If you’ve read any amount of news over the past three months you are probably aware that President Trump has enabled Elon Musk and the new Department of Governmental Efficiency to fire employees across the federal government. As I’ve written about before, one of the things we stand to lose in the face of this dramatic scale back of the federal government is access to high quality public data
A recent U.S. Economic Experts Panel explored the impacts of this impending loss of data. The general consensus of the panel was that scaling back the number of federal statisticians who collected and reported this data would have negative consequences. One thing that stood out to me as I skimmed through the responses was one comment written by Erik Hurst from the University of Chicago. He said “To make good policy, data is needed to understand how the economy is currently performing and to examine potential key economic variables that are changing. The data is a public good and is not otherwise provided by the private sector.”
This comment essentially echoes the point of my blog post, but the last sentence sticks out to me. “The data is a public good” is a rather strong claim.
A public good is not just something that the government provides, it refers to a classification system that economists use to understand how goods are traded in markets. In this classification system, goods need to be either rival or non-rival, and either excludable or non-excludable.
A good is rival if one person’s consumption of that good prevents another person from consuming it. Most day-to-day purchases are rival. If I go and buy a bike at the local shop, that prevents someone else from buying and also benefiting from that bike. Roads are an example of a non-rival good. In most circumstances, one person driving their car on a road does not prevent another person from also using and benefiting from that road.
A good is excludable if it is possible to prevent someone from using it. Anything you buy in a store is excludable, because the producer can wait until you give them money to allow you to benefit from it. An example of a non-excludable good would be something like trees on a street. Everyone benefits from the added shade of trees, and there is no way to prevent people from benefiting.
For something to be a public good, it needs to be both non-rival and non-excludable. If you think about what those two things mean together, it makes sense why the government should be providing these goods. Non-excludable means there is no way for a private firm to profit from providing this good, and non-rival means there isn’t a limit on how many people can use a good.
Unlike private firms that would not be able to raise any sort of revenue from providing these goods, the government has the ability to collect taxes, essentially charging everyone and spreading the burden of paying for these goods across the population. We even see taxes for specific public goods, such as gasoline taxes that help pay for roads.
So, does Census data qualify as a public good?
First, Census data is certainly non-rival. My ability to download a spreadsheet does not prevent anyone else from doing the same. Is Census data non-excludable, that requires some more thought.
For private firms that do data collection, data can certainly be excludable to some extent. Companies can require people to pay to access their data, and they can require some agreement that prevents data sharing. For context, non-rival, excludable goods are called “club goods.”
While it is technically possible for the Census Bureau to adopt this business model, it would essentially amount to adding a user tax on data. However when we increase taxes on a good, people consume it less than they otherwise would in a tax-free market. This can be a good thing if a good creates negative externalities, but as someone who works for a company whose mission is in part to “provide policymakers and policy influencers with evidence-based analysis of pressing public problems,” I believe that it is clear that this type of data has a ton of positive externalities.
The basic rules of microeconomic theory suggest that turning Census data into a club good would reduce the total benefits people are getting in our economy. We all benefit from good access to public data. The upside to making sure that high quality data remains a public good is extremely clear: it helps us create better policies and make better decisions.