Opinion | When economic policy is digitized


Posted on November 2, 2021 at 8:55 amUpdated at 9:00 am on November 2, 2021

These last 40 years have been marked by “just in time”. Everything from production to delivery is fluid and cost-increasing inventory accumulation must be minimized. To stay competitive, companies are forced to shorten delivery times. In the name of the theory of comparative advantage, chains of container ships, planes and trucks traverse the roads around the sea, sky and the earth to ensure real-time supply of increasingly fragmented production chains. doing. This management has become possible with the development of the Internet, making it possible to place and track orders instantly.

The covid-19 fad broke a beautiful puzzle of this rare complexity and therefore seemed fragile. In Asia, the United States, or Europe, hundreds of thousands of containers are in short supply to deliver goods and goods on time. The shortage is increasing and energy prices are rising sharply. In fact, the crisis is strengthening digital as companies absolutely need the data to anticipate their needs, adjust orders as much as possible, and comply with them. They can arbitrate based on the most accurate knowledge of the availability of factories, ships, ports, etc. Amazon already uses instant data to track the evolution of food and tech product needs in real time and process orders as quickly as possible.

For many years, the slow feedback of information made it difficult for governments to understand the situation in real time. The first quote for American Gross National Product is from 1934 and was initially provided with a delay of 13 months. In the 1950s, young Alan Greenspan, the future governor of the US Central Bank, monitored freight vehicle traffic to measure steel production. Despite advances in national accounts through the use of computer tools, the government was relatively blind to decision making.

In 1975, while overcoming the recession in this way, the French government embarked on an accident of economic revival. This stimulus has only contributed to already high inflation. The second oil shock in 1979 was also underestimated. In 2007/2008, the administration and the central bank of the United States were unaware of the impact on employment and subprime crisis activity. This wouldn’t have done much damage if the Federal Reserve had reduced interest rates to near zero in December 2007, when the United States plunged into a recession rather than December 2008.


In 2011, it was the European Central Bank that made the mistake of making a decision by relying on the wrong signal. It accidentally raised interest rates in the context of temporary inflation, unaware that it was putting the euro area in recession. Regarding health, the French Ministry of Health was unable to assess the impact of heat waves on mortality in August due to the lack of real-time statistics in 2003. It took me until the end of the year to realize that the heat had killed more than 15,000 people.

Until recent years, the tools used by the government remained very rudimentary. A US industrial classification used by administrative economists dating back to the New Deal (1937). Despite the updates, the industry still had 24 subsections, despite growth over the last 30 years, despite only three across the financial sector.

At the end of World War II, economists and statisticians were asked by the government to assess the effectiveness of public policy and establish a decision-making grid based on their costs, strengths and weaknesses. Econometric models have been developed to make macroeconomic forecasts. Since the 1970s, economists have incorporated behavioral data into their analysis. Sociology, psychology, and even psychoanalysis are sought after to help business people.

The covid-19 epidemic has led governments and central banks to use real-time data. They check restaurant reservations, card payments, the number of highway toll passages, the number of train and plane tickets sold, and electricity consumption. It also analyzes word searches on Google and movements using phone chips to assess whether a household goes to a movie theater, a restaurant, or a vacation.

In May 2020, the regional federal governments of Dallas and New York in the United States created an activity index based on data from SafeGraph, a start-up company specializing in leveraging geoposition and mobility data from mobile phones. The Federal Reserve Bank of St. Louis used data from Homebase, a US provider of business apps for small businesses, to track daily employment trends. Both showed a lack of economic activity ahead of official data. This indicator was used by the US central bank to establish the level of economic support achieved in real time.

The results are still rudimentary, but as digital devices, sensors, and fast payments become more prevalent, the ability to monitor the economy accurately and quickly is increasing. If this information provides the government with the means to take the best possible action in real time, it also provides them with a temptation to interfere more strongly with their economic life.

Most prominent economists, such as Harvard University’s Raj Chetty, no longer use official data exclusively. They run a laboratory that specializes in data collection and automated analysis. Banks like JPMorgan Chase can help you look at bank balance and credit card billing data in real time to determine if your household is spending or saving. The rise of online shopping has made behavior tracking easier. According to McKinsey, real-time payments in 2020 increased by 41%.

Online commerce is becoming the majority in China as well as India. (India recorded 25.6 billion such transactions in 2020). Monitoring of “missing” products is almost generalized, allowing you to assess shortages in real time. The development of the central bank’s digital currency “govcoins” must complete the digitization of all economic relations. These currencies have been tested in 50 states, with China leading in this area.

Prior to the crisis, central banks estimated that it would take at least 18 months for interest rate fluctuations to affect the economy. The covid-19 crisis has allowed governments to act swiftly by sending money directly to households and businesses, thanks to digital tools. To increase efficiency, Hong Kong is trying to distribute cash in a time-limited digital wallet so that people can consume it as soon as possible.

Social benefits paid digitally based on real-time reported tax data can also be adapted in real-time, taking into account the circumstances of the citizen. Through the wealth of data it collects, GAFA can obtain highly detailed and sophisticated indicators for detecting changes in growth. Apple and Google are tracking customer movements. They know their tastes, fears, and desires of the moment through the pages they explore.

In both the public and private sectors, the danger is to fall into a generalized surveillance syndrome. It is the dream of the Chinese Communist Party to engage in the form of a digital central plan. Western countries are heading for a resurgence of Keynesianism after years of deregulation. Interventionism is needed both in responding to the health crisis and in the fight against global warming. Digital offers the possibility for decision makers to connect macroeconomics and microeconomics.

Beyond the potential advances provided by the use of data for public decision makers, the issue of public freedom arises with the risk of personal management. In addition, the economy may prove to resist Orwell’s temptations. The future cannot be codified by algorithms. It’s complex in nature, and its evolution is based on the voluntary actions of billions of independent businesses and consumers. In essence, innovation, bursts, crises, and crashes cannot be probabilized and cannot be modeled.

Philip Kleber Specializes in macroeconomic issues. Founder of Lorello Ecodata, an economic research and strategy company, he also oversees Cercle del’Epargne, a research and information center specializing in savings and retirement.