January
FRONTIER TECHNOLOGY QUARTERLY
2019
Data Economy: Radical transformation or dystopia? Data is shaping the future of humanity. The production, distribution and consumption of digital data-the data economy-are driving rapid advances in machine learning, artificial intelligence and automation. Individuals and businesses are using data to reduce search and transaction costs and make informed choices. Data is facilitating scientific and medical research, making societies more productive. It is helping to improve the efficacy of public policy, delivery of public services, transparency and accountability. Data is helping us track progress on every sustainable development goal in the 2030 Agenda and deliver broad-based social welfare.
I. Data economy is different Distinctions between buyers and sellers or consumers and producers are blurred in the data economy. Supply and demand do not necessarily determine price, price is often indeterminate or implicit, and yet, enormous values are created in the data economy. Data is increasingly a critical factor of production, complementing labour and physical capital. But unlike capital or labour, data is non-depletable. The use of data by many does not diminish its quantity or value. On the contrary, the use of the data by many may increase its value. At the same time, data can become less relevant, and less valuable, over time. The value of data, unlike physical capital, also depends on its unique characteristics. An individual data point can carry little value, but its value can multiply manifold when aggregated and analyzed with other relevant data. Standard economic theories are increasingly deficient to explain the workings of the data economy. Data is also non-rival-millions can use it simultaneously. Yet, data is not necessarily a public good because data owners can exclude people from accessing and using it. The value of data can depend on it being private, determining who can use it and who cannot. Furthermore, data can be stored and transported at very low cost. Individuals, households, businesses are both often producers and consumers in the data economy, with firms extracting, analyzing and intermediating data. A Google search, for example, produces a data point-its algorithm crunching and analyzing millions of underlying data stored in hundreds of different computers across many countries. That search result-a new data point-then instantaneously feeds into the algorithm and becomes a factor input to refine future Google searches. Given the reasons above, it is hard to precisely value data. How value is generated in the data economy-and how that value is shared among market participants-has important competitive and distributional implications that merit appropriate policy responses. On one hand, the data economy is radically transforming many economic activities
and creating new levels of prosperity. On the other, it presents the possibility of a perilous dystopia, where participants in the data economy can face chronic trust deficits and insecurity. People cannot often trust data. They do not know what they actually pay and what they get in return. People do not know whether they are paying more or less than others. They do not know if they are targeted by market researchers or advertisers. Consumer protection is generally weak in the data economy. Furthermore, the collection and use of personal data, designed to influence behavior, carries with it an ever-present potential for abuse. Political interests can access personal data to engage in highly targeted campaigns that appeal to the narrow interests of specific groups rather than societal interests. These efforts can be as effective as they are devastating. A market economy cannot function without trust, and the data economy is no exception. Trust deficits can unravel the data market and undermine social cohesion, stability and peace. Uniform standards, quality controls and regulations enhancing consumer protection can instill trust in the data economy and make it work for all. World Economic and Social Survey 2018: Frontier Technology for Sustainable Development -a flagship publication of the United Nations Department of Economic and Social Affairs (DESA) generated considerable interest in new technologies and their development impacts. Inspired by this strong interest, the Economic Analysis and Policy Division has undertaken to produce quarterly reviews on frontier technologies, delving deeper into specific aspects of a new technology. The series will identify challenges and raise many questions-and answer a few-while motivating policy research in UNDESA and beyond. The first edition of the series focuses on data economy. The second edition will discuss genetic technologies. Subsequent quarterly reviews will address technological advances in new materials and blockchain technology. The quarterly reviews will be shared and discussed in development policy seminars and social media platforms to enrich policy discourse on frontier technologies.
Hoi Wai Jackie Cheng, Marcelo LaFleur and Hamid Rashid authored the Quarterly under the supervision of Hamid Rashid, Chief of the Development Research Branch, Economic Analysis and Policy Division of UNDESA. Nazrul Islam, Alex Julca, Hiroshi Kawamura and Mariangela Parra-Lancourt provided useful comments on the draft. Research support was provided by Nicole Hunt. Typesetting was done by Nancy Settecasi. The views and opinions expressed herein are those of the authors’ and do not necessarily reflect those of the United Nations Secretariat.
Economic Analysis and Policy Division w Department of Economic and Social Affairs