It is a trade-off which is not always acknowledged. It is not something that has 0 potentially negative consequences. And the competition and innovation that is stifled is often invisible (hard to see what could have been).

If you had less intervention with respect to privacy would there be more dynamic market-driven initiatives to fill the gaps? Would there be more incentive to develop technology that would be effective for privacy? I don't know.

Regulation is just hard because reality is complex and dynamic and regulation is often complex but not very dynamic.