The perils of navigating the economy using old maps

Outdated tools make it hard to answer even basic economic questions, much less create thoughtful policy. It’s time to create a better data architecture for mapping our increasingly complex technology-driven business world.

It is hard to know where you are going if you don’t have a decent map – either a physical map, or a mental map based on experience. First-time visitors to London can be forgiven for wondering why there are so many “High Streets” in the same city, or how they wound up in Westminster or St John’s Wood when they thought they were in London. The London Tube map – stylized, simplified, and necessarily inaccurate – turns out to be an indispensable guide for getting around a charmingly idiosyncratic city.

What happens when the tools and categories you use for your map no longer work? For much of the 20th century, you could reasonably describe the US economy using a simple set of nested categories; industries consisted of firms that operated establishments (factories, offices, stores) staffed by employees who engaged in occupations. Today, not so much: when crypto exchange Coinbase went public in 2021, its prospectus noted that it did not have a physical headquarters for its (minuscule) workforce because it was a remote-first company, and declared its industry to be “business services, not elsewhere classified”. We still use tools created during the Great Depression to map an economy in which work-from-home contractors directed by placeless “algos” contribute to virtual goods sold on global app stores.

Our outdated tools make it hard to answer even basic questions, much less create thoughtful policy. It’s time to create a better data architecture for mapping the 21st century economy – particularly when it comes to employment.

Seeing like a state
Twenty five years ago, Yale’s James C Scott published a remarkable book, Seeing Like a State: How Certain Schemes to Improve the Human Condition have Failed. The book described high modernism, where governments aim to make societies more legible and easier to manage by imposing simplified categories on a complex world. States like to have a synoptic view – like a London Underground map – and often seek to impose a map that does not fit. Sometimes these mapping efforts are benign – say, naming roads and numbering houses that make it easier to deliver mail. Other efforts to impose a map have been disastrous, from “urban renewal” that bulldozed thriving neighborhoods for highways to Stalin’s forced collectivization.

Scott describes an early version of high modernism with the birth of German forestry science in the 18th century. One of the important sources of royal wealth was ownership of forests, and forestry science was developed to help estimate how much board wood and cord wood could be produced each year. The forest contained much beyond this, but monarchs were most concerned with the revenue-producing parts of their holdings, and not so much the flowers, fruits, shrubs, mushrooms, and rodents. Of course, a forest would be a lot more efficient if it included only cash crops like Norway spruce or Scotch pine, planted in even rows and columns – easier to plant, manage, harvest, and count. On the other hand, a monocrop production forest is far more susceptible to disease and blight, which provides a telling analogy for other high modernist efforts.
Source: IMD