Classic moments in dissertating

So I have a dissertation chair now. The reason I went ahead with this, even though I don't plan to do a proposal until spring, was that I had a topic that I really liked but that was going to be very hard to get data for. The collective advice of various faculty members, who were enthused about my idea (it was original, interesting, never been done, likely to get attention, important, yada yada), was to get a committee formed so I could explore data sources.

And now almost the exact same work has been released by someone else.

A very tentative conversation with my chair had him saying thinking this helped prove the case that my work is important and I should go ahead. But I'm afraid that whatever I do now in this line will be seen as derivative, as a response to what this person did. (In some ways that is true, because it would be bad research not to take that work into account - but I don't get credit for coming up with x independently. It's like being close in horseshoes.) Morever, this person is an economist, which is probably one reason why the folks I talked to weren't aware it was being done. However, I'm kind of afraid of economists. It seems like education research by economists goes like this: Economist A releases a groundbreaking report on, say, the effectiveness of charter schools. Economist B then releases a report saying, ah, but if you include this variable, the effects disappear; A did not specify the model correctly. Economist A then releases a report saying that what B put in doesn't belong, is an effect and not a cause, and before you know it the whole thing become a pissing match about whether Ariano-Bond indicators ought to be used with Heckman selection. (Or something. The argument goes from something you can explain to Mom to something technical that Dale Ballou ends up using in one of his quant seminars where even the other faculty have their heads on the table in despair.)

Even with our heavily quantitative training, I'm afraid I'm not in that league, nor is it what I really want to do. Now I'm torn between really digging in and looking to see if I can salvage this or just putting it off until after comps. Because I really should be focusing on comps and some research that needs to be farther along before I can submit it to a conference, and the deadline for that is the end of the month. I'd rather be thinking about the diss than studying (which is a whole other post), but preferences and good strategy may not be interesecting here, let alone forming a union.

Also, this situation is just about the most stereotypical PhD story ever.