Data: The Future of the U.S. Economy

In a great display of synchronicity, I had two reports released simultaneously today: “Beyond Goods and Services: The (Unmeasured) Rise of the Data-Driven Economy” and “The Geography of the App Economy”.

The first paper came out of the Progressive Policy Institute, and will serve as the keynote paper for the conference we are running in Rome next week, The Rise of the Data-Driven Economy: Implications for Growth and Policy.

The second paper was done for CTIA and the App Developers Alliance by myself and Judy Scherer, under the auspices of the economic development consulting firm South Mountain Economics LLC.

Both papers send the same message–that data is the driving force for both job growth and GDP growth. “The Geography of the App Economy” examines app economy jobs in each state, starting from Washington and California at the top of the list to Wyoming and West Virginia at the bottom. We show that the number of app economy jobs nationally is rising quickly, from 466,000 at the end of 2011 to 519,000 in April 2012. And we have plenty of examples, including ways that states can attract more app economy jobs.

“Beyond Goods and Services: The (Unmeasured) Rise of the Data-Driven Economy” look at the impact of data on economic growth. I argue that data should be a separate economic category, along with goods and services. The implication is that the growth rate of the economy is being underestimated, by about 0.6 percentage points.

There’s a political message here as well, but I think I’ll put that in a different post.



  1. Regarding the first paper about measuring the data economy, I disagree with your industrial age mindset of collecting better statistics to “control” the economy better. That never really worked and it’s positively stone-age thinking in our current dynamic economy. Even so, I don’t buy the distinction of data as separate from goods and services, as you could make the exact same argument about any information professional from a century ago. If a lawyer wrote a book, it was a good; if he consulted with a client, it was a service. Ergo, he’s in a separate data sector? You can easily split up online data the same way, ie if it’s a product like an ebook, it’s a good, but technical consulting about datamining is a service.

    I do agree that online activity is being undercounted in some sense- I’ve been saying that for awhile- but perhaps deservedly so, as you note that many of those new online services are free. If there’s no revenue coming in, the free stuff does drag on GDP. Just as a more efficient car would lead to less gas being used and the gas sales contribution to GDP shrinking, it’s more accurate to say that online services made the economy more efficient. How exactly that should be counted in GDP is a difficult question, but I think the established approach of adding up revenue is probably best. If that throws off calculations which take GDP as the one great good stat that always must grow, great, as it was never that important or accurate to begin with.

    As for your throwaway line about “highly-educated” Europeans doing better in the app economy, they will never do well, because it’s not about education, it’s about risk. The PC then internet then mobile revolutions are 30 years in now and the European contributions are still scant. All they really have is SAP and Nokia, though the latter is in a tailspin, where is the European Google or Apple or Microsoft? I don’t think they’re incapable, they’ve just chosen a society that is less “risky,” but also snuffs out innovation and entrepreneurship. “Education” only makes that equation worse, not better.

  2. Just finished going over the second paper about the app economy, some good anecdotal info there. I will note that a lot of the mobile app boom is just a knee-jerk reaction to jump on a trend, as many companies create a mobile app just to have one. There’s no real business need there, it’s just becoming a calling card, like saying you have a website. For example, you say mobile apps are “a natural fit for… finance companies,” why? Why would a mortgage lender like Quicken need a mobile app? It really does resemble the boom, in that all these companies are herded into wasting money on the “new tech,” regardless of whether it makes sense or not. That suggests that this mobile app trend will crest and fall also, as ultimately it always comes back to business need, ie whether the mobile app investment actually brings more money back in.

    You note that mobile apps can be developed anywhere in the US, but that also means this market is wide open to global competition. There are companies who make good money offshoring mobile app development, just like most other business services are being outsourced nowadays. This trend is only going to accelerate, as they catch on to mobile more.

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