I am rushing to the airport (Kunming), but here is my (short) debate with Noah Smith on that topic. Here is my closer:
The sad truth is that American productivity growth was, for the most part, considerably higher in the 1920s and 1930s, a time when most institutions were far worse than they are today, including of course public health. We didn’t even have a National Science Foundation back then. What we did have was a lot of technologies ripe for further exploitation, namely the combination of fossil fuels, electricity, powerful machines and a somewhat freer economy.
Let’s hope the internet and artificial intelligence can lead a new tech revolution, but so far it is looking like a long, tough slog.
Not just electricity, but also the budding electronics, which facilitated control of those machines, not to mention spawned several new industries such as the “radio music box”.
“Wireless telegraphy had been discovered in 1895 by an Italian, Guglielmo Marconi — but its future possibilities were not comprehended in 1900, when Reginald A. Fessenden first transmitted speech by wireless; or in 1904, when Sir John Ambrose Fleming produced the radio detector or Fleming valve; or in 1907, when Dr. Lee De Forest produced the audion [vacuum tube]; or in 1912, when Edwin H. Armstrong discovered the electric generator circuit by means of which the feeble impulses received by radio could be “fed back” and multiplied many times. For that matter, as late as 1915, when David Sarnoff, assistant traffic manager of the Marconi Wireless Telegraph Company, proposed a “radio music box” and suggested the future possibilities of public broadcasting, he spoke to deaf ears. But the seeds of the radio and television industries had been sown.”
–‘The Big Change: America Transforms Itself 1900-1950’ (1952), Frederick Allen Lewis
Nor should we ignore that before penicillin, going to the doctor/hospital increased your chances of dying. Which, by the way, is an excellent incentive system to keep health care costs down, but with a high death rate.
How much productivity growth can you expect out of a service economy? Scary answer is not much if humans perform the services.
+1
+100
Sandia, no, think of accountants and bookkeepers; today one person can handle the accounts for many small firms, much higher productivity than in the days of paper ledgers and double-entry bookkeeping. Services are easily as eligible for productivity gains as other sectors.
Some services, not all.
CHAPTER 12
FORMERLY
HOUSE BILL NO. 92
AN ACT TO AMEND CHAPTER 23, PART III, TITLE 30 OF THE DELAWARE CODE RELATING TO THE GROSS RECEIPTS TAX; AND PROVIDING AN EXEMPTION FOR DRAYMEN OR MOVERS.
(5) Circus exhibitor, $750. “Circus exhibitor”
Why should the circus have to pay a license fee? Isn’t that an act of violence? I already pay an income tax.
Sure, but I think a lot of that has already occurred? Also the occupations you mention (and let’s throw in banking and finance) are really not productivity in the way most people would like to think of it. More like taxes on the economy. So reducing those taxes is good. Ok.
The data on bank deposits per bank employee sharply contradicts your claim that banks are not productive.
“productivity” factors involve much more than just technology improvements
consider the level of government business interventions & taxes in 1910’s/20’s/30’s versus today
All else being equal, productivity increases are good. But if you want to stimulate economic growth, and median income, is productivity best?
(I recognize that many of Noah’s policy prescriptions would benefit median income, but there might be some divergence. Certainly automation has a push-pull effect on employment and wages.)
More on the push-pull of technology from the Warren Buffett link below:
It will add “$19,000 of GDP per person, family of four, $76,000 in one generation,” says Buffett. “So, your children and your children’s children and all that, they will live far, far, far better than we live with 2 percent growth.”
And yet, many individuals are stuck. “The economy is doing well, but all Americans aren’t doing well,” says Buffett.
Part of the reason some are struggling, says the octogenarian investor, is that the automation and digitization of the U.S. labor force is happening faster than employees can be retrained.
“the automation and digitization of the U.S. labor force is happening faster than employees can be retrained.”
We hear this all the time. How about a good example? Or several? At the same time, isn’t it a responsibiltiy for businesses adopting automation and digitization to do the retraining of their labor force, just as they have put new equipment and techniques to use?
Economically, NAFTA and the growth of globalized trade have dramatically increased imports and exports that are shipped in marine International Organization for Standardization containers. Furthermore, the rise in fuel costs have limited the options for cost-cutting along the supply chain. Although drayage is a very small component (both in terms of time and distance) of the supply chain, its cost and potential problems can be disproportionately high.
That is the standard rustbelt narrative. Sure productivity improved, but .. see Michigan per capita income indexed against the US.
http://michiganeconomy.chicagofedblogs.org/?p=52
“We hear this all the time. How about a good example? Or several? At the same time, isn’t it a responsibiltiy for businesses adopting automation and digitization to do the retraining of their labor force, just as they have put new equipment and techniques to use?”
Companies do that all the time. And the automation leads to a smaller workforce per output so they use their existing work force to expand production. Therefore their future hiring is less. Most people wouldn’t consider it a companies responsibility to “retrain” people that they never hired in the first place.
Stories about companies laying people off are written all the time, but I suspect there’s a lot more people who weren’t hired because such and such firm automated the job away years ago.
If it business’ responsibility it’s one they aren’t meeting. Generally the employees are just shown the door and that’s that.
Is the myth that you can take the average high school dropout and train him/her so that s/he has the skill set (knowledge, eye-hand competence, discipline/attention to detail/focus, interpersonal skills) to competently contribute in the service economy a talking point of the Right, as it is of the Left? Retrain? At what cost and with what success rate? We don’t talk much about that.
I’m not sure I would qualify it as coming from the Left or Right, but it certainly seems to be a dubious supposition.
“U.S. Study Says Job Retraining Is Not Effective”
http://www.nytimes.com/1993/10/15/us/us-study-says-job-retraining-is-not-effective.html
This is from 1993! Surely it’s time for economists to realize that retraining isn’t a universal solution.
The northern European economies seem to do a good job of this.
Retraining was two things: an economic assumption and a public policy.
In say 1995, a conservative might have said that workers just would find better employment. A liberal might have wanted government to help. I think nowadays pessimists are less sure of either path. Adaptation, especially later in life, proved hard.
Real per capita GDP in the USA has quadrupled since the end of WWII, from $15,000 to almost $60,000. Which means, in terms of additional purchasing power, a 1% increase today gets you as much as a 4% increase in 1946- an extra $600. Is this a simple story of diminishing marginal returns?
By the way, you definitely trounced Noah there. Good job.
Per capita anything is a poor proxy for median anything.
And of course the debate should be about the very real divergence we experienced.
https://en.m.wikipedia.org/wiki/File:US_GDP_per_capita_vs_median_household_income.png
Thanks for the duh primer on average vs. median. We’re talking about the size of the pie here, so pack away your genius vision of redistribution for another thread.
That is a pretty crazy answer. I note that the median is what Americans experience, and you jump to the conclusion that anyone who even understands median will want “redistribution.”
Actually I was thinking of growth policies to favor the median American.
Just for fun though:
http://www.cnbc.com/2017/06/27/warren-buffett-says-the-problem-with-the-economy-is-people-like-him.html
Warren even talks about how this economy is moving the “per capita” rather than the “median.”
I understand that you want to talk about what you want to talk about, but that’s not the subject under discussion. We are talking about the size of the pie.
You realize that even if we were talking about your pet subject, your sanctimonious posturing can be easily outflanked by someone with even a bigger heart, who claims that it is, say, the 25th percentile we should be most worried about. But of course that is a separate discussion.
Well you see, I could talk to someone with other perspectives. The various outcomes among the 5 income quintiles is a common one, or a wealth based view.
I wouldn’t get emotional, go ad hominem, call people “sanctimonious” for merely having data, especially not before they endorse any particular policy position.
I did offer a general goal: “Actually I was thinking of growth policies to favor the median American.”
Is that bad?
+1 Brian.
Thank you.
…which is another way of saying that, if China currently has annual per capita GDP of $15,000 (I think it might be close to that), and they grow per capita GDP at 4% per year while the USA manages a paltry 1%, Chinese income will reach American levels by 2064, with annual per capita GDP of $95,000 (the Chinese will still be much less wealthy, of course, because income =/= wealth.) The horror!
By then I expect the Chinese will be wealthier, because their infrastructure will be less decayed.
I bet you’re wrong. I’ll be 99 then. Let’s meet back here.
In his dream, the gold rose not too long ago, and gwenivere under the tree sleeping so peacefully, Oh no, oh no. Then they both saw white specks like ash drifting slowly, and the augustinians down farther along the marble pivimento were coming up. Coming up from the golden roads, in the misty blue mawning, never to grow old. And gwenivere tried to cover her nakedness. The sky was filled with a thousand stars and eleven moons.
… and government spending is a major factor in that big GDP-increase calculation
more unproductive government spending = bigger GDP
“By the way, you definitely trounced Noah there. Good job.”
Agreed, Noah was spouting PC rhetoric, not showing a deep understanding of the subject.
“Cowen: I wholeheartedly agree with all of your policy ideas, for reasons of liberty, justice and also efficiency. ”
Yeah, that’s the way to “trounce” someone, right there.
Did you seriously just cherry pick a quote that baldly? As in you left out the critical second sentence. Here’s the entire quote that Anonymous cherry picked.
Tyler Cowen: “I wholeheartedly agree with all of your policy ideas, for reasons of liberty, justice and also efficiency. That said, I wonder if they are more likely to give us one-time gains rather than an ongoing increase in rates of productivity growth.”
Here’s the paraphrase of the substantial rebuttal.
Noah Smith, Solar power, batteries, immigration and urban zoning will lead to higher productivity.
Tyler Cowen, We’re a service economy and the price of electricity isn’t going to drive a long term increase to productivity. The US has had high immigration for decades and growth is low. Urban re-zoning might just as likely lower the productivity of the current high productivity areas.
The trouncing was by pointing out that energy storage as a driver of productivity growth is complete bullshit argument, high skilled immigration is an extremely dubious driver of productivity growth and there are even potential downsides to productivity of increasing density in SF. It’s not that Noah has the wrong policy, it’s that he has terrible arguments for how they’re going to lead to productivity growth and Cowen made this very clear.
Maybe I am just too pragmatic. If you “wholeheartedly agree with [a set of] policy ideas, for reasons of liberty, justice and also efficiency” the rest is just decoration.
As far as what batteries will do in the next 20 years, everybody can guess. Go ahead, but if investment is the policy, that is the policy.
“wholeheartedly agree with [a set of] policy ideas, for reasons of liberty, justice and also efficiency” is just decoration.
The rest is the meat of the argument. You’re not pragmatic, you just got it backwards.
Was it not economics then, but futurist conjecture?
And “trounced” is about prediction? Meet back in 20 years?
“And “trounced” is about prediction? Meet back in 20 years?”
There’s a classic example of Nathan refusing to admit he’s wrong.
lol. The first Nathan was funny. The second funnier. Though now I want a hot dog.
Seriously though, Noah and Tyler agree on policy, other than that it looks they disagree on expectations. Which I’m not going to get excited about, became prediction is hard, especially about the future.
As always, the managerial class sees “increased productivity” as an end in itself – with no consideration of whether the impact on the knowledge and service workers or indeed society a whole will be positive or negative.
>We didn’t even have a National Science Foundation back then.
Wow. How dystopian. I’m amazed that anyone in those dark times was even able to tie their own shoes without the guidance of the National Science Foundation.
Are you sure this is true? Why didn’t everyone starve to death?
“So the illusion grows and grows, with government funding, tax dollars, swelling (and self-feeding) bureaucracies in Washington all devoted to helping birds fly better. Problems occur when people start cutting such funding— with a spate of accusations of killing birds by not helping them fly.”
–Taleb, Nassim Nicholas. Antifragile: Things That Gain from Disorder
I come here for the humor, and I am still laughing about this one.
Excellent.
+1
The federal government did not have the NSF but there were state-run research universities as well as federally-sponsored entities such as the Smithsonian Institution which, among other things, helped fund Robert Goddard’s experiments with rockets.
Perhaps because our “pro business” culture doesn’t realize that the true goal of business is to create competitive barriers by any means possible (only one of which is being productive). We need to restore competition to capitalism.
Smith uses “human enhancement”, why not just call it what it is?
Tyler claims that, in the 1920s and 1930s, most institutions were worse than they are today. But were they, considering only the quality of the institutions and not the technological tools they have been given? Consider:
-Government spending is a much larger percentage of GDP.
-More regulation.
-Educational institutions spend a much larger percentage of their budgets on make-work administrative tasks and much less on actual education.
-Governmental and social incentives for non production are present.(Welfare, child support, ect) We went from nearly all able bodied men either working or looking for work to a large percentage idle.
The one exception I can think of are the police, who are much less corrupt thank they were in the 1920s and 1930s. Some would bring up racism, but I’m not convinced that, on a purely economic level, it was an worse than our current anti racism.
“Some would bring up racism, but I’m not convinced that, on a purely economic level, it was an worse than our current anti racism.” – LOL on a purely economic level, it was certainly not worse for one of the races, but probably worse for the others.
I imagine even for the most dogmatic Black Lives Matter activist there is some indifference curve that charts trade-offs between dignity and equality vs. security and order (or their converse Racism & Segregation vs. Chaos & Crime)
“Some would bring up racism, but I’m not convinced that, on a purely economic level, it was an worse than our current anti racism.”
Yeah, all the evidence indicates it was clearly worse. The reason the US could support a minimum wage of a nominal rate of $11 in 1968 is because large chunks of blacks and women were kept out of the legal workforce. The 1950’s and 1960’s were certainly much better for low skilled white male workers than today’s working environment, but that was at the expense of a lot of other people.
“large chunks of blacks and women were kept out of the legal workforce.”
Yeah, because in 1969 the lowest-paid jobs were restricted to White men only. LOL.
Women yes. But black people? To be sure there was enough relict segregation still in force that black men were not always able to compete with white men– but they were not relegated to unemployment either. They were in the labor force, just in a partially segregated “black jobs” portion of it. (The same is largely true of women who were in the labor force). And unless they were working entirely under the tab;e they were still being paid that minimum wage too.
“they were still being paid that minimum wage too.”
No, quite often they were not. Many blacks were involved in agricultural or other exempt work and the minimum wage laws did not apply.
” The 1961 amendments greatly expanded the FLSA’s scope in the retail trade sector … The 1966 amendments also extended coverage to public schools, nursing homes, laundries, and the entire construction industry. Farms were subject to coverage for the first time if their employment reached 500 or more man days of labor in the previous year’s peak quarter.
…
The minimum wage went to $1.00 an hour effective February 1967 for newly covered nonfarm workers,”
https://www.dol.gov/whd/minwage/coverage.htm
Prior to the late 1960’s, much of what we consider “minimum wage” work was exempt from the minimum wage laws.
Just some idle speculation:
How much of the Productivity gains of the first half of the 20th century were a result of a significant portion of the population moving from farm work to other work.
US percentage population of farmers: 1900 38%, 1910 31%, 1920 27%, 1930 21%, 1940 18%, 1950 12%, 1960 8%, 1970 5%, 1980 3%, 1990 3% (Note: that as the farming population was dropping, farming productivity was soaring). So essentially, the productivity measures got a huge tail wind as all the food was being produced by a rapidly shrinking portion of the population and the rest were producing additional goods. This tailwind disappeared around 1980 as the farming population bottomed out at around 3%.
https://goo.gl/8fuqmj
https://goo.gl/CFyEmA
Also, is this graph correct? https://goo.gl/9x7b74 Has European productivity lagged this badly over the last 20 years?
We might want to zoom in a little closer. It wasn’t necessarily that so many left the farms, but rather those with the mechanical ability, “smarts”, etc. that normally stayed on the farm were not seeking better opportunities off the farm. Today, even the poorest, remotest kid in most of the world, knows there are better opportunities and has ways to get to those opportunities.
If there is something holding kids back from better opportunities than they parents, it is their ethnic culture, such as academic achievement, even reading more than necessary, is denigrated in the African-American urban/rap culture, regardless of parental hopes. But then to a lesser extent this happens if the “brainy” kid ends up in a community that reveres sports and athletics, see the sub-plot of ‘Varsity Blues’, or plot of ‘Revenge of the Nerds’.
This is actually an area I feel optimistic about. The culture is changing, even in African-American “rap culture”, being smart and using your brain to succeed isn’t uncool anymore, after Barack Obama and Steve Jobs/Dr. Dre and so on. The Nerds have won.
Do you have any first hand experience with that culture? If not, what are you basing your optimism on?
The nerds didn’t win. They segregated themselves into a bubble with other nerds. Which would be fine, except it’s an option not available to those in grade school, and that bubble is 80% male.
I have at least as much “first hand experience” with that culture as you do, so my chat room opining is at least as valid as yours.
I’m not the one opining about any change in that culture, I think absent other evidence the default assumption should be that current trends will continue.
Obama is a nerd??? Obama made not smart, but boring ‘cool’ to nerd white folks, cool. Nerd expects some kind of intellect.
What’s so bad about life on the farm? Aside from the fact that most farmers are shackled to their bankers, they lead a pretty good life, living in nice homes with large lawns, driving big, expensive pick-ups and spending their winters in Florida and Arizona, enjoying federal subsidies and acquiring massive equity in their property.
In Georgia, there is .25% occupational tax on banks. In Delaware, there is a fee associated with different businesses.
People have been moving from farms to cities since the paint was fresh on the ziggurat of Ur. In fact the only way that cities maintained population or grew was by in-migration from rural areas since urban death rates generally exceeded urban birth rates right into the 19th century.
1920-1930?
Of course there was no NSF. Perhaps the US was freeriding on European scientists that fled the mess at the time. In a certain way, a peaceful Europe means less scientists/engineers.
Perhaps science can refine but it seldom innovates. Innovation comes from millions having the opportunity to try their crazy idea. Then, there is careful study which may refine the process, increase the ability to engineer, i.e., use the least materials and time, the process.
Take for examples: the steam engine, the Bessemer steel-making process, the wheel, fire, the hammer, blacksmithing, water power, the ‘Post-It’, the microwave, vacuum tube (based on the “interesting, but useless” Edison Effect, etc.
Tyler: ” but storing power through batteries just isn’t very efficient and I don’t see that changing anytime soon. ”
LOL, that’s quite the understatement Tyler. Storing power is always a negative efficiency. You get out less power than you put in. A 100% efficient battery (which would still add cost) is impossible with current technology.
It can be economical to store power, assuming a price differential greater than the efficiency loss, of course.
>A 100% efficient battery (which would still add cost) is impossible with current technology.
No, it’s impossible due to the laws of thermodynamics.
But Al Gore says if we give him enough money, he’ll start a PAC to get those repealed.
Ha! Sick burn, take THAT Gore!
And thermo says this is to be expected in all energy products. There is quite a bit of loss between tar sands just laying there in Canada and my local BP station.
It’s just that oil is so cheap in general, that we don’t sweat acquisition, refining, and distribution costs. (And of course since those costs have been literally buried beneath our feel, all our lives, we tend to ignore them.)
Externalities excepted, of course.
“No, it’s impossible due to the laws of thermodynamics.”
I started to say it that way but didn’t want to get into technicalities. Someone was likely to come out with the rebuttal that a 99.9% efficient battery is possible (and it is), but ignores the more salient fact that we don’t know how to build one.
There are two losses in batteries: the round-trip loss (you’ll get less out than you put in, even if you take it out right after you put it in) and storage losses (the stored energy leaks away over time). Which will be true for just about any system that stores energy.
BUT the biggest problems with electric storage batteries remain the high initial cost per kwh stored, the limited life of the battery with successive charge-discharge cycles and, for transportation and portable-device use, the size and weight of the battery relative to the amount of energy that can be stored in it.
And (of course) if you want to store a large amount of energy in just about anything there will always be some concern over what might happen should all that energy be inadvertently released suddenly and destructively.
I had some 20 year old Coleman camping fuel in the garage. I think pretty much all the energy is still there, but yesterday the can started worrying me. So I transferred some to an MSR bottle and took the rest to the hazardous waste center.
It will be a while before high density batteries can last 20 years in the garage before you start to worry about hem.
Is public health an “institution”?
Maybe there are similarities to the question, Why is it so difficult to raise birth rates? The only ways I know to do that are (1) have more kids yourself and (2) join a religion with a higher-than-average birth rate.
Both Smith and Cowen work in higher education. With the explosion of knowledge and its dissemination via networked computers, perhaps they can explain to us what has kept productivity from increasing in higher education. I suspect that it is the institution.
These institutions- and their monopoly accredited schools have on awarding credentials- are surely vulnerable to massive technological disruption if/when seat-time (aka credit-hours) becomes optional because credentials can be earned by passing comprehensive exams (with or without the credits)?
It’s not just an absence of productivity improvement in higher ed., but a sharp decline over time as the inflation-adjusted price moves ever higher. Unless one assumes substantial improvements in the quality of the product, of course.
Were I work, I can easily boost the productivity of the low status workers through fairly simple software. They understand that the software may eventually cost them their jobs, but there isn’t much they can do about it.
The high status workers productivity can also be raised through software. They also understand that that software may eventually cost them their jobs, and they can raise hell about it, halt development, or refuse to use new software. This is usually only overcome by convincing a vice president or C level executive to back the software. If it is not related to the two or three areas the CEO is focused on, it doesn’t happen.
What industry are you in?
Retail
Unlike some leftist commenters here who don’t like productivity because it doesn’t capture the median, I come from the other direction. Productivity may not correspond to the ability of a society as a whole to do things. The Soviet Union had lower productivity than the United States but punched above its weight geopolitically.
Only for a while, and mainly with smoke and mirrors. Are you suggesting we try it the Soviet way?
No but I think state capacity matters.
Good discussion, pretty much sums up my views. None of the typical pro-growth policies are actually going to lift up productivity growth. This goes for both sides of the aisle. Different versions of voodoo economics.
Unstated in this particular exchange was education…count me in the skeptic column when it comes to massive post-secondary education investment (like, say, Tennessee).
Interesting to note that the huge increase in college attendance corresponds to the decrease in productivity growth.
“…count me in the skeptic column when it comes to massive post-secondary education investment (like, say, Tennessee).”
I think you are mostly correct, but wrong about when you mention Tennessee. Currently the state ranks 41st/37th in Bachelors/Advanced degrees. So, TN has a lot of relatively lower hanging fruit to be taken with regards to higher education. And the massive investment is nearly all lottery money, so most people don’t feel as if they’re paying a particularly high price for universal community college.
CNTRL + F + “patents” and not a single hit in this thread…nor the original debate. Unreal.
In fact ‘Great Stagnation’ may be due to a misunderstanding of catchup effects… see the raw data below. I’ll try and elaborate on the Bloomberg thread.
From Maddison, “Monitoring the World Economy”, Paris, 1995
Output per head as a percentage of income per head in Western Europe (Western Europe = 100)
Region / years, snapshots: (1820, 1913, 1950, 1992)
Western Offshoots (USA, Canada, Australia and New Zealand): 90%, 140%, 180%, 120%
Southern Europe: 60%, 45%, 40%, 50%
Eastern Europe: 60%, 45%, 50%, 25%
Latin America: 55%, 40%, 50%, 30%
Asia: 45%, 20%, 15%, 20%
Africa: 35%, 15%, 15%, 10%
Conclusion: catchup-growth has not occurred. From the book: “Butterfly Economics” by Paul Ormerod (1998)
The total number of patents granted in India increased from under 1,500 in 2003 to 7,539 in 2007. Since 2002, Indian patent revenues have increased at an average of 50 percent. More pertinent to the pharmaceutical industry, the number of chemical patents and drug patents accounted for over a third of the increase. Chemical patents increased 498 percent from 2002-2007, while the amount of drug patents grew 255 percent during the same time period.
US patents provide a good indicator of inventive activity at the international level. The amount of Indian patents granted by the USPTO increased dramatically after TRIP’s. The amount of chemical patents granted by USPTO to Indian inventors totaled 193 in all years before 1993. In 2004 alone the number granted was 209, and by 2007 the total number had grown 1000%?
Well, there you go, confirmation that India is on it’s way up up and away. Though it’s surprising about pharma and patents, since India about 10 or 15 years ago was arguing in some forums that drugs should not be patented for moral reasons.
“We didn’t even have a National Science Foundation back then.”
Translation: Without government subsidies there is no science. What a warped and disturbing view some people have of science – and government..
Low-IQ people have substantially lower productivity than high-IQ, and the gap widens every day. The only long-run solution is to figure out a way to raise IQs at the left side of the bell curve. And no, education doesn’t work. No form of known education raises general fluid intelligence. It can teach concrete skills, but contra feel-good mantras it doesn’t teach people “how to think”.
The solution will almost assuredly be pharmaceutical in the near-term. And some combination of genetic engineering and cybernetic enhancement in the long-term. The good news the existing scant efforts in this realm show that it’s probably easier to raise the intelligence of the dumb than the smart. Modafinil seems to be particularly effective for the low-IQ. Rather than being a controlled substance, it should probably be handed out like candy. Some other nootropics have moderate efficacy, but we need to be investing far more than we currently do. And FDA regulations need to get out of the way.
Technocrats always think that new technology is the path to productivity. But where did the real gains in productivity come from in the past half century? I would argue that Federal Express, Wal-Mart, the privatization of transportation which led to vastly more efficient rail and air freight, the rise of global shipping networks based on standardized containers, and other managerial innovations are responsible for a large amount of this.
This allowed manufacturers to move to just-in-time inventories, which removed huge amounts of waste. It enabled companies to move away from vertical integration and towards more distributed production models which enabled more specialization. Supply chains grew larger, communication between suppliers became faster, etc.
Technology played a part in enabling those new industries – especially the internet based innovations like Amazon. But the real innovations that mattered came from entrepreneurs with new business models that disrupted archaic ways of doing business and drove efficiencies to new levels.
How much of the increase in productivity over the past two decades was due to WalMart alone? I remember reading that it was responsible for shaving at least a full point off of inflation during its period of maximum growth.
Also, the rate of productivity growth from 2000-2016 was about the same as from 1870 to today.
In 2002, the gradual decline of Rupee stopped when the exchange rate achieved its peak at 48.57 Rupees / 1 USD. That was a start of currency appreciation (approx. by 15% in 2002-2007 – a phenomenon which India had never experienced before. The primarily cause for that was an unprecedented in India’s modern history increase of capital inflows from abroad: e.g., in 2007, the amount of global capital invested into India increased to a record $44 billion (up from $24 billion in 2006)
I hope this isn’t the same Noah Smith of Noahpinion?
Before the welfare state?
Why econometrics is tautology:
The R-squared value in this regression has increased to .3329 with the added variable. 33.29% of the dependent variable’s variation is explained by the variation within the two included independent variables. The P-value of zero to three decimal places indicates the amount of patents granted by each host country is statistically significant within this model in increasing foreign direct investment.
I believe there are multiple drags on the GDP / Productivity numbers.
1) The 25% of GDP that is government or massively government controlled. There really are insufficient incentives to overcome the resistance to improvement in this quarter of ‘production’. My public library could make massive improvements in hours open and costs with a few changes but it is not worth the effort for anyone to try to make that change because the vines of stagnation have so covered it up.
2) The inability to measure new efficiencies hides improvements from GDP.. With Spotify (and others) I can get almost any music ever made for the equivalent of one CD a month. GDP Spending decreases but the value to me increases. Sure they can try to estimate this cost but how accurate can that be? This also suggests andother zero bound problem.
3) Once something is ‘free’ how do you measure improvements. Once it is almost free it will be too small a component of GDP that any massive improvements won’t be measured.
4) Demographics and marginal return on human effort. For mid to low talent people it takes effort to achieve. Once nearly unlimited entertainment is available upgrading to a luxury car vs a used Honda isn’t worth the effort especially as the government takes more as they work harder.
As the world becomes more intellectual, productivity becomes impossible to measure.
Only if you have a pretty effed up definition of intellectual.
What would growth be if we cut the military budget in half and returned it to tax payers? That’s about 1.6% of GDP that we could stop lighting on fire.