Larry Summers says the world “profoundly under-invests in data collection and statistics.” The Harvard economist and former Treasury secretary has extra incentive these days to promote such investment. He is now a director of startup Premise Data, which collects and processes economic information in new ways. Talking his book doesn’t make him wrong, though.
Premise on Wednesday unveiled a pilot project with the World Bank to help bureaucrats benefit from greater use of Big Data. While official figures for consumer prices and the like benefit from consistency, they often come late. Sometimes there are also questions about official interference – as, for example, in Argentina under former President Cristina Fernandez. Modern technology and methods can add sharper figures, speed and global comparisons.
Mauricio Macri, who was elected Argentina’s president in November, suspended official statistics pending an overhaul of the national office’s methods. The last reading for domestic consumer price inflation was 14.3 percent in the year to October. Data from Premise’s network, essentially individuals snapping photographs of price tags in stores, pegged the pace of price increases above 20 percent at the time. It’s a more credible figure that has since risen to above 30 percent, according to a March 16 blog post quoting data only four days old.
As well as providing near real-time information and a sanity check, this ground-up approach offers a way to stack up figures against those in other countries. That can be difficult with official data when governments derive price information in different ways. Premise’s project involving more than 160 items in 15 countries should help the World Bank improve its purchasing-power parity information. This is used to normalize measures like GDP between different economies using the price of similar baskets of goods instead of market exchange rates, which can be misleading.
It’s a more comprehensive – and more statistically sound – version of the Economist’s long-running Big Mac Index, which tracks global prices of one near-ubiquitous product. It doesn’t take a Harvard professor to figure out that mountains of unfiltered data from smartphone users might threaten a government’s sense of control over its statistics. When a bureaucratic organization like the World Bank is open to the idea, however, it suggests there are ways to cut through the red tape.
(This item has been corrected in paragraph four to refer to more than 160 items in 15 countries, not to more than 160 countries. The new version also clarifies in paragraph two that Premise, not the World Bank, publicized the pilot project directly.)