy and quickly respond to changing consumer preferences.

Government intervention, on the other hand, would smother this process, harm consumers, and hinder electronic commerce. A single, government-imposed privacy policy would deny consumers the flexibility promised by the private sector's products. And it would smother the demand for these products by creating a false sense of security among Internet users. Companies like Lumeria would be crippled. Consumers would be denied the benefits that new innovations promise. And regulation's detrimental effects would extend across the Internet.

New privacy regulations would raise the start-up costs of online businesses, many of which are small and have limited capital. These regulations would dampen the web's entrepreneurial character and invite an onslaught of regulations pushed forward in the name of consumer protection. By creating a reliance on government solutions to the Internet's "problems," such regulations would erode the cornerstones of freedom and enterprise at the foundation of the Internet's promising future.

*Justin Matlick is Director of the Center for Freedom and Technology. To learn more about the CFT and the Pacific Research Institute, see www.pacificresearch.org.