Revolt of the data points

Libération has a very interesting article about the politics and ethics of big data. It cites some excellent books, such as Eden Medina’s brilliant Cybernetic Revolutionaries about Project Cybersyn in Allende’s Chile, and Alain Desrosières’ classic The Politics of Large Numbers. It doesn’t mention Francis Spufford’s Red Plenty, which makes exactly this point (and is a cracking read too): «La planification soviétique et l’ultralibéralisme se rejoignent ainsi pour asservir le droit à ses calculs d’utilité.»

There is huge interest in using big data techniques to construct better economic statistics (including on my part!). Here in the UK, the ONS is launching a data science campus. The Turing Institute has just been funded by HSBC to look at economic data (although the release says nothing about the work or the researchers involved, so this looks like very early stages). There’s particular progress on constructing price indices using big data, as in this VoxEU column or the Billion Prices Project.

But, as the Libération article underlines, the utopianism of ‘datacratie’ can tip into a dystopian extreme. The technology looks like it can make the utilitarian project of measuring the costs and benefits of everthing a reality, extracting information from every click, every move, every choice. But when the data points (aka humans) realise what’s happening, they won’t necessarily like it.

Bring on the philosophers and ethicists.




Talking statistics in the woods

I just spent a couple of days at an excellent conference, The Political Economy of Macroeconomic Indicators, organised under the new Fickle Formulas programme led by Prof Daniel Mügge of the University of Amsterdam. Authors of several of the wave of books about GDP itself were there: me (GDP: A Brief but Affectionate History), Philipp Lepenies (The Power of a Single Number), Lorenzo Fioramonti (Gross Domestic Problem) and Dirk Philipsen’s (The Little Big Number). We also had with us Tom Stapleford (The Cost of Living in America), Brett Christophers (Banking Across Boundaries) and Yoshiko Herrera (Mirrors of the Economy) and Florence Jany-Catrice (The Social Sciences of Quantification) (and also Faut il attendre la croissance?)

It was also a great conference for hearing speakers refer to other books. I’ve already read Matthias Schmeltzer’s The Hegemony of Growth and  Ehsan Masood’s The Great Invention. Classics were mentioned, such as Alain Delarosière’s The Politics of Large Numbers. There were others I definitely need to have a look at. The New Global Rulers, for instance. Jacob Assa’s The Financialization of GDP. Paul Edwards’ A Vast Machine. I did feel the most orthodox of the multi-disciplinary crowd; the other economists would mainly describe themselves as heterodox, I think, and there were moments when I played ‘neoliberal’ bingo, so often was the term used. Good for me, no doubt.

The woods at the Drakenburg conference venue in Hilversum

The woods at the Drakenburg conference venue in Hilversum



National wellbeing

I just read

by Paul Allin and David Hand, a very nice overview of the issues in going ‘Beyond GDP’. It came out in 2014, about the same time as my
, so unfortunately I’d not had chance to read it before writing mine. In the couple of years since, the momentum behind the agenda to go ‘beyond’ has certainly increased. This book is a very clear, and rigorous but non-technical explanation of the scope of the issues, and the state of play. As Allin and Hand describe, there has been a good deal of work on looking at alternative ways of defining and measuring ‘wellbeing’ directly, and at wider approaches to assessing whether or not society is progressing.

[amazon_image id=”1118489578″ link=”true” target=”_blank” size=”medium” ]The Wellbeing of Nations: Meaning, Motive and Measurement[/amazon_image]

I am more cautious than they are about any survey-based direct measurement of wellbeing. There seems to be a lot still to understand about the psychology, and about how people’s judgements are formed. After all, we don’t just introspect, we’re also influenced by social context – have we just read an upbeat book about progress? or rather, just read the execrable Daily Express? I’m more with the programme when the book looks at how to (greatly) improve what we do now. For instance, report net national income per capita, not total GDP. Include income distribution and environmental measures. As they note, there are already statistics on many indicators that would give a richer picture of economic welfare. Jones and Klenow have a very nice recent paper on a single summary measure of aggregate economic welfare rooted in economic theory: it calculates a consumption equivalent measure combining income/leisure, distribution and life expectancy. This omits questions of environmental sustainability but good progress is being made on environmental ‘satellite’ accounts and natural capital measurement.

There are some important questions not addressed by Allin and Hand. They describe a proliferation of approaches to measuring wellbeing and indeed call for a thousand flowers to bloom. In my view, if there is no narrowing down of the options, the existing standard of GDP and the conventional national accounts will be far harder to dislodge. A new focal point is needed. (I have a paper on this out soon. Others – like Ehsan Masood in

– call for a single index for this reason although for different single indices.)  The reason is not tidy-mindedness, but rather the role that official economic statistics play in holding governments to account.

The other question ignored by all of what you could describe as the pro-wellbeing literature (not that I’m against well-being) is innovation. In disparaging GDP growth as a metric, they overlook the fact that GDP growth is not mainly about more shoes, food and vehicles of the same kind, it is mainly the introduction of innovations, from small changes in variety to profound new technologies like the smartphone or the personalised cancer treatment. GDP doesn’t measure these well, and there is a fuzziness as between quality change potentially reflected in prices and real growth, and unmeasurable consumer surplus. But innovation is a huge contributor to wellbeing and people will continue to like ‘growth’. No-growth is a non-starter outside authoritarian and autarkic polities.

These caveats aside, I really liked the book and it is well worth a read if you’re interested in this territory. As many people are – statistics is the new rock and roll.


Summer reading – a prelude

It’s summer reading lists season & I think I’ll do one here at the weekend for all the saddo folks who (like me) will be taking some economics books away for the summer. Meanwhile, here’s the one from Nature which includes my recommendations: Robert Gordon’s

, not because I agree with it (I don’t), but because it’s asking the right questions in a compelling way; and James Bessen’s
, essentially about the same questions (and I do agree with it).

[amazon_image id=”0691147728″ link=”true” target=”_blank” size=”medium” ]The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War (The Princeton Economic History of the Western World)[/amazon_image]  [amazon_image id=”0300195664″ link=”true” target=”_blank” size=”medium” ]Learning by Doing: The Real Connection Between Innovation, Wages, and Wealth[/amazon_image]

I’ve been thinking a lot about productivity and GDP measurement, and am doing a paper on why the effect of digital is far more pervasive than much of this work recognises. Just recently I re-read after a very long time a 1994 AER paper by Zvi Griliches, Productivity, R&D and the Data Constraint. Zvi was one of my econometrics teachers when I was at Harvard, and a lovely man although terrifyingly clever (at least to a not very confident PhD student). The paper concludes:

“Knowledge is not like a stock of ore sitting there waiting to be mined. It is an extremely heterogeneous assortment of information in continuous flux. Only a small part of it is in use to someone at a particular point in time, and it takes effort and resources to access, retrieve and adapt it to one’s own use. Thus models of externalities must perforce be models of interaction between different actors in the economy. … Our measurement frameworks are not set up to record detailed origin and destination data for commodity flows and less so for information flows.”


National accounts as metaphor

I happened to be reading (as you do) an essay by Thomas Schelling in an out-of-print 1958 NBER volume,

. It’s a very thought-provoking challenge to the very idea that the double (or in fact quadruple) entry system is appropriate for aggregate economic measurement. He argues that they are an elegant theoretical construct but few of the numbers have any practical interest. He suggests the drive for consistency can be counter-productive: “There is no need to impose consistency on our tables if, in fact, businessmen evaluate a significant magnitude wrongly, or just differently from the economist; both estimates are of economic significance.”

Schelling also writes: “The fact is that the real accounts do not balance, only money accounts do. I think this point is insufficiently appreciated. …[W]hat we call “real” magnitudes are not completely real; only the money magnitudes are real. The “real” ones are hypothetical.” Real values don’t follow the rules of accounting, he emphasises.

This brought to mind the illustrations in Andre Vanoli’s

(another out-of-print volume – is this a theme?) of the simplified social accounting matrices set out by Richard Stone in his work in the early days of modern national accounting. Increasingly large, they have only a small proportion of cells with anything in them. The actual numbers don’t matter; the point is the logical relations between them. As Schelling says in his essay, they might just as well be asterisks or emoticons (well, he doesn’t say emoticons but they would do fine). It’s ironic that what appears to be the area of economics closest to the coal face of actual data – national accounting – is no less saturated with theoretical (‘hypothetical’) constructs than any other area of economics.

The famous Punch cartoon of the Phillips Machine still has bite

The famous Punch cartoon of the Phillips Machine still has bite


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