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.

That figure, which is perilously close to hyperinflation, ought to make every Venezuelans’ blood boil. Government officials are doing untold damage to the country’s economy, and making things worse by failing to publish statistics about the problem.

Unfortunately, the Venezuelan government is not an exception in Latin America. My past research, also part of MIT’s Billion Prices Project, used online prices to measure inflation in Argentina. This work showed that Argentina’s inflation rate was nearly three times higher than the government’s official estimate between the years 2007 and 2015. The revelation confirmed the long held suspicion that the Argentinian government manipulated its economic data and provided an alternative statistic for people to use.

True, alternative estimates of inflation exist in Venezuela, but our data has several advantages. We are an academic project unaffiliated to any political group. Our statistics are updated every day: all individual prices and code are publicly available on our website, so anyone can check for mistakes. And perhaps most important, the use of crowdsourced prices from dozens of volunteers all over the country means that the government cannot stop us from obtaining and publishing our results.

At this stage we have one of the largest publicly available price datasets in Venezuela.  But we need more help. In order to increase the accuracy of our measurements, we need more courageous volunteers willing to stand up to government suppression and lies.

To that end, we’ve made volunteering for our project extremely easy: there is no special training required, and participation takes only a few minutes each week. All our volunteers need to do is download our app, then go to any store and select the same handful of items. (This could be anything from a liter of milk, to a carton of eggs, to a loaf of bread.) They then need to enter the barcode and price of their items and take a photo of the price tag. Our technology takes care of the number crunching. Volunteers also help us validate prices by looking at the images of prices we receive on our website.

Our goal is to create a social movement—one that’s determined to shine a light on government manipulation of data and contribute to economic transparency. By participating in this project, ordinary Venezuelans can bypass the government and fight back against a Central Bank that’s intent on hiding the truth.

We live in a world where governments no longer have the monopoly on data. Using new data and technologies that allow us to measure economic variables, we can fill in the gap in inflation statistics for normal people who need to make choices, policymakers who want to try to solve the problem, and for future generations that will demand to know what really happened.

Read the original post at infobae.

Alberto Cavallo is the Douglas Drane Career Development Professor of Information Technology and Management and an Associate Professor of Applied Economics at the MIT Sloan School of Management.

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