A New Kind Of Economic Stimulus

Last week, when the House of Representatives passed the “American Recovery and Reinvestment Act,” better known as our national Hail Mary stimulus bill, they ladled out billions for infrastructure projects ranging from roads to mass transit to rural broadband.  But the law also contained a measure promoting a less-noted type of economic infrastructure: government data. In the name of transparency, all the Fed’s stimulus-spending data will be posted at a new government site, Recovery.gov. That step may be more than a minor victory for the democracy. It could be a stimulus in and of itself.

The reason, open government advocates argue, is that accessible government information—particularly databases released in machine-readable formats, like RSS, XML, and KML—spawn new business and grease the wheels of the economy. “The data is the infrastructure,” in the words of Sean Gorman, the CEO of FortiusOne, a company that builds layered maps around open-source geographic information. For every spreadsheet squirreled away on a federal agency server, there are entrepreneurs like Gorman ready to turn a profit by reorganizing, parsing, and displaying it.

When President Obama campaigned on a promise of prying open government information coffers, of course, his goals were more civil than economic. Yet even a step as simple as making the contracting process more transparent at Recovery.gov could aid business, suggests David Robinson, associate director for the Center for Information Technology Policy at Princeton. “There are all sorts of accumulated bureaucratic barriers to competing for government contracts,” he says. “The more transparent we make that shopping process, we not only give the government a better chance to get value for money, but we give more businesses the chance to profit.”

The more obvious economic benefits, however, will come from innovations that pop up around freely available data itself. Robinson and three Princeton colleagues argue in a recent Yale Journal of Law and Technology article that the federal government should focus on making as much data available as RSS feeds and XML data dumps, in lieu of spending resources to display the data themselves. “Private actors,” they write, “are better suited to deliver government information to citizens and can constantly create and reshape the tools individuals use to find and leverage public data.”

And government data, often hidden behind pay walls or trapped in PDF files, is ripe to be freed. “It’s not unlike the situation in 1996 when President Clinton began the process of ending the distortion of civilian GPS signals,” says David Stephenson, a government transparency analyst and author of the forthcoming book Democratizing Data. GPS went from being a secretive military technology to spawning a $6 billion ecosystem of location-based companies. Dozens of software and marketing firms, meanwhile, thrive entirely on slicing and interpreting U.S. Census data, released free in a format called Tiger. Google Earth and Microsoft Visual Earth both depend on government satellite data and private sources for their underlying maps, while real estate websites like Zillow and Trulia take advantage of housing and demographic feeds from state and local governments. More recently, Web 2.0 startups like CloudMade and Swivel have developed user-driven widgets to visualize and combine public data sets.

Other data-driven innovations are more serendipitous. The Arizona-based startup ImportGenius tracks U.S. imports and exports by scouring bills of lading data, and then sells it to firms looking to keep an eye on the competitors. The company’s most famous discovery to date, however, came when it uncovered evidence of the iPhone 3G’s launch—before Apple announced it—hidden in customs data for containers from Shanghai.

In the long term, the clearest business case for breaking up government data monopolies is the hardest to quantify, in the efficiencies that arise as the information leaches through the economy. Whether it’s EPA pollution statistics that help analysts assess manufacturers, or weather data that aids the agricultural sector, the more data that industries can layer into their decisions, the better decisions they’ll make. The SEC, for one, is currently moving toward mandating that all financial disclosures are made in XBLR, a language that allows for structured, digitized financial reporting. “I’m sure there will be middle-level players who create due analyses of that data, publish it, and charge for it,” says David Robinson. “But more importantly, there will be companies that buy that data and then benefit from it.”

In fact, Robinson argues, the unforeseeable nature of data-driven innovation is exactly the point. “It’s a little bit like if we were sitting in the Soviet Union in the mid-’80s, and somebody said ‘What if we had an open market? What kind of businesses would we see?’” he says. “It’s the nature of the benefits here that they are hard to predict.”