A few weeks ago I attended the Digital Economy Days, a technological conference organized by the University of Amsterdam in partnership with Samsung, that encourages students to get ready for the digital economy environment in which they will be working. Being rather tech adverse and having a limited understanding of anything beyond Microsoft Office, one could say that I wasn’t exactly in my comfort zone. However, from my position I sill licked up on the leitmotif of the day: “Data analysis is the deal”. So, as this was mentioned by the CEO’s of Samsung, TomTom, and VodafoneZiggo, I decided that this is the time I exit my sphere of ignorance and fear and finally understand what Big Data is. More importantly, my final goal was to understand why Big Data is such a game changer for economics. As such, I put together a small introduction to how recent data analysis technologies will impact behavioral sciences and the skills future employers seek when hiring economics graduates.
Big Data Big Deal
From a technological perspective, Big Data is data that has a large volume, velocity and that cannot be processed using traditional techniques. For people less familiar with this terms, it just means a very large amount of information that we can now understand and analyze because of recent technological developments. The importance of this data comes from its potential and what one chooses to do with it. For us, that might mainly mean more available information for economic modeling and better future predictions on both macro and micro scale
Where exactly does the data come from?
In short, the data come from you. Or more specifically, anytime you are online and search the web, use Facebook, make a purchase or just communicate with your friends. However, this data mostly comes unstructured. Here is where the recently developed algorithms come in handy. They are the ones that select and process the data given your particular preferences. A very common example of a programme that uses such an algorithm is predictive on your iPhone keyboard. However, this enormous data collection does not come without harm. Over the past weeks, we have particularly seen problems with data collection come to light. The recent Facebook Cambridge Analytica scandal is probably the most famous one. Security of the gathered data, despite its importance, is not the main theme of the article. But, it’s applicability in economics is.
So… Why is this important to economics?
First of all, big data offers us immense opportunity for development of economic policy. As such, governments can use it to analyze the impact of former regulation and create a more effective and efficient administration. Also, authorities could get a better understanding of how the underlying framework influences the goals of the government. A tangible example can be found in the project done by the University of Edinburgh and the Uganda Bureau of Statistics. The aim of the research is quite straightforward. In Uganda, the roof of the house represents the financial status of the family and can, therefore, be used as a measure of assessing poverty levels. So, what the researchers are planning on doing is using satellite and aerial images to monitor the changes in rooftops. What this means is that Uganda will be rapidly gathering poverty information and could implement more effective developmental policies in the future. Another very important aspect of big data is that the research conducted from it results in a system that is more centered on the well-being of the citizen. This is mostly the case as the information is gathered from the user directly. Data will eventually give a better understanding of what the specific needs of a population are. Finance might also be greatly influenced by this new technology. Finding the driving factors for fluctuations in price shares and behavior changes are only a few of the applications. Therefore, Big data will influence the majority of the fields in economics, from research to investment and consultancy.
What should you do?
At first glance, it might seem that anything that has to do with data can be quite repetitive and not as fun as being an investment banker on Wall Street. Well. It appears that the data analysis skill is exactly the type of qualification that will most likely make you stand out. Despite data scientist not being the first career path for any economics student, some of the skills possessed by those who practice this profession will most likely come in handy in the developing labor market. Analyzing and understanding the data yourself offers you more independence from both an academic and practical point of view.
Firstly, as we previously saw it might be particularly important in the research field. As the data offers opportunities for improved economic theory, you might even become one of the researchers to finally explain business cycles. Also, understanding the “oil” of the digital era is a very forward thinking skill. Many predict data to be the driving force of our future and a stepping stone in creating a more sustainable life. So, maybe the first thing you could do is look into understanding what some of the developed analysis programmes do. Many data manipulation courses are also available online if you feel you are ready to take the next step.
All in all, Big Data might be, or already is changing the game rules for economics. With more effective and focused policies and a better understanding of the behavioral world, new ideas will most likely come as well. So ,frankly, Big Data is just the selection of significant parts out of a multitude of information. The selective information has been always the basis of learning and innovation. Data analysis promises to deliver exactly that, with accelerated and more practical development. Of course, problems are and will always be. Privacy, security, the feeling that somebody is watching over you are indeed justifiable. But, if used for good purposes the trade-off might even fall in favor of the benefits derived from your preferences.