A New Threat to Economic Data

Economists, sociologists, demographers, and other researchers need accurate, ideally individual-level data to understand what’s going on in the world. At the same time, most people don’t want information like their address or income available for everyone to see. How do we reconcile these two goals? Some countries, like Norway and Sweden, err on the side of openness, making even individual income tax records public. The US typically values privacy highly, which means the Census has begun to use “noise infusion,” a technique for anonymizing individual and business-level data by adding random changes to individual data points. At a high level, the random noise cancels out, in theory letting you still learn accurate facts about, say, a county or industry, without violating specific people or businesses’ privacy.

When the Census announced they would do this to the 2020 Census data, leading to strange conclusions like finding that 48 people live on the same island as the Statue of Liberty (in reality zero people do, at least legally), there was a major backlash and the agency eventually backed down. Now, the Trump Commerce Department is proposing to ban any use of noise infusion. Nathan Goldschlag, a former staff economist at the Census Bureau, has a post at the Economic Innovation Group’s blog arguing this goes much too far and risks leading the Bureau to just not release certain data at all. I am far from an expert on this and honestly think the US tends to overweight privacy in these matters, but it’s the kind of debate that could have far-reaching ramifications for how we understand the economy.