What are the best statistics in an era of big data?

Executive Summary

Economists, business executives and investors confront a barrage of economic statistics every day—much of it conflicting. Government agencies such as the Bureau of Economic Analysis issue indicators designed to gauge the U.S. economy, the world's largest. Yet the nation's shift from a manufacturing economy to one based on information and services has called into question whether traditional measurements developed in the post-World War II era reflect economic reality. Critics say no, and they are using a host of new tools based on “real time” data—from Internet searches to satellite imagery to photographic analysis—to try to answer the fundamental question of how the economy is doing. But others say this new approach is imprecise and cannot replace traditional surveys. Among the questions under debate: Do traditional indicators really reflect the U.S. economy? Will using new sources of data improve economic forecasting and measurement? Do traditional economic indicators such as GDP reflect reality in the developing world?

Resources

Bibliography

Books

Baumohl, Bernard, “The Secrets of Economic Indicators: Hidden Clues to Future Economic Trends and Investment Opportunities,” 3rd ed., FT Press, 2012. The chief global economist at The Economic Outlook Group, who is also a former economics reporter for Time magazine, offers an engaging assessment of economic measures, updating the latest edition of his best-selling book to include lessons from the 2007–09 recession.

Coyle, Diane, “GDP: A Brief but Affectionate History,” Princeton University Press, 2014. An economist and former adviser to the U.K. treasury department traces the history of GDP as an economic-growth standard and concludes the metric is increasingly inappropriate for evaluating 21st-century economies supported by innovation, services and intangible goods.

Litan, Robert, “Trillion Dollar Economists: How Economists and Their Ideas have Transformed Business,” John Wiley & Sons, 2014. The director of economic research at organizations that have included the Brookings Institution, Kauffman Foundation and Bloomberg Government details the influence economists have had—and are having—in the business world.

Articles

Dube, Ryan, “Argentina's Macri Tackles Flawed Government Data as Part of Overhaul,” The Wall Street Journal, Dec. 27, 2015, http://tinyurl.com/zcedybg. Economic fixes by the new president of Argentina include steps to repair past data reporting issues.

Ito, Aki, and Alisa Odenheimer, “Your 119 Billion Google Searches Now a Central Bank Tool,” Bloomberg Business, Aug. 1, 2012, http://tinyurl.com/ol56aw7. This article, one of the first on the topic of using Internet searches to track economic trends, includes interviews with economists Hal Varian and Erik Brynjolfsson and provides an overview of other central bank and academic studies.

Kearns, Jeff, “Satellite Images Show Economies Growing and Shrinking in Real Time,” Bloomberg Business, July 8, 2015, http://tinyurl.com/o8yykzp. Data scientists, economists and former NASA engineers are using satellite images, some shot from increasingly inexpensive orbiting cameras, to detect global economic trends.

Kelsh, Chaz, “Household surveys: Problems, usefulness in collecting data,” Journalist's Resource, Harvard Kennedy School, Shorenstein Center on Media, Politics and Public Policy, Jan. 5, 2016, http://tinyurl.com/hh824bq. This compilation provides background on the issues surrounding household survey data and growing questions about its use as a primary tool in economic data collection.

Levin, Jonathan, “Economics in the Age of Big Data,” Technology/Academics/Policy, April 21, 2014, http://tinyurl.com/hcf7rat. The chair of the Stanford University economics department summarizes the ways economists use big data and looks at the opportunities this data can provide.

Marcuss, Rosemary D., and Richard E. Kane, “U.S. National Income and Product Statistics; Born of the Great Depression and World War II,” Survey of Current Business, Bureau of Economic Analysis, February 2007, http://tinyurl.com/zuup383. Two government economists recount the history of major U.S. economic statistics.

Somoza, Lela, “Part Chart, Part Science: The Evolution of Economic Indicators,” EconSouth, Federal Reserve Bank of Atlanta, Third Quarter 2012, http://tinyurl.com/hvm7v72. The metrics economists follow have evolved to reflect a changing economy.

Reports and Studies

Choi, Hyunyoung, and Hal Varian, “Predicting the Present with Google Trends,” Google Inc., April 10, 2009, http://tinyurl.com/ha4ca8o. A groundbreaking study from economists at Google showed how using data generated from the company's Internet searches could help inform economic data and invited other economists to study this further.

Koch-Weser, Iacob N., “The Reliability of China's Economic Data: An Analysis of National Output,” U.S.-China Economic and Security Review Commission Staff Research Project, Jan. 28, 2013, http://tinyurl.com/z33esb8. The staff of a congressionally appointed bipartisan panel examines the issues surrounding the veracity of China's data collection methods and reporting.

Stone, Chad, et al., “A Guide to Statistics on Historical Trends in Income Inequality,” Center on Budget and Policy Priorities, Oct. 26, 2015, http://tinyurl.com/j6pqdue. Research group that focuses on issues surrounding poverty reduction pulls together the various measurements showing the growing income disparity in the United States.

Suhoy, Tanya, “Query Indices and a 2008 Downturn: Israeli Data,” Research Department, Bank of Israel, July 2009, http://tinyurl.com/j7vcxuz. The Bank of Israel was the first central bank to take up the invitation from a Google economist to study how to link Internet search data to economic trends.

Wu, Lynn, and Erik Brynjolfsson, “The Future of Prediction: How Google Searches Foreshadow Housing Prices and Sales,” Aug. 30, 2013, available at SSRN, http://tinyurl.com/h6yrhop. Data from Google searches provides a way to predict housing sales trends, according to Wu, an assistant professor at the University of Pennsylvania's Wharton School, and Brynjolfsson, a noted MIT economist; they published the early drafts of their paper in 2009, just months after the Bank of Israel study, giving additional support to the utility of search data in assessing the economy and thus triggering a spate of additional studies on the topic.

The Next Step

Alternative Data

Torres, Craig, “What You Tweet Might Tell Janet Yellen It's Time to Raise Rates,” Bloomberg Business, March 13, 2015, http://tinyurl.com/q766fvr. Federal Reserve economists are exploring ways to incorporate big data collected by Google, social media websites, the human resources company ADP and other private sources into their economic forecasts.

Zumbrun, Josh, “The Billion Prices Project Thinks Inflation May Have Turned a Sharp Corner,” The Wall Street Journal, March 13, 2015, http://tinyurl.com/lkhu5cd. A project created by Massachusetts Institute of Technology researchers collects daily price data from hundreds of online retailers to forecast trends in U.S. inflation weeks before official forecasts by the Federal Reserve and other federal agencies.

Big Data

Casselman, Ben, “Big Government Is Getting In The Way Of Big Data,” FiveThirtyEight, March 9, 2015, http://tinyurl.com/l7k25uy. Federal privacy restrictions bar the U.S. Bureau of Labor Statistics from using IRS data to calculate monthly employment figures, and data-collection standards often prevent statistical agencies from using big data collected by other government sources.

Pisani, Bob, “A better way to do economic forecasting?” CNBC, Oct. 14, 2015, http://tinyurl.com/zp9a968. A New York-based analytics company forecasts U.S. consumer and producer prices and personal income indices by analyzing real-time Web search data and has produced more accurate forecasts than some Wall Street analysts, according to the firm's CEO.

Forecasting

“A mean feat,” The Economist, Jan. 9, 2016, http://tinyurl.com/jtukoxb. An analysis by The Economist shows that semiannual economic forecasts from the International Monetary Fund, which uses both theoretical and data-based methods, become more accurate as they approach the end of the year.

McKenna, Barrie, “The trouble with economic forecasts? Getting it right,” The Globe and Mail [Canada], June 21, 2015, http://tinyurl.com/hpmnyxt. Economists’ overly optimistic outlooks, fears of negative effects on business and habitual group thinking have caused them to fail to forecast economic downturns in Canada and other countries, according to internal reports by global economic development organizations.

Saler, Tom, “Economic turbulence could prove to be dangerous,” The Milwaukee Journal Sentinel, Feb. 13, 2016, http://tinyurl.com/z3p29sx. Economists from financial services company Citigroup predict the United States will fall into a recession in 2016, while international economists project the U.S. economy will grow by at least 2 percent.

GDP

Dasgupta, Saibal, “Probe Targeting China's Statistic Head Sparks Concern,” Voice of America, Feb. 11, 2016, http://tinyurl.com/zvp7g6e. Economists have for years suspected China's government of inflating GDP figures, and experts say a pending Chinese Communist Party investigation of the country's National Statistical Bureau leader could further weaken international confidence in official Chinese statistics.

Oyedele, Akin, “REVEALED: The best indicator of the US economy,” Business Insider, July 13, 2015, http://tinyurl.com/pnoa5ll. A manufacturing-activity index produced by the Federal Reserve Bank of Philadelphia is the most reliable component for measuring real-time national GDP, according to researchers at the Federal Reserve, Boston College and the University of Washington.

Ujikane, Keiko, and Kyoko Shimodoi, “Dodgy Data That Plagued Japan in War Still Worries Policy Makers,” Bloomberg Business, Jan. 7, 2016, http://tinyurl.com/hgf6qar. Numerous revisions of Japan's official GDP figures over the last decade have led Japanese policymakers to be uncertain whether they can rely upon their government's figures to set economic policies.

Organizations

American Economic Association
2014 Broadway, Suite 305, Nashville, TN 37203
615-322-2595
www.aeaweb.org/
Academic and professional association and publisher of economic journals, with more than 18,000 members drawn from academia, business and government.

American Institute for Economic Research
PO Box 1000, Great Barrington, MA 01230-1000
888-528-1216
www.aier.org
Nonpartisan, independent economic research organization.

Billion Prices Project and PriceStats
1 Broadway St., 14th Floor, Cambridge, MA 02142
617-577-3908
http://bpp.mit.edu/
www.pricestats.com/about-us/history
Founded by two MIT professors, the Billion Prices Project collects price information from hundreds of online retailers to produce alternative price indexes for numerous countries; related company PriceStats measures inflation in 22 economies.

Bureau of Economic Analysis
1441 L St., N.W., Washington, DC 20230
202-606-9900
http://bea.gov/
Part of the Department of Commerce that produces national, regional, industry and international data, including closely watched gross domestic product (GDP) estimates.

Bureau of Labor Statistics
Postal Square Building, 2 Massachusetts Ave., N.E., Washington, DC 20212
202-691-5200
www.bls.gov/
Part of the Department of Labor that measures labor market activity, working conditions and price changes.

Census Bureau
4600 Silver Hill Road, Washington, DC 20233
301-763-4636
www.census.gov/
Conducts economic census and produces data on 14 economic indicators; the Current Population Survey, produced jointly with Bureau of Labor Statistics, is the primary source of labor force statistics.

The Conference Board
845 Third Ave., New York, NY 10022-6600
212-759-0900
www.conference-board.org/
Global, independent business membership and research association, founded in 1916; publishes the Consumer Confidence Index, Leading Economic Indicators and other key data for the United States and other countries.

Federal Reserve
20th Street and Constitution Avenue, N.W., Washington, D.C. 20551
202-452-3000
www.federalreserve.gov/
U.S. central bank, made up of the Federal Reserve Board of Governors and 12 regional banks; produces economic data focusing on monetary elements, including debt, wealth and savings.

Institute for Supply Management
2055 E. Centennial Circle, Tempe, AZ 85284-1802
480-752-6276
www.instituteforsupplymanagement.org/
Group of supply managers that publishes the ISM Manufacturing Report on Business (since 1931) and ISM Non-Manufacturing Report on Business (since 1998).

International Monetary Fund
700 19th St., N.W., Washington, DC 20431
202-623-7000
www.imf.org/external/index.htm
Organization of 188 nations that works to ensure stability of the international monetary system; conducts global economic research.

National Association for Business Economics
1920 L St., N.W., Suite 300, Washington DC 20036
202-463-6223
www.nabe.com/
Professional association for business economists; membership includes economists in business, academia and government.

Organisation for Economic Co-operation and Development
2, rue André Pascal, 75775 Paris Cedex 16, France
33-1-45-24-82-00
www.oecd.org/
Group of 34 of the world's wealthy nations that promotes policies to improve economic and social well-being; produces data on social as well as economic measures.

United Nations Working Group on Big Data for Official Statistics
United Nations Statistics Division, United Nations, New York, NY 10017
http://unstats.un.org/unsd/bigdata/
U.N. group from national statistical agencies and organizations that studies how to incorporate “big data” into official statistics.

World Bank Group
1818 H St., N.W., Washington, DC 20433
202-473-1000
www.worldbank.org/
www.worldbank.org/en/research
http://data.worldbank.org/
Multinational organization that lends to developing countries; produces data and research about development.

DOI: 10.1177/237455680205.n1