Central bankers seeking to understand what’s really happening in the economy might want to forget about market research surveys and get hip to the number of Taylor Swift downloads instead, the chief economist at the Bank of England has suggested.
Andy Haldane said researchers were increasingly looking at music download sites such as Spotify and studying the lyrics of songs to gauge the public mood.
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In a speech about the possibilities created by big data, Haldane said it was “devilishly difficult” to work out how people felt because traditional surveys of market participants or the general public tended to be “biased in their sampling and framed in their responses”.
He said researchers were using non-traditional methods in an attempt to understand consumer behaviour.
“To give one recent example, data on music downloads from Spotify has been used, in tandem with semantic search techniques applied to the words of songs, to provide an indicator of people’s sentiment.”
Haldane said the results were at least as good at tracking consumer sentiment as the monthly Michigan University survey, which is considered by economists to be a good guide to how confident Americans are feeling.
“And why stop at music? People’s tastes in books, TV and radio may also offer a window on their soul. So too might their taste in [computer] games,” Haldane added.
Multiplayer online games such as World of Warcraft already had “primitive” economies attached to them that economists were studying, not only to gauge the public mood but also to assess how individuals would respond to policy changes such as moves in interest rates or tougher regulations.
“Indeed, in the latter role, the game could serve as a test bed for policy action – a large-scale dynamic, digital focus group.”
Haldane noted that not all attempts to harness online searches have been successful. Google tried to predict flu outbreaks based on online searches with little success after a promising start.
But he expressed confidence that big data would fulfil its promise and help the Bank of England “to create a real-time map of financial and activity flows across the economy, in much the same way as is already done for flows of traffic or information or weather.
“Once mapped, there would then be scope to model and, through policy, modify these flows. This is an idea I first talked about six years ago. Today, it looks closer than ever to being within our grasp.”