Economics used to be led by theory-heavy researchers who worked alone. The new superstars such as Raj Chetty collaborate with many more partners
Cybersyn never got off the ground. But something curiously similar has emerged in Salina, a small city in Kansas., a local paper, has started publishing a “community dashboard” for the area, with rapid-fire data on local retail prices, the number of job vacancies and more—in effect, an electrocardiogram of the economy.
And, third, this new type of economics involves little theory. Practitioners claim to let the information speak for itself. Raj Chetty, a Harvard professor and one of the pioneers, has suggested that controversies between economists should be little different from disagreements among doctors about whether coffee is bad for you: a matter purely of evidence.
Second-wave economics nonetheless remained constrained by data. Most national statistics are published with lags of months or years. “The traditional government statistics weren’t really all that helpful—by the time they came out, the data were stale,” says Michael Faulkender, an assistant treasury secretary in Washington at the start of the pandemic. The quality of official local economic data is mixed, at best; they do a poor job of covering the housing market and consumer spending.
The Brexit referendum of June 2016 was the first big event when real-time data were put to the test. The British government and investors needed to get a sense of this unusual shock long before Britain’s officialnumbers came out. They scraped web pages for telltale signs such as restaurant reservations and the number of supermarkets offering discounts—and concluded, correctly, that though the economy was slowing, it was far from the catastrophe that many forecasters had predicted.
It is harder to quantify the policy impact. Some economists scoff at the notion that their research has influenced politicians’ pandemic response. Many studies using real-time data suggested that the Paycheck Protection Programme, an effort to channel money to American small firms, was doing less good than hoped. Yet small-business lobbyists ensured that politicians did not get rid of it for months.
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