Open Data: Economic Development & Spending Tax Dollars Most Effectively

If you read yesterday’s post, “36 Benefits of Civic Hacking,” you probably saw at least one benefit that seemed worthwhile to you.

But you might wonder, “Do those benefits from open data and civic hacking have value in terms of cold, hard cash?”

I mean, it’s all well and good that “Is It Recycling Week?” (IIRW) will tell me if I should put out my recycle bin tonight for the garbage truck to pick up tomorrow morning. But if I spend my time trying to build something with open data, or if the government makes open data available and supports civic hacking, is that a cost-effective use of time and money?

Some civic hacks will be done because they bring convenience (like IIRW) or they make life a little easier for you (like a civic hack to help you choose which school to send your kids to ) or for someone else (like Adopt-A-Hydrant).

Other aspects of open data and civic hacking have definite impact on civic engagement, although the dollar value of this is challenging to pin down. Voting hacks like the Voting Information Project, TurboVote or Vote411 increase voter turnout and voter knowledge about candidates and issues on the ballot. And to the extent that civic engagement builds trust in your city or county, that data and those hacks are giving the government something that money can’t buy. I really like the way Mark Headd addresses this topic in “Civic Tech Fundamentals.”

“...Open data is the bedrock foundation on top of which civic technology is built – not just because it is one of the most important raw materials used to build civic apps, but because it represents a willingness on the part of government to collaborate. Governments that embrace open data send a strong signal to the community that they are interested in new ideas and open to establishing partnerships with new allies…”

But some uses of open data have definite economic impact. One big-dollar-impact example is global positioning systems (GPS). The annual GPS open data annual impact was reported as $90 billion in a 2012 article. Another example is that the core asset of the Weather Channel is open weather data from the National Oceanic and Atmospheric Administration (NOAA). In 2013, NBC bought the Weather Channel for $3.5 billion.

For other economic benefit examples, read the McKinsey Global Institute 2013 report which estimated the yearly global value of open data at more than $3 trillion dollars. According to the McKinsey report:

“GPS data, weather data, and census information are examples of information sets that are collected by public agencies in the course of their work and then made freely available for use by citizens, businesses, and academics...Climate Corporation, a startup that was recently acquired for about $1 billion, combines 30 years of weather data, 60 years of crop yield data, and 14 terabytes of soil data—all from government agencies—for such uses as research and pricing crop insurance.”

The McKinsey report is worthwhile reading if you want an in-depth understanding of the innovation and economic impact of open data.

Although some open data is used for limited-scope personal interest projects, it can also help drive local or regional economic improvement. The Forbes article “Is Civic Hacking The Future Of Democracy And Job Creation?” says:

“...whatever level a civic hacking group engages, it is an opportunity to look at the balance of skills required to skills available in the community. I think this is one of the secrets to grassroots job creation and it is a reason to get students, from middle school on up, involved in civic projects like this. If you talk to business owners, they will frequently complain that they cannot fill certain technical positions, that their local community does not have the talent and they have to look elsewhere. What is required, I think, is to radically shorten this loop between what needs to be done and local people (quickly) developing the skills to fulfill these needs. Hackathons of all sorts are great for this kind of spontaneous, collaborative learning.”

Another jobs-related and economic-impact example is the proposed NE Wisconsin collaborative cybersecurity initiative. The impact of this initiative will be creation of new cybersecurity jobs and companies (or expansion of existing companies) in NE Wisconsin. It will also provide training for local residents to qualify them for high paying jobs. Finally, it will reduce financial impact of cybercrime on people and businesses in our region.

A less visible, but still real, financial impact of open data is when that data is used to deliver city or county services more cost-effectively than was done before the open data was available. Chicago had a 20% cost savings on a rat-control program by using open data. Open data saves San Francisco $1 million annually on their 311 non-emergency system. Harder still to quantify are the savings from civic hacking or open data that improves the front-end (better user experience) or back-end (business processes and data handling systems) of government services. In the long run, though, those improved government services will save money compared to inefficiently muddling along with the status quo, or just making repairs or incremental improvements when systems get broken and don’t work.

In spite of the above multi-billion dollar examples, economic benefit from open data and civic hacking is still an emerging phenomenon. In “The Wired City,” Nicole Zhu and her co-authors point out:

The Wired City

“...there were approximately 906,000 technology startups in the United States in 2010. Yet, only a handful of those, like Eder’s company DataMade, are fully devoted to civic innovation...I think the next step is going from people doing this in their volunteer time to spurring off businesses that allow people to do this for a living...the more people we allow to work full time on civic innovation, the better off we’ll be...”

So the answer to your question about economic impact is, “Yes, open data and civic hacking absolutely do generate money through the creation of products, jobs and companies, and they do save money by delivering government services better and using tax dollars more cost-effectively.”

Open data and civic hacking are worth the time and money.

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Tomorrow's post will be "4th of July & US Civic Hacking." Check out that post first thing tomorrow morning! As you US civic hackers go about your holiday activities, think about how civic hacking relates to July 4th and what civic hacks you can work on in the upcoming year to make US Independence Day better in 2016 than it was in 2015. Also consider what ambitious BHAG civic hacks you can launch to make the United States of America better than it is today...

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Government ED people (economic development) and entrepreneurs who want to dive deeper into the economic value of civic hacking can check out the links above in the post or the additional ones below:
Data Chronicles the Rise of a New Industry: Civic Technology
How to Successfully Harvest Value from Open Data
Open Data Is Open for Business
Hack the government
Civic Tech Is Ready For Investment
Civic tech investment analysis, expanded with your feedback
Updated: What’s the value of open data?
Data Mining Start-Up Enigma to Expand Commercial Business
Why Open Data?
The rise of creativity propels open data forward
Realtime Open Data
Delivering core economic development services, promoting inclusive economic opportunities
Code for America & GovTech Companies
Anthony Townsend on Hacking Into ‘Smart Cities’

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