We can't understand our economy without better firm-level information systems.  That's my essential summary of a new report out today, "Assessing competitiveness: how firm-level data can help," from Brugel, a European think tank.  It's a well-crafted and important report as it makes the case for policymakers why the back-end systems are important investments.  As the report shows, when we worry about averages and don't look more specifically at elements of the distributions and how those are changing or could be impacted by certain policies, we hurt our chances of driving competitiveness and economic growth.

In the appendix to the report the authors reference some of the international experiences related to firm-level data sets.  I think their summary there was restrained in its criticisms.  Indeed, I recently sat through a meeting of leading experts on measuring firm-level innovation and growth at the OECD and was appalled at some of the compromises that were going to have to be made in order to fulfill a European Commission mandate for immediate data.  It was clear why the compromises had to be made - national statistical offices have not received the investments they need to develop their infrastructures but more importantly they are only just beginning to realize they need to find ways to encourage firm-level research with their data. However, even with the signs of change I've seen afoot in terms of determination from these offices, they have no legal, political, or practical systems in place to meet this challenge.  Indeed, at a time when most countries are undergoing significant public sector cuts, I am worried that the clear needs here will not be met with dollars.  I've seen many bodies, including the OECD which I had always thought of as the true champion of international analyses using government data moving towards more instances in which their reports rely more heavily on private data sources instead of government data.  While private sources should have their place, they cannot be a replacement for official data.  That said, if national statistical offices don't get behind some of the important issues Brugel outlined here, I fear that many nations may become more and more satisfied with substandard official statistics.  Indeed, some of the current crises in Europe have been driven by lacking regulatory mechanisms on national statistics (see articles on Greece).