Tuesday, August 19, 2014

The Power of Open Data

I heard at a function to launch Wayne Swan's book A Good Fight last night about a report on open data  prepared by Lateral Economics with assistance from Equity Economics.

Lateral Economics CEO Nicholas Gruen was the Chair of the Gov 2.0 Taskforce, which (remarkably) resulted in a significant implementation of a Gov 2.0 agenda. Open data is a part of that.

Equity Economics is an economics advisory firm that specialises in the study of equity (i.e. the reduction of inequality) not equities (shares). People like Wayne Swan who are proud to call themselves social democrats (unlike Chris Bowen who wants to drop the title) understand that there is no value to growth if it doesn't reduce inequality. As I recently wrote in an AFR Technology opinion piece we need to note that increasing inequality has a negative effect on growth.

Their report Open for Business: How Open Data Can Help Achieve the G20 Growth Target was commissioned by Omidyar Network which is inherently a investment vehicle for social good created by the founder of eBay. Omidyar Network "invests in entrepreneurs who share our commitment to advancing social good at the pace and scale the world needs today. We are focused on five key areas we believe are building blocks for prosperous, stable, and open societies: Consumer Internet and Mobile, Education, Financial Inclusion, Government Transparency, and Property Rights."

The report identifies a wider role for Government than merely releasing existing data, though that is a good start, saying:

With the increasing ease with which data can be stored, used and distributed, the marginal benefit of all such activities increases. Governments can enrich current data collections, collect additional data for release, and modify regulations pertaining to information (e.g. standards) so as to facilitate greater use of open data and review regulation in specific industries.

Governments may also create value by modifying the environment under which open data are being used. For example, governments may review the regulatory environment if it obstructs open data, and facilitate the emergence of information standards, which enhance the value of private data – for instance, by facilitating comparisons. This will be more effective when harmonised across jurisdictions, giving international forums such as the G20 particular relevance in fully realising the open data opportunity.

The potential returns the report identifies are impressive, saying:

This report estimates returns to investment in the creation/collection of data and the impacts of increased data accessibility and (conservatively) focusing on government- and publicly-funded research data only, we provide a likely lower bound estimate of the potential value of open data.

Exploring the additional returns that might arise from doubling data accessibility and use, we find that returns to investment in Australian government and research data might rise by around a present value of AUD 240 billion over 20 years, the mid-point of a range from an increase of AUD 120 billion to AUD 360 billion.

It is important to note the inclusion here of research data - though in this case limited to government funded research. An issue that has become more critical in academe - and written about by me on another blog - is the issue of whether the data used in a study academic papers should be made available on line to allow verification of results.

This feeds into a wider question about what the relationship should be between government funded research and the intellectual property arising from it. The "corporate" model of the University and R&D seeks to maximise IP protection to create a future revenue stream, while the stream that picks up on Newton's dictum that he saw further than others by standing on the shoulders of giants would promote open access to government funded IP.

This discussion in turn relates to a real question in economic growth theory. Given that knowledge accumulation is a factor in growth the question is whether the private incentive to invest in R&D (the property right in IP) is more or less important than creating an eco-system of knowledge creation and accumulation.

It should be noted that in sciences like physics and economics where the proportion of potentially valuable discoveries are low the academic publishing model now includes plenty of advanced publication of working papers - especially in theoretical physics. This has a two fold effect. The first is it helps establish primacy for receipt of the academic credit. But secondly it fosters a collaborative research program.

This becomes critical to the "innovation" discussion because things like the Global Innovation Index really measure more the ability to create property rights in IP than in the creation of knowledge itself.

If the issue of the eco-system is more important then promoting it is important. As I've also blogged previously elsewhere - Government could play a useful role in breaking the current publisher focussed model of academic publishing and create an open community. Why should the opinion of three referees be the determinants rather than the rating of anyone who wants to read - with a TripAdvisor or Amazon like star system and all the data available.

Ultimately it comes down to understanding growth. Which I will use to return to the book launch. Wayne Swan reminded people of the importance of maintaining confidence during the crisis, not just the quality of your institutions. By "institutions" he meant the formal institutions of regulators and firms (in this case banks). But the original American institutionalists would have identified "confidence" as an institution - in this case a rule of thumb or heuristic that consumers use in making purchasing decisions other than just straight rational analysis. Mitchell - one of these people - was also famous as the economist who first really started gathering large amounts of data. (In brief an individual's demand profile, and the aggregate demand curve, are not only determined by current income but the consumer confidence that the income will be retained).

It is good that Malcolm Turnbull has taken an active interest in open data - speaking at the National Archives and an AIIA function recently, and launching theNational Map Open Data initiative. But the analysis needs to go to another level on how much data should be made available.

(As a finishing note Joshua Gans has also blogged about the ways economic data may be opened and shared more easily.)

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