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Auctioning Off the Jobs Report and Economic Efficiency

Friday, 14 June 2013 11:17

Neil Irwin has an interesting discussion of a new practice by which some private data gathering outfits sell early access to the releases of their data at a premium. The idea is that a small number of people will have access to the new information ahead of the market.

Irwin raises several issues about this practice, but misses an important one: economic efficiency. From an economic standpoint we would like as few resources as possible to be devoted to the process of collecting and disseminating information.

This means for example, that if we can have 2000 people involved in the process of collecting data on employment, wages, prices and output and disseminating this information to the rest of us, we are much richer collectively than if we have 2 million people involved in this process (including the running of financial markets). In the former case, the other 1,998,000 people would be able to spend their time providing the rest of us with health care, housing, education, or other goods and services of value.

However if we deliberately create a situation where there are large amounts of money to be made by getting early access to data then we will almost certainly be pulling more people into this process of collecting and disseminating information. To be concrete, if people think that they can make millions or billions of dollars by beating the crowd to information then many people will devote great effort to beating the crowd to information.

This is pure rent-seeking in that their behavior offers no benefit to the economy. It will not make the economy more efficient if the price of a specific stock or other financial assets adjust 1 second more quickly to new information, however it can make particular individuals very rich.

In principle we want to set rules for the market so that people have incentive to engage in behavior that increases the wealth of society for example by inventing more efficient cars or developing better drugs. We don't want the incentives to drive them toward rent-seeking behavior that offers no social benefit. Opportunities to get market moving data ahead of others will undoubtedly encourage more rent-seeking behavior. This is a loss to the economy and society. 

Comments (6)Add Comment
written by Pauley, June 14, 2013 12:35
"...if we can have 2000 2 thousand involved ... we are much richer collectively than if we have 2 million people involved... In the former case, the other 1,998,000 people..."
very interesting
written by widgetmaker, June 14, 2013 12:38
Insightful commentary. One would wonder what damage to the economy is occurring from this sort of behaviour. It is not readily apparent to the layman, until you hear a take from someone who has sound reasoning and thought it through. Makes sense to me. I believe economists started out as moral philosohpers and Dr Baker does a fine job of continuing in this tradition.
But we're *NOT* auctioning off access, we are just selling it
written by anon, June 14, 2013 12:54
The point being, if access to the information were auctioned the auction price should come close to the value of the information. The sale price would be captured to the seller, and in the case of government, could be put back into social good.
Economic Predators Want to Monetize Everything: Let's Give It to Them
written by Last Mover, June 14, 2013 3:11
Americans are being exploited with monetization schemes arising from market power to the point it's starting to look like living 24/7 in economic captivity on an airplane.

Imagine getting billed individually for each drink of water, each napkin, each toilet flush, each minute for turning on the light as the announcement drawls "thank you for flying with us, we know you have a choice".

Early access to new data for an added price is no different. It allows the rich to move to the front of the line like they already have everywhere else, crowding out once again those who at least had an equal opportunity to start the race from the same starting point as everyone else. Unequal outcomes? Hell, let's destroy what's left of equal opportunity as well.

Ok, they want a monetization revolution. Let's give it to them. From here going forward are the mandated monetized fees for using the private property of an American citizen as follows, assessed on a per use incidence basis:

Name ........... $100

Address ........ $200

Email Address .. $75

URL ............ $225

Phone Number ... $175

Credit Report .. $500

Surveillance ... $1,000

There is also a fixed one-time fee for the first and subsequent use of any of the above of $2,000 each, to discourage trivial use and waste of valuable private property wasting away in vast storage centers of big data.

These fees have been established on willingness to pay standards and therefore meet the usual standards of free market prices assessed by economic predators.

Thank you for your time ... oh wait ... that will $500 based on the opportunity cost of lost income as a monetization expert ...
how to do it?
written by Jennifer, June 14, 2013 3:50
Yes, such an interesting point. Really, though isn't it tied up to the (too much) fiancialization of the economy? There are just too many people in general doing things with money which are just draining the economy as opposed to increasing productive growth. The whole sector needs some serious overhaul
written by watermelonpunch, June 14, 2013 9:23
Thank you.
Just thank you for this post.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.