The Economic Impact of Transparency and Open Government

DRAFT MARCH 12, 2011

Beth Simone Noveck, Professor of Law, former United States Deputy Chief Technology Officer for Open Government and Director, White House Open Government Initiative



On his first full day in office, President Obama signed the Memorandum on Transparency and Open Government, calling for “unprecedented level of openness in Government” and creating public institutions governed by the values of transparency, public participation, and collaboration.

The White House Open Government Initiative, a collaboration between the White House and all the major Departments and agencies, was coordinated by White House Counsel, the Office of Management and Budget, and the Office of Science and Technology Policy.

Two years later and every cabinet department and major agency in the U.S. has a brainstorming website for public consultation and can visit the General Services Administration’s online catalog to select from many more. The White House alone has eight Twitter accounts, including an open government account (@opengov) with over 150,000 followers, and many Cabinet Secretaries as well as their Departments tweet.  Each of these organizations also has a fully articulated Open Government Plan, laying out concrete and specific steps they will take to make themselves more transparent, participatory and collaborative.


Agencies are putting up thousands of collections of government information online on their own agency websites

and making those data sets searchable through the national data portal –  In addition, agencies and the White House are reaching out to get “all hands on deck” to solve problems (sometimes using that data) through, the new national website that offers prize-backed rewards for the development of creative solutions to problems.

The private sector is responding to the profusion of newly available information in reusable form by organizing initiatives that bring together policymakers, statisticians and technologists to use this government data to build tools that inform policymaking, help consumers make better decisions, and help citizens hold government more accountable.

Opening up how institutions work to enable greater collaboration informed by data – what some might term open innovation – affords the opportunity to use network technology to discover creative solutions to challenges that a handful of people in Washington might not necessarily devise.  By itself, government doesn’t have all the answers.

In the network age, twenty-first-century institutions are not bigger or smaller ones: they are smarter hybrids that leverage somewhat anarchic technologies within tightly controlled bureaucracies to connect the organization to a network of people in order to devise new approaches that would never come from within the bureaucracy itself.   By using technology to build connections between institutions and networks, we can open up new, manageable and useful ways for government and citizens to solve problems together.  Everyone is an expert in something and so many would be willing to participate if given the opportunity to bring our talents, skills, expertise and enthusiasm to bring to bear for the public good.

Providing opportunities for citizens to collaborate is vital to fostering an engaged and democratic citizenry and accountable government. Especially in this era when journalism is in economic transition, we have to look to new strategies that leverage technology to create democratic accountability by making many more people partners in the co-creation of governance.

In addition to promoting government accountability and stronger democracy, open government, in particular the move to open up government data, has the potential to bring about economic growth and create new jobs in seven important ways.

1) GOVERNMENT AS MARKET PLAYER:  Three young programmers responding to a contest to create a useful tool with a government data – in this case the file containing ten years of Federal Registers (data can include text not just numbers), the daily gazette of government – designed the new They had never done business with the federal government before. An open government needs new technologies in order to innovate. As such, the government will make purchases for more technology, such as the contract given these young entrepreneurs, as well as other services that will generate jobs.

2) GOVERNMENT AS PLATFORM:  In the same way that Twitter provides an application programming interface (API) to enable third-party providers to build tools that interact with and leverage its network, a tech-enabled open government also provisions APIs that stimulate the growth of new businesses. For example, “’s Web Service API provides methods for obtaining small business resources and geographic data used by’s core search tools…developers can build new applications and mashups using authoritative information from Federal, state and local government agencies.”

With more open API’s, the opportunity for value-added services will emerge.

3) GOVERNMENT AS SHOWCASE: In order to enable greater citizen engagement, the US Federal Government has started to contract for free social media platforms, such as Twitter and Facebook as well as less famous tools from smaller vendors.

It also executes no cost agreements, such as the contract between the United States Patent Office and Google to make USPTO data searchable to the public

or the agreement between the General Services Administration and Challenge Post to build

Presumably, being chosen by the government affords reputational benefits that translate into market advantages to companies. In addition, public participation in government processes can afford skills-based experience that translates into increased employability. For example, in a survey of volunteer reviewers in the Peer-to-Patent program that invites public participation in researching pending patent applications, 52% responded that they participated for reasons of professional development, such as getting a job or developing a professional reputation.


4) GOVERNMENT AS INNOVATOR: By providing data and reaching outside of government for answers to tough problems, open government can lead to policies that are more effective and save money, which in turn will promote economic growth. In this era when government is trying to curtail spending, new technology is giving rise to opportunities to identify innovations that make it possible to solve a problem or deliver a service in creative new ways. For example, imagine if instead of regulating speed limits that reduce trade, government mandated that carmakers install transmitters to detect and prevent crashes before they happen.

The value from “doing more with less” is the potentially biggest payoff of open government.  Each one of these instances of innovation will necessitate study and the examples should be catalogued for the benefit of subsequent research.


are putting out vast quantities of raw data about how government spends money.  This afford the opportunity to apply robust methodologies for analyzing this data. If we can spot the patterns of fraud, waste and abuse, there is a potentially enormous impact to be had from reducing spending by government. The ongoing release of such datasets onto the public domain involves significant computational challenges posed by the collation, navigation, mining and visualization of such complex, multi-faceted datasets. In addition, in such complex informational networks, the possibility of extracting meaningful communities or subgroups could provide insights into the structure and functioning of the system and uncover hidden connections and insights.  If we understand flows of money across federal, state and local systems, we can streamline them.  The Institute of Mathematical Sciences at Imperial College in the United Kingdom is a research group engaged in the work of developing mathematical tools for the analysis of large-scale data (others are working on visualization and linked data techniques) in order to find faithful representations of the data and generate simplified, intelligible reductions of such networks in terms of a “multi-level dynamical hierarchy of communities that can uncover patterns of interaction in the data.”


6) GOVERNMENT AS HIGH VALUE DATA PROVIDER:  The Open Government Directive, the government-wide policy directing federal agencies to create open government plans, specifically directs agencies to inventory their “high value” data, where high value is defined as: “[I]nformation that can be used to increase agency accountability and responsiveness; improve public knowledge of the agency and its operations; further the core mission of the agency; create economic opportunity; or respond to need and demand as identified through public consultation.” Open data is, by no means, limited the United States. Ten countries have national data portals as do dozens of states, regions and cities.


Hidden within the troves of public data is information that could translate into private sector job growth and the next GPS or genomics industry.  Here are a number of examples:

BrightScope has made a profitable business of using government data about 401(k) plans.

They’ve raised $2 million in venture capital and hired 30 people and is likely to double headcount to at least 60 by the end of the year. They did $2M in sales in 2010 and are currently on a $10M+ run rate for 2011.


The National Oceanic and Atmospheric Agency in the United States has a ~$5 billion dollar annual budget. Through the open release of data, NOAA is catalyzing at least 100 times that value in the private sector market of weather and climate services when including market and non-market valuations.

The ~$1 billion it spends on the National Weather Service enabled, which has since been sold for $3.5 billion.  As the Economist writes: “Public access to government figures is certain to release economic value and encourage entrepreneurship. That has already happened with weather data and with America’s GPS satellite-navigation system that was opened for full commercial use a decade ago. And many firms make a good living out of searching for or repackaging patent filings.”


The Health 2.0 and Open Gov movements have helped unlock large repositories of data – from user-generated data in hundreds of online communities to mobile devices to federal quality indicators to medical record data within provider organizations. “A number of communities have cropped up to promote access to medical data and the integration of user-reported and behavioral data within the clinical decision stream including, #healthapps, #health2dev, #73cents, #getupandmove and #WhyPM. With the opening up of health datasets, platform APIs and increasingly sophisticated analytic engines to make user-generated health data clinically relevant, we can finally unleash the wider developer community to build robust and integrated tools to improve health and healthcare.”


By putting out data, an open government enables study of what’s working and what’s not.  We have a profusion of data in the US already, such as census data and other economic databases. Because of the availability of our data, the US attracts free evaluation by academics and graduate students than the government could or would be able to do for itself or to pay a consultant to do. This kind of feedback loop aids with analyzing what works and improving performance management.

The cultural transformation underway is in the offing. However, in this era of bitter partisan wrangling, when each side fears that the other will use transparency as a stick, there is resistance and back-sliding. Even with the best of intentions and the most sweeping policies, making government information available in real-time, online demands an enormous change in the technical and sociological processes by which data is created.  Taking full advantage of the value to be derived from open data also requires changing the way that government works to foster collaboration between dot gov and dot edu to conduct research and analysis but also between dot gov and dot com and org to identify creative strategies informed by data for solving problems together.

While emphasizing that democratic engagement and government accountability are the primary motivators for opening up government, the additional “carrot” of job creation could help governments regardless of party continue the forward momentum toward making our political processes more collaborative and democratic.

Goals and Objectives for the Research Initiative on Open Government and Economic Growth

The goal of this research initiative is to have data at our disposal to educate policymakers about the economic impact of open government policy and generate interest among researchers in studying the effects and effectiveness of open government. Right now, open government advocates know a handful of anecdotes, such as the story of Brightscope. What’s needed is both more anecdotes and systematic research and analysis.

Hence the audience for the work comprises government officials interested in knowing how open government policies affect growth; government organizations looking for people to study the economic impact of their data releases; open government advocates interested in having empirical evidence to bolster the case for creating an open and collaborative culture in the public sector; and the international academic community interested in studying the linkages between job creation and open government.

Context for the Project

There is no systematic project underway to study the impact of open public data on economic growth and job creation. There are analogues in other domains that will inform our work.

These include work sponsored by the National Bureau of Economic Research and the Sloan Foundation to study the impact of intellectual property law on innovation;

work being undertaken by Erich von Hippel at MIT to study the impact of user generated content on the economy;

and the STAR Metrics program

developed by the National Science Foundation to develop metrics for assessing the economic impact of science and technology grants awarded under the 2009-2010 stimulus package.

What We Will Do: Strategies for Accomplishing the Work

In developing this plan, we have consulted with the White House Office of Science and Technology Policy and the United States Deputy Chief Technology Officer for Government Innovation as well as with the Chief Economists of NOAA and the Department of Labor, all of whom were enthusiastic about this effort.  Over the next year, we propose to:

1) Build a Platform to Curate Stories of Open Data and Economic Growth – We will establish a platform akin to to collect papers, datasets, and analysis of the impact of open government on economic growth and job creation.  The platform will serve two purposes. It will provide a ready store of examples for use by policymakers wishing to talk about the economic benefits of open data and identify new case studies for further analysis. In addition, the tool will help to connect innovators to those who can study their innovations. By enabling the general public to self-report examples of open government related job growth, researchers can find initial evidence for subsequent systematic study and analysis.

2) Conduct Controlled Experiments – We will do two planning workshops. Prof. Richard Freeman of the National Bureau of Economic Research and Harvard University will host one in Cambridge, Massachusetts and Profs. Yaliraki and Barahona at Imperial College will host the second. We will focus on developing a framework and methodology for selecting key datasets at different levels of government in the US and in the UK and then tracing the distribution and reuse of that data.  We will work with the relevant government authorities to tag 100+ collections of data to enable us to trace their reuse with the consent and knowledge of the reusers. We can then undertake both quantitative and qualitative analysis of that reuse. We will work both with datasets that we already know to be reused for economic benefit as well as newly released datasets. We will also experiment with methods for tagging, tracking and data analysis.

3) Write Up Recommendations – At the conclusion of the year, we will write up the results together with recommendations (policy and technical) to enable future measurement, such as requirements for creating unique dataset identifiers.