Let’s talk about … economic measurement


Let’s talk about … economic measurement

Most economists would probably not describe the topic of economic measurement as being the forefront of their discipline, attracting a lot of attention from academic economists and economics students. This is in spite of the central importance of data and statistics to the general economics discourse and a long list of Nobel laureates who have made important contributions to the field of economic measurement. Indeed, in his independent review of UK economic statistics, Professor Sir Charles Bean noted that it is “striking how little professional economists today are taught about measurement issues”. More recently, the UK Office for National Statistics (ONS) has found it necessary to begin producing its own textbook on measuring the economy for students of economics and related subjects.

There is some evidence that this situation is changing, perhaps hurried on by the digital and data revolution that is disrupting production in many industries, including amongst statistical agencies. As testament to this, earlier this year the Royal Economic Society featured a special session on “Economic measurement with big data”, organised by the ESCoE and the Data Science Campus, and the Brookings Institution hosted a high-level seminar around the question “Can big data improve economic measurement?”.

The digital revolution has also helped move the economic measurement debate into more mainstream economics by igniting or re-igniting questions about the ability of GDP to reflect economic activity in the modern economy, let alone broader concepts such as welfare. These are questions that have generated interest in both the media and must read economics journals.

ESCoE and Economic Measurement

The ESCoE Conference on Economic Measurement is a new forum to promote research on economic measurement and increase dialogue between academic economists, national statisticians and statistics users to improve economic measurement. A joint venture between the ESCoE and the ONS, the 2019 conference was this year hosted at King’s College London, 8-10 May.

What conversations took place? Several sessions concerned new, typically big, data sources and the many challenges in converting these into economic statistics. Papers covered the use of newspaper text data, administrative data and card transactional data to measure the level of activity in the economy, as well as machine learning methods for nowcasting regional output growth. In his keynote address, Alberto Cavallo of Harvard Business School provided examples of how one might deal with some of the technical issues that arise when using crowd-sourced and online price data for measurement.

Many papers concerned conceptual issues in measuring the digital economy, tackling questions such as “How can we begin to value data as an asset?” and “How can we measure the contributions of cloud computing to the economy?”, as well as the measurement of other intangible assets and implications for the measurement of labour force skills.

The question of where to draw the line between GDP and welfare measures was also debated in two sessions on “GDP and beyond”. Contributions included papers on the measurement of well-being and sustainability and democratic measures of national income growth for the UK, as supplements to the GDP.

Other topics that were viewed through the lens of economic measurement included: productivity, capital, prices, inequality and international trade. On productivity, John Fernald of the Federal Reserve Bank of San Francisco and INSEAD discussed in his keynote address the pitfalls of total factor productivity (TFP) measurement and argued that the productivity slowdown that we observe across advanced economies could not be explained by rising measurement error associated with the growth of information technologies. Papers on trade all touched upon issues for measurement arising because of the increasingly global nature of supply chains and production networks. The topic of production networks was also considered by Vasco Carvalho of University of Cambridge in his keynote address. He discussed the advances in macroeconomic understanding that might be made if we were better able to measure production links using transaction-level data.

Contributions to the discussions at the conference were also made by many PhD students, including Cian Allen (Trinity College Dublin), Andreas Freitag (University of Basel),Tahnee Ooms (University of Oxford) and Nam Hoai Vu (Swansea University) who for their contributions were awarded financial support to attend the conference by the Royal Economic Society.

The conference also saw the launch of a new online repository of historical data for the UK, a joint project between the Bank of England, ESCoE and the ONS. Panel debates covered the issue of trust in economic statistics in a post-truth world and policymakers, statisticians and academics set forth their priorities for the new SNA (aka the “national statistician’s bible”).

If you joined us at King’s College London for the ESCoE conference this year, you too may have noticed what seemed like a shift in attitudes towards and interest in economic measurement.

We are pleased to announce that we will be continuing the conversation next year at Economic Measurement 2020 to be held at King’s College London, 20th – 22nd  May. The call for papers will open in November 2019.

ESCoE blogs are published to further debate.  Any views expressed are solely those of the author(s) and so cannot be taken to represent those of the ESCoE, its partner institutions or the Office for National Statistics.

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