DATA-GATHERING is the least sexy part of economics, which is saying something. Yet it is also among the most important. The discipline is rife with elaborate theories built on assumptions that turned out to be false once someone took the time to pull together the relevant data. Accordingly, one of the most valuable papers produced in 2017 is an epic example of data-retrieval: a piece of research that spells out the rates of return on important asset classes, for 16 advanced economies, from 1870 to 2015. It is fascinating work, a rich seam for other economists to mine, and a source of insight into some of today’s great economic debates.
Rates of return both influence and are influenced by the way firms and households expect the future to unfold. They therefore find their way into all sorts of economic models. Yet data on asset returns are incomplete. The new research, published as an NBER working paper in December 2017, fills in quite a few gaps. It is the work of five economists: Òscar Jordà of...Continue reading