Discussion Thread: Economic Data
Read Hughes-Cromwick & Coronado’s (2019) article on the value of economic data on business decisions. Summarize the findings of the article and locate additional peer reviewed articles that provide industry examples of the value of economic data in their specific decisions.
Provide a summary and include a minimum of five new peer reviewed journal articles.
Provide a 600 to 800-word summary (formatted according to APA guidelines) of the new research in this area from a minimum of fivenew peer reviewed journal articles and identify questions that need exploring in future research.
Your discussion should be organized in a three-paragraph format:
Introductory Paragraph:
gives an overview and definition of the topic you chose. At the end of the paragraph it gives an idea of how your forum is organized.
Current Trends Paragraph:
In this paragraph, you will discuss the themes that you found in the research from the 5 articles related to your topic. This paragraph should be a synthesis of the research and not just a listing of annotated summaries.
Future Research Paragraph:
In this paragraph, you will discuss areas of future research by referencing the 5 articles that you identified. The future research areas should be based on the findings of the authors of those articles rather than general ideas you may have.
*A reference section should then be included at the end of your discussion.
The Value of US Government Data to US Business Decisions Journal of Economic Perspectives—Volume 33, Number 1—Winter 2019—Pages 131–146 T he US government is a major producer of economic and financial data, statistics, analysis, and forecasts that are gathered, compiled, and published as public goods for use by citizens, government agencies, researchers, nonprofits, and the business community. There is no market transaction in the publication and dissemination of these government data and therefore no market- determined value. The purpose of this paper is to outline and augment our understanding of the value of government data for business decision-making. We provide an over- view of the topic, including results from government reports and a private sector survey. We then provide concrete examples of how these government data are used to make business decisions focusing on three sectors: automotive, energy, and finan- cial services. Examples of new initiatives by the federal government to open access to more data, exploiting technology advances associated with the internet, cloud storage, and software applications, are discussed. With the significant growth in the digital economy, we also include discussion and insights around how digital platform companies utilize government data in conjunction with their privately generated data (or “big data”) to foster more informed business decisions. The Value of US Government Data to US Business Decisions ■ Ellen Hughes-Cromwick is Associate Director and Senior Economist, University of Michigan Energy Institute, Ann Arbor, Michigan. She is also a Senior Advisor at MacroPolicy Perspec- tives LLC. Julia Coronado is President of MacroPolicy Perspectives LLC, New York City, New York. Hughes-Cromwick is the corresponding author at
[email protected]. † For supplementary materials such as appendices, datasets, and author disclosure statements, see the article page at https://doi.org/10.1257/jep.33.1.131 doi=10.1257/jep.33.1.131 Ellen Hughes-Cromwick and Julia Coronado mailto:
[email protected] 132 Journal of Economic Perspectives Our exploration of the value of the public good provided by government data is necessarily qualitative, but a common theme is that for private firms, public data is an important complement and baseline to their own data. For example, in a 2017 panel discussion of the importance of government data, one participant noted that the big data now produced by many businesses are not sufficient to support optimal business decisions. Value is derived when “a firm’s own data are complemented with a wide range of data that are collected by the government. Federal data are compre- hensive, covering the entire US, and, as a result, are useful for benchmarking and supplementing businesses’ own data. They’re also consistent with many data series spanning decades, allowing comparisons across place and over time” (Project at Brookings and American Enterprise Institute 2017; Brooks et al. 2017). We believe that government support of data development and access to data is a competitive advantage for both existing and new US businesses. We see a risk that declining government support will lead to an erosion in the quality of public data and the value it provides to US businesses. As of FY 2017, total funding for the government’s 13 principal statistical agencies stood at $2.257 billion (Office of Management and Budget 2018). By our calculations, this represents an 8.7 percent decline in real dollars from the 2004–2013 average budget for these agencies (based on Economics and Statistics Administration 2014, p. 13).1 At a time when data capa- bilities and information technology are advancing rapidly, public data collection and dissemination requires ongoing investment and modernization to keep pace with rapid economic structural change. Broad Assessments of the Value of Public Data to the Business Sector Two US Department of Commerce reports and a recent survey of business economists provide broad-based assessments of the value of public data to the busi- ness sector. US Department of Commerce Reports A report from the Economic and Statistics Administration (2014) provides substantive documentation regarding the value of government data for professional managers at US businesses. The report includes a summary of “government-data–intensive sectors” (GDIS) including businesses that “rely heavily on government data in their production processes” (p. 31). These include investment analysts, database aggregator firms, market researchers, benchmarkers, and others. The report estimated the 2012 GDIS 1 To estimate inflation-adjusted outlays, the authors used the Personal Consumption Expenditure price index, produced by the US Bureau of Economic Analysis. For comparability, costs of the 2010 Decennial Census are omitted from the 2004–2013 average, and preliminary costs of the 2020 Decennial Census are omitted from the government statistical budget in 2017. Ellen Hughes-Cromwick and Julia Coronado 133 revenues at $220.8 billion (p. 41). This sector has grown substantially as digital plat- form companies combine government data with internally generated big data to create analytic tools and platforms that inform a host of business decisions. A more recent comprehensive estimate of GDIS revenues will require an update of this data obtained from the 2012 Economic Census, and initial release of more recent data will begin in September 2019. However, other data sources strongly suggest that the GDIS sectors have been growing substantially since 2012. For example, the Census Bureau’s 2015 report of “Statistics of US Businesses” (SUSB) includes information on payroll outlays and number of employees in GDIS. As of 2015, the payroll outlays were $197.8 billion and 2.721 million employees, up 25.0 and 11.3 percent, respectively, since 2012.2 The Bureau of Economic Analysis (BEA) data on GDP by industry includes gross output in current dollars for NAICS code 51930—internet publishing and broadcasting and web search. As of 2017, BEA esti- mates this industry had gross output of $176.9 billion, a 92 percent increase since 2012, and well above the revised 2012 output of $92.2 billion in output published in a November 2018 BEA release.3 Table 1 provides a snapshot on several private and public companies that rely substantially on government data to undertake their business activities in govern- ment-data–intensive sectors. Business revenues are substantial and have grown, in part because of new technologies enabling greater value creation through analytics. Growth in the value-added of government data has been enhanced by the ability to link directly to government data sources through application programming inter- faces (API). Beyond this electronic access, businesses employ more sophisticated, cloud-based tools, which provide for the integration of government and big data to undertake analytics. Advancements in technology mean government data are now leveraged for even greater value across many different industries. The Economic and Statistics Administration (2014) report also features a number of “data-driven” business decisions, which give concrete examples of the ways in which many firms use government data. For example, a large retailer used data from the American Community Survey (ACS) produced by the US Census Bureau to target customized inventories tailored to suburban and urban purchase attributes (p. 19). A small business in Texas received “customized market research from the US Commercial Service (in the International Trade Administration at the US Department of Commerce), which assisted the company in its penetration of 2 The Statistics of U.S. Businesses (SUSB) dataset from the US Census Bureau can be found at https:// www.census.gov/programs-surveys/susb/data.html. These totals include annual payroll outlays for NAICs codes 5191 (Other Information Services), 5313 (Other Activities Related to Real Estate), 5416 (Management, Scientific, and Technical Consulting Services), and 5419 (Other Professional, Scientific, and Technical Services). While not all of the activity in these NAICS codes can be attributed to support for data-driven business decisions, it does provide some sense of the magnitude of how government data generates value added in the business community. 3 Bureau of Economic Analysis, https://apps.bea.gov/iTable/index_industry_gdpIndy.cfm. GDP-by- Industry, Underlying Detail of Industry, “Economic Accounts: GDP by Industry,” “Table U: Gross Output by Industry,” Billions of Dollars, November 2018. https://www.census.gov/programs-surveys/susb/data.html https://www.census.gov/programs-surveys/susb/data.html https://apps.bea.gov/iTable/index_industry_gdpIndy.cfm 134 Journal of Economic Perspectives export markets (p. 21). Businesses use producer price data to inform price adjust- ments to sales and purchase contracts (p. 25). A large pet supplies retailer used Census Bureau data to optimize new store locations and to inform decisions about merchandise planning and advertising (p. 34). Another way to gauge the use of government data by businesses is with Input– Output Accounts produced by the Bureau of Economic Analysis (2018). For input–output (IO) code 514, which includes data processing, internet publishing, and other information services, the BEA accounts indicate a total output of $189 billion in 2016, up by 26.4 percent as compared to 2012.4 Admittedly, not all of the value of this industry is represented by government data. Even so, it represents only a portion of the government-data–intensive sector as defined in the Economic and Statistics Administration (2014) report. The Economics and Statistics Administration (2015) followed up with a more focused study of business use in an assessment of the American Community Survey (ACS), an annual US Census Bureau survey of households that gathers detailed demographic data on jobs and occupations, educational attainment, home owner- ship, and other topics. As of November 2014, nearly 4,000 businesses subscribed to the ACS email updates, accounting for 12.3 percent of the subscriber base (p. 32). 4 IO Code 514 includes NAICs codes 5182, 51911-2, 51919, and 51913. These industries are data processing, hosting & related services, libraries and archives, news syndicates, internet publishing & broadcasting & web search portals, and all other information services (NAICs codes can be found here: https://www.census.gov/eos/www/naics/). Table 1 Some Firms in the Government-Data–Intensive Sector: Revenue and Market Capitalization Company Revenue ($ millions) Market cap ($ millions) Public Acxiom 930 3,770 IHS Markit 3,890 20,160 Nielsen 6,660 9,350 Redfin 430 1,430 Thomson Reuters 11,410 31,600 Zillow 1,190 7,740 Private Bloomberg LP 9,400 NA ESRI 1,000 NA Haver Analytics 3 NA Mapquest 210 NA McKinsey 10,000 NA Truven Health 610 NA Source: Data for public companies obtained from www.finance.yahoo. com; includes latest four-quarter trailing revenues and market cap as of October 11, 2018. Private company data are estimates from Gale Business Insights as of October 2018. https://www.census.gov/eos/www/naics/ http://www.finance.yahoo.com http://www.finance.yahoo.com The Value of US Government Data to US Business Decisions 135 The report gives a number of examples of how firms use the ACS. For example, businesses use it to inform their decisions about site selection and other commercial real estate decisions (pp. 33–34). Demographic information culled from the ACS is analyzed in conjunction with a businesses’ proprietary information on sales in order to determine market share and other benchmark metrics (pp. 33–34). The ACS is used to develop business plans for product and marketing decisions. As part of this effort, businesses combine data on sales and store attributes with local demo- graphic data to understand if they are positioning products properly to optimize sales (p. 34). This report highlights business demand for more and better govern- ment data to assist in their growth and development. National Association for Business Economics Survey The National Association for Business Economics (NABE) conducted a survey of its private sector members on the use of government data (for details, see Appendix 1). The survey was administered during April–May 2018 and included 14 questions regarding survey respondents’ use of government data to inform business decisions. Just under 60 NABE members responded to the survey from a mixture of industries, including service industries like finance, insurance, and real estate, as well as goods-producing industries. Sixty-four percent of the respondents noted that their employer sells products and services through digital platforms. Ninety-five percent of the respondents replied yes to the question, “Are govern- ment data important to analyses and forecasting that drive business decisions?” Figure 1 displays responses to the survey question, “From which of the following agencies do you obtain data to inform business decisions at your firm, or firms with whom you work or consult?” When NABE members were asked how they rated the importance of specific types of government data they used from these agencies in order to inform business decisions, the top five responses were: 1) Employment and unemployment; 2) Prices and wages; 3) GDP; 4) Population; and 5) Income and profits. Respondents were also asked to evaluate the usefulness of government data as inputs into a host of decision-making processes at their companies. On a scale of 1 to 5, with 1 being not critical and 5 being very critical, about half of respon- dents rated the following decisions as most critical (a response of 4 or 5): capital spending decisions; price-related decisions pertaining to cost-of-living adjustments for workers; finance-related decisions, such as discount rates for pension funds or recommendations regarding asset allocation; and interest rate decisions, such as when to borrow or lend and at what duration and/or cost.