Google Now Encroaching on Shadow Stats

Hhm, is there any use of data that won’t in the end interest Google? The idea of using price information on websites as a way of developing an inflation index is clever, but I wonder how they will deal with the issues that bedevil statisticians, like discounting (I can tell a gym in my area is a tad desperate, for instance, by its unusual generosity with one month passes to possible new members. That suggests a prospective member can bargain for goodies, like extra free months, but you’d never get that from its published membership rates).

From the Financial Times:

Google is using its vast database of web shopping data to construct the ‘Google Price Index’ – a daily measure of inflation that could one day provide an alternative to official statistics.

The work by Google’s chief economist, Hal Varian, highlights how economic data can be gathered far more rapidly using online sources. The official Consumer Price Index data are collected by hand from shops, and only published monthly with a time lag of several weeks….

While the Federal Reserve is unlikely to panic just yet, Mr Varian said that the GPI shows a “very clear deflationary trend” for web-traded goods in the US since Christmas. Although the data are not seasonally adjusted, Mr Varian said that prices rose during the same period a year ago. The ‘core’ CPI in the US, which excludes food and energy, rose 0.9 per cent on a year ago in August….

Mr Varian emphasised that the GPI is not a direct replacement for the CPI because the mix of goods that are sold on the web is different to the mix in the wider economy. Housing accounts for about 40 per cent of the US CPI, for example, but only 18 per cent of the GPI.

The GPI shows a “pretty good correlation” with the CPI for goods such as cameras and watches that are often sold on the web, but less so for others, such as car parts, that are infrequently traded online.

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  1. Jason Rines

    Google CEO. Now playing star wars when the world is a barbaric culture. Good
    luck competing with John Lounsbury and Steven Hansen or getting more capital for 5.0 when the world is 3.7.

    Hey Eric, no we dont need Google to tell us what to do. Thanks anyways.

  2. KingBadger

    “Google’s chief economist”

    Googleman Sachs here we come. In 20 years they will essentially run the entire global financial system (except in China and North Korea). Maybe they will do a better job than the current overlords, though I bet their algorithms could still turn junk into triple-A for the right price.

  3. NS

    Google bots will be self-aware in 2 years.

    Google, along with Kroger and Waste Management are now buying low-income rental housing. Rather than investing in projects which create jobs, businesses with cash are going to house the poor and aged. Nice.

    Don’t be an EVIL SLUMLORD…Google.

    “Investor returns, which vary based on terms of individual deals, are derived from federal credits and depreciation deductions that reduce tax bills. Investors make money primarily by paying less than a dollar for a dollar’s worth of tax credits. The transactions are usually best suited to companies with consistent profits and a long-term outlook because the tax credits are meted out over 10 years and equity can be tied up for 15 years.”

  4. spc

    Sorry, but google isn’t threat to you nor your privacy – the real problem is facebook.
    Google roams free internet while facebook created walled network, excluding G.
    FB is going to be bigger than google in next 6-7 years. Net under reign of Zuck is scarry perspective and, for me, that’s “quiet coup” of the internet.

    @NS sorry mate google bots are self-aware already, disclosure: I’m one of them. Cheers.

    1. Lil'D

      It’s amazing how many people will voluntarily give up their privacy for a chance to build a more interesting farm online, or to answer meaningless quizzes…

      The fascist state will be here when the military-industrial complex merges with online marketers, and provides all information back to the government for consulting fees…

  5. ella

    GPI? Does it include the real cost of housing? Health care? Fuel? Currently we spend 28% of our gross on health care. The insurance premiums, deductibles and co-pays account for most of the cost. Where does it end? Why is it not fairly represented in the CPI?

  6. nowhereman

    GPI; indeed, when do we get a true measure of inflation again. We know they changed the basket of goods used so that COLA clauses were cheated. It would be a good thing if the rise in price of things we actually consumed were measured and reported. I could get on board with that.
    However, I still have a major distrust of the “social network” meme. I can’t help but feel there is a great danger lurking there.

  7. readerOfTeaLeaves

    Hmmmm… thanks for the links on this article.
    FWIW, I have a few quibbles.

    The link re: Apple TV seems to assume it’s ‘tv in the living room’. This is quite different from my watching Netflix, iTunes videos, etc, on my iPad. So whoever wrote that article is looking into the past, not the future. I suspect the implications of Apple TV have not yet fully played out.

    Re: the item about Android being Google’s next cash cow; look at the adoption rates over the past year. If Android isn’t a cash cow, it’s at the the very least a cash heifer.

  8. tyaresun

    You folks are simply incredible. The federal govt. is ages behind in adapting to the changes in technology and data availability. Several private enterprises have come in to fill the void with Shadow Stats being the weakest of them all.

    There is nothing to prevent the federal govt. from collecting real time data from a variety of sources and coming up with more up to date stats to help better manage the economy.

  9. Mark K

    I actually use google finance to track my portfolio and have though whether google uses this kind of information. Imagine if just 1 million investors follow their portfolio like this, and how valuable that information would be.

    Hence I think I’ll stop using google.

  10. cougar_w

    Name freak alert:

    Hal. Varian.

    And HAL was rumored at the time of 2001-ASO to be an encoding of IBM. Yeah I’m that old.

  11. Mladen Adamovic

    Did you know that there is already a price index created by ex-Google software engineer available at website It’s crowedsourced like wikipedia. It might be interesting to your readers as well. Thanks

  12. Progressive Ed

    What can you expect from a company that has the phrase DO NO EVIL as its corporate motto. And they have everything you’ve ever written or searched for on the internet archived for future use. Too bad George Orwell didn’t live long enough to update 1984. He’d probably replace the Ministry of Truth with a well-known internet search company. (Maybe he’s have it digitalize all known books; I’ll leave it to your imagination what that puts them in a position to do. Hint: “Which one is the original version and which one is the politically purified one”.).

  13. jchen

    I think the discount is much less an issue here. Housing and transportation account for more than half of the CPI index and these expenditures generally don’t take place online. BTW, does it take all the efforts in digging online data and a chief economist’s salary to figure out there is price deflation in consumer electronics such as cameras?

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