In many cases they seem to be used interchangeably, but in an IT environment knowing the meanings can have an impact on how you configure your systems.
A permission is a property of an object, such as a file. It says which agents are permitted to use the object, and what they are permitted to do (read it, modify it, etc.). A privilege is a property of an agent, such as a user. It lets the agent do things that are not ordinarily allowed. For example, there are privileges which allow an agent to access an object that it does not have permission to access, and privileges which allow an agent to perform maintenance functions such as restart the computer.
AJ Henderson supports this view
…a user might be granted a privilege that corresponds to the permission being demanded, but that would really be semantics of some systems and isn’t always the case.
As does Gilles with this comment:
That distinction is common in the unix world, where we tend to say that a process has privileges (what they can or cannot do) and files have permissions (what can or cannot be done to them)
Callum Wilson offers the more specific case under full Role Based Access Control (RBAC)
the permission is the ER link between the role, function and application, i.e. permissions are given to roles the privilege is the ER link between an individual and the application, i.e. privileges are given to people.
And a further slight twist from KeithS:
A permission is asked for, a privilege is granted. When you think about the conversational use of the two words, the “proactive” use of a permission (the first action typically taken by any subject in a sentence within a context) is to ask for it; the “reactive” use (the second action taken in response to the first) is to grant it. By contrast, the proactive use of a privilege is to grant it, while the reactive use is to exercise it. Permissions are situation-based; privileges are time-based. Again, the connotation of the two terms is that permission is something that must be requested and granted each and every time you perform the action, and whether it is granted can then be based on the circumstances of the situation. A privilege, however, is in regard to some specific action that the subject knows they are allowed to do, because they have been informed once that they may do this thing, and then the subject proceeds to do so without specifically asking, until they are told they can no longer do this thing.
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