Big Data and Real-Time Economic Measurement

sep. 08, 2015

Governments have always tried to predict where the economy is heading. On September 7 Google Chief Economist Hal Varian visited Stockholm School of Economics to talk about how data from private companies can be used to improve forecasting. Joining him in this discussion was previous Minister for Finance Anders Borg.

Hal Varian is emeritus professor at the University of California, Berkeley specializing in microeconomics and information economics. He spoke about big data and how it can be used to find information on trends in consumption, housing markets and unemployment for example. With search data from Google, trends can be discovered earlier than before which is something that should be of interest for government agencies, argued Hal Varian.

He explained that more people searching for information about unemployment benefits in the US typically indicate an increase in the unemployment rate later on. The pattern could be the same for Sweden. And this is just one example of predictions that can be made out of search data. They both discussed the transformational power of the digitalization on our economies and predicted a downward pressure on inflation and the disruption of many jobs in the coming years.

– For the financial industry this is particularly true. Basically everything in the financial industry can be done electronically and all of the big companies are throwing resources to keep up with the digital revolution. I think we are going to see a very problematic period for banks ahead. Headcounts in the Nordic banks have been reduced significantly in the past years and it is quite clear that the industry is in the middle of a transformation, said Anders Borg.