GOOD DATA ENABLES GOOD POLICY
Data is a public good, which means many benefit from it, yet data users are often unable or unwilling to pay for it. This is why data on labour market, inflation or economic growth (gross domestic product) is collected and published by the government, and paid for with taxpayers’ money.
Good quality data enables good policy decisions. For example, the BLS jobs report and inflation numbers are studied carefully by the Federal Reserve to set US interest rates.
The consumer price index (CPI) – a widely watched inflation index – is a benchmark for the US central bank’s mandate to keep inflation at its 2 per cent target. So the quality of the CPI sets the floor for the quality of interest rate decisions.
Financial markets, too, watch government data closely. Both US stock and bond markets, worth trillions of dollars, move sharply on jobs and inflation releases.
DATA ONLY FOR THOSE PREPARED TO PAY?
Sophisticated institutional traders such as hedge funds have long profited from having access to higher-quality data.
For example, some hedge funds use satellite images of retail giant Walmart’s parking lots to count the number of cars, which helps predict quarterly sales. This allows them to make money from the insights before Walmart’s sales data becomes public.
