58 Finance & economics The EconomistFebruary 29th 2020
E
veryone knowsthat data are worth
something. The biggest companies in
the world base their businesses on them.
Artificial-intelligence algorithms guzzle
them in droves. But data are not like
normal traded goods and services, such
as apples and haircuts. They can be used
time and again, like public goods. They
also have spillover effects, both positive,
such as helping to improve health care,
and negative, such as breaches of perso-
nal information. That makes them far
from easy to value.
A new report, led by Diane Coyle, an
economist at the University of Cam-
bridge, attempts to address this by un-
derstanding the value of data and who
stands to benefit from it. She says market
prices often do not ascribe full value to
data because, in many cases, trading is
too thin. Moreover, while much of soci-
ety’s emphasis is on the dangers of mis-
use of personal data, the report chooses
to highlight data’s contribution to “the
broad economic well-being of all of
society.” That gives it a much deeper
value than a simple monetary one.
She outlines a variety of data types
and uses. Some may be more useful in
aggregate, others for individual pur-
poses. For example, a patient’s medical
records may be most valuable when they
are combined with everyone else’s, while
web-browsing history has value when it
is used individually to bombard a person
with advertisements. Timeliness also
matters: phone-location records flowing
in real-time for a cargps-navigation
system are useful for ten minutes, while
today’s retail-sales transactions help
forecast next year’s demand.
As yet the data economy does notdistinguish such features well. Ms Coyle
argues that a new mindset is needed, as
well as institutions, such as data trusts,
to ensure information is fairly distri-
buted. Personal information should not
be regarded through the lens of “own-
ership” but “access rights,” she says.
Hence, people may control how it is
used, but should not treat it as a winning
ticket to be monetised.
That should apply more broadly, she
argues. For governments, the right strat-
egy may be to make data freely acces-
sible. Estimates for the value of open
government data range from less than
0.1% to more than 7% ofgdp. Companies
also should consider privileging access
to personal data above ownership of it.
Try telling that to the tech giants, though.
However data are valued, they have no
doubt about how valuable exclusive
control is to them.Data, data everywhere
The information economyNew thinking on how to value one of the world’s most precious resourcesIt all used to be so much simplerN
o wonder advertisements implore
Americans to spend, spend, spend.
These days they are positively Swabian,
saving a much bigger share of their post-
tax incomes than they have done for most
of the past three decades (see chart). This is
more than just an economic curiosity.
Many households’ savings end up in Trea-
sury bonds, reducing the government’s
borrowing costs. Savings allow households
to consume more later or to cushion the
blow of a misfortune. But why is their pro-
pensity to save so high today?
Saving typically rises during the bad
times and falls during the good. The finan-
cial crisis of 2007-09 prompted Americans
to pull back on spending and pay down
debts. The share of disposable income
squirrelled away rose from 3% in 2005 to
8% in 2010-12. These days the economy is
much stronger. The unemployment rate, at
3.6%, is at a five-decade low, while con-
sumer confidence is high. As other coun-
tries have recovered from the crisis, their
personal-saving rates have tumbled. But
America’s remains high, and has risen in
recent years. Goldman Sachs, a bank, says
that the personal-saving rate is four per-
centage points higher than it “should” be,
given the strength of the economy.
One commonly heard explanation for
higher saving relates to inequality. Poorer
people may save little or nothing—re-
search from the Federal Reserve suggests
that 12% of adults would be unable to cover
a $400 emergency expense. Rich people, by
contrast, tend to save a big share of their in-
come. A body of evidence suggests that in
recent years the rich have taken a greater
share of total income, thereby dragging theoverall personal-saving rate upwards. Still,
rising inequality is at best an incomplete
explanation for America’s savings puzzle.
As the chart shows, saving was far higher in
the 1970s, yet inequality was lower.
The financial system may play a more
important role. In recent years many Amer-
icans have found it more difficult to access
credit. From 2008 banks tightened lending
standards on consumer and credit-card
loans. The median credit score for both
mortgages and car loans is higher than it
was before the crisis. It is now more diffi-
cult for middle-income households to
spend beyond their means.
Another possible factor is that, despite a
strong economy, households remain deep-ly uncertain about the future. There is good
evidence that Americans are worried about
the threat to their jobs from automation
and import competition. The on- and off-
again trade war may be another source of
anxiety. A widely watched measure of eco-
nomic uncertainty, based on analysis of
newspaper articles, last year hit an all-time
high—and it may rise further if the covid-19
outbreak worsens. All this encourages pru-
dent behaviour. According to the Fed, the
share of people saying that “liquidity” (in
plain English, having rainy-day money) is
the most important reason for saving has
been rising since the mid-2000s. Ameri-
cans could be stashing the cash for some
time yet. 7SAN FRANCISCO
Why America’s personal-saving rate is
unusually highAmericans’ personal financesLand of the frugal
Are the squirrels nuts?
United States, personal savings as % of
personal disposable incomeSource: US Bureau of Economic Analysis151050
191020009080701959Recessions