Wednesday, September 25, 2013

The fuss about big data

"Big data" is the latest buzzword describing the next technological revolution wherein enormous amounts of data can be collected about our daily lives and can be used to improve our choices and better understand what is going on in all sorts of dimensions. That includes very detailed information about transactions, locations, and even online behavior. Who has not noticed that ads suddenly turn to what one has searched for a few days ago, if not getting emails about that. Whether big data will keep its promise will depend in part on what will happen with privacy protection. Europe has already taken steps, for example imposing that web cookies need to be accepted by users. In the US, people have been so far very tolerant with companies (but not the government) spying on them, but the tide could turn. But what are really the promises of big data?

Liran Einav and Jonathan Levin focus on economic policy and research. Quite obviously, we complain when data is not available when we want to measure something. Will big data make that possible? While I do not think the (mostly) random collection of big data will allow us to get exactly what we need, the authors thinks that with new statistical techniques and computer algorithms being developed specifically for big data, there should be something useful for economists. They hope to achieve better statistical power from massively larger and finer data. The opening of larger administrative data sets also has a lot of potential, especially, I would add, if the researcher is allowed to link them to each other. Denmark has shown how great data allows for better research and policy, and also makes researchers flock to you. But again, this is all dependent on how privacy laws will evolve.

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