RIETI - Value of data: There’s no such thing as a free lunch in the digital economy

Value of data: There’s no such thing as a free lunch in the digital economy

Recently, data has been driven to the forefront of value creation in world markets. The opaque nature of its true value and the way that data seems to pervade and effect a massive variety of fields, excites the biggest players in the business and makes governments, the public and wary investors nervous, especially in the wake of recent data-based scandals that have shaken politics and other realms to their foundations. Governments have the difficult task of creating policies that will address the concerns of both sides of the aisle, including public safety, democracy and privacy on one side, and fluidity in the economy on the other, while investors face the challenge of being able to correctly ascertain the value of organizations whose value comes from data-driven business.

In this column, Li et al. develop individual case studies for companies that follow distinct data-driven business models, analyzing monetization strategies, consumer and third-party value creation based on the publically available data for each case. They highlight the inadequacies of typical approaches to setting appropriate values for goods especially in the case of data, and try to clarify where some approaches have undervalued the data in circulation in order to shine light on this tremendous challenge facing the powers that be.

This month's featured article

Value of data: There’s no such thing as a free lunch in the digital economy

Wendy C.Y. LI Research Economist, US Bureau of Economic Analysis

NIREI MakotoFaculty Fellow, RIETI

YAMANA KazufumiAssistant Professor, Department of Economics, Kanagawa University

Online platforms that provide services at zero monetary cost benefit greatly from the data these transactions generate. This column proposes a new method to value these data, based on firm investments in organisational capital. The method also captures the social value of consumer data. Accurate estimates may guide investment and improve national accounts.

Many online platforms have been providing digital goods and services to consumers at zero monetary cost. But consumers, in fact, exchange their personal data for 'free' digital goods and services, and the Facebook–Cambridge Analytica data scandal demonstrates that there is no such thing as a free lunch in the digital economy.

To read the full text
https://www.rieti.go.jp/en/columns/v01_0121.html

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