The democracy of data: how Venezuelans can stand up to government lies – Alberto Cavallo

MIT Sloan Assoc. Prof. Alberto Cavallo

From infobae

Venezuela, once one of Latin America’s wealthiest countries, appears to be teetering on the brink of collapse. Its economy is shrinking. Food is in short supply. Its currency—the bolivar—is virtually worthless, and inflation appears to be out of control. But, in light of the fact that the country’s Central Bank stopped publishing inflation data in December 2015, no one has an accurate picture of just how dire the situation is.

This dearth of inflation data may seem like an academic problem, but in actual fact, economic indicators are no small things. Without official statistics, it’s impossible to draw accurate conclusions about the wellbeing of the Venezuelan people. The lack of data has consequences on a micro level, too. The inflation rate, for instance, is a vital number for anyone who wants to negotiate a wage, decide on an affordable rent, or make any savings or financial plans for the future.

With a government intent on suppressing important information, many Venezuelans are angry. As a native from Argentina —another Latin American country that lied about inflation in the past—I feel their pain. As an economist, I urge them to fuel their frustration into action.

Earlier this year, my colleagues and I started a project to measure inflation in Venezuela using a new and highly effective technique: crowdsourcing with mobile phones. My team developed a special app for android phones that allows people in the country to report the prices of everyday products and services. We then aggregate the data to estimate the level of inflation. Over the past five months, we have collected more than 3,000 observations from 1,000 products in 10 cities around the country.

Our data indicates that Venezuela’s inflation rate is about 25% on a monthly basis, which represents one of highest rates in the world.

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