Google Price Index — A Shining Example of Socially Useful Data


In 2008, in the requisite “predict the future” chapter (12: Online Targeting, 1995-2015 — Fast Start, Exciting Future) of Winning Results With Google AdWords, I had the good fortune to write/predict as follows:

“It is far from out of the question that these trends will deeply alter the way that public policy is made. Today, for example, measures of inflation may be led by an arbitrary government-led data-gathering process. With enough committed members, a measure of ‘true’ inflation as experienced by peers would not be that difficult to arrive at based on a willing constituency of participants willing to log purchases over the long haul. It’s not a matter of whether such data revolutions are possible — they are, in nearly every field — but more a matter of how they will be implemented, by whom, and how they might be used to better our lives.”

This week, Google’s Chief Economist Hal Varian revealed that the company is working on a Google Price Index,

Clearly, the Google Price Index is a blunt, early-stage tool, but a great, shining example of how real-time and broader-based data can give us more accurate measurements of, among other things, key social and economic indicators.

Varian noted that the US data show a “very clear deflationary trend,” whereas similar data in the UK shows a “slight inflationary trend.”

Of course the key to social policy oriented data is, in part, interpreting it correctly, especially here given the beta style methodology. Deflation is common and pervasive in some categories, and the Internet is still a rapidly evolving buying platform that doesn’t account for the lion’s share of retail sales today.

And even if all signs pointed to deflation, pushing one or two policy levers may not help unwind the spooky dynamics already set in motion by the rise and fall of certain asset bubbles.

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