The Great Productivity Puzzle
newyorker.com
newyorker.com
Yes, GDP$ per unit hour has not gone up much, but the flip side is that the economic value of the output has gone down. If you look in terms of PPP, workers are doing better: fewer labor hours go into buying dinner.
The corollary is that fewer hours are required to produce PPP equivalent product (e.g. a car) so fewer workers are needed (since the $ are not going up at the same rate it looks like productivity is not). That's why the LFPR is sinking.
A victorian era "smokestack" model isn't useful when looking at this world. This is why automation really is likely to cut employment this time (in fact it already is) and that's the real economic problem to be worrying about. Which some are (e.g. the small UBI experiments under way) but it's still not mainstream.
Clearly there is geographical variation! But low inflation is considered a trap by many mainstream economists (I disagree but appreciate their reasoning).
Just look at the number of hours of typical labor required to buy many goods (TVs, meals, etc) and compare it to your parents' time and you can see the low inflation in action.
To your point: the way to fix these problems is to make sure that everyone, irrespective of their ability to make money selling their labor, is able to consume a fair amount. Hence the need for a basic income for all: the higher the better. The quicker we break from the moralistic perspective that everyone should "work" in a world where not everyone can, the quicker we can create a world that is about "the pursuit if happiness" again.
The fact is that we don't live in the long term so although truck driving and coal mining are shitty jobs (and absolutely should be automated or eliminated) we have to take care of the current practitioners (both financially and finding a way for them to preserve their dignity) as their employment goes away.
Separately I don't think we'll need all that many robot designers either.
If there is shortage of skilled workers to do those jobs then they should train them too. The lack of long term job security has lead to the end of loyalty which means private companies have no incentive to train people which means the unemployed have to take on debt to study courses which aren't necessarily giving the skills they need. That and companies need to start sponsoring and training and accept that some will end up at a competitor.
While the article doesn't explicitly mention it, I'd assume that they're looking at productivity in real, not nominal figures, precisely to disentangle the effects of inflation.
Meaningful comparison across countries requires purchase power parity (PPP) exchange rates, rather than market exchange rates. However, this article doesn't really talk about other countries at all, so I don't understand why you bring up PPP here. If fewer hours of labour are required to buy dinner, that's just real wages, nothing to do with PPP...
And how does lower labour force participation enter? (If we assume that less productive workers drop out first, that should increase productivity, btw - which we don't see...)
I think a lot of the productivity mystery lies is due to artifacts in the shitty tools we have. For example, GDP is like the Dow Jones indices: designed to be easy to calculate with pencil and paper, plagued by necessary changes in their own baselines over time (mostly: what is counted and what is not), not terribly reflective of what we really want to know, and yet it would be stupid to discard them because we'd lose any time series. Everybody knows they are broken but nobody has any idea yet what would be better.
It's not like I have a great idea of what we should be using instead ettither. But I fell it's foolish to say "we have strong qualitative signals but since we can't find them in our model they are bogus". Especially since we all know our current theories are woefully incomplete and perhaps even inaccurate.
Those who don't see the productivity advance aren't idiots: those who, like me, believe in those signals justifiably have a large hurdle to leap.
Are marketing cost and G&A (general and administrative) increasing as a fraction of cost of goods/services sold? Perhaps it's the overhead of capitalism. Advertising just moves demand around; where the savings rate is low, it can't create it. There are a surprising number of products, from movies to telephone service, where the marketing cost exceeds the cost of providing the product or service.
One problem with a winner-take-all economy is that the cost of competition goes up, because being slightly better at the margin becomes more expensive. It's like sports; the additional input required for 1% more performance is a lot more than 1%, once you're close to the record.
It turns out renting office space or a big enough apartment/house to have an extra office is expensive. Wouldn't it be nice if somebody else paid for that? Perhaps somebody who also pays you and can then recuperate this cost with scale by putting multiple people together in the same area.
If everyone had their own home office, how much would salary have to increase?
Take San Francisco for example. Renting a 2-bedroom apartment instead of a 1-bedroom would increase my and my girlfriend's rent by about $1,000 per month. This would give one of us a good home office. The startup I work for pays about $10,000 to rent a big-ish office space. There are 15 of us working in it pretty comfortably.
That's a lot cheaper than everyone paying an extra $1,000.
(incidentally, the novel is great, still reads fresh, and is not primarily about work life in the 1950s/60s)
I don't forget what someone just told me.
I have a trail of requests and ideas from clients and coworkers.
if necessary I will jump on a phone call for faster data transfer.
the office is great for talking to coworkers, which is almost always about non work stuff, vs when I'm at home working and all my conversations are about work.
I rarely get interrupted when I'm in the zone unless it's an actual emergency.
I could go on.
I cannot incorporate something into my task list that's undocumented, and text (email or JIRA preferred, chat is sufficient for small things but can't be a priority item) is a fantastic way to ensure that it makes it into the queue.
... aand since people think it's weird and antisocial to communicate via e-mail, I end up abusing org-capture. I.e. I have a quick hotkey (C-c c t) to input and save a task directly to the self-organizing system I use, so if people absolutely refuse to send e-mail, they get an "uh, ok, thanks; I've noted it down and will deal with this later" from me, and I don't spend even 5 seconds thinking about it until the time is right.
Hell, I could give you a good dozen examples of interesting things that can't be communicated properly over long distance, but I'm never going to prove that here, am I? You're never going to understand how confident or uncertain I am. You're never going to grasp an idea that isn't already weighed down by the bias of my word choices and take it with it's natural abstract flexibility and apply it on your own terms.
So I won't take you at your word.
I restrict conversations about jobs, raises and things that require convincing to face to face encounters, but those are intermittent and not a daily or even weekly occurrence.
since the majority of my conversations are: hey, X needs to be done on Y, or build a mesos cluster on Z, or we're having intermittent connection issues on demo. It makes sense to have everything written down for reference, jira helps too, but getting the business side to create tickets is harder than it looks.
overall maybe it's more of a role based issue.
I also find conversations more of a lazy way to communicate. Most just talk and never really think. Forcing someone to validate their idea(s) to the point where they are writing them down helps everyone involved.
Finally, written down helps avoid the circular conversations and keeps others who were not present up to speed. Being able to go off and think and come back to exactly where the written conversation left off is a big win. Contrast this with the often endless meetings where the same things are discussed for a majority of the start of the meeting and at the end 1 extra decision is made.
To drop a data point - as a developer, there's very little in my job that would be done better by personal meeting that isn't handled better via asynchronous communication. Be it IM or e-mail, or whatever. E-mail preferably, because IMs seem to give people the impression they don't have to think before writing. As for things that do require personal meetings - I'd say some initial architectural discussions, when you really want to be together in front of a large whiteboard. That however could be moved to software too, if someone someday writes a non-utterly-shitty collaboration program.
But some office jobs actually involve creativity which seriously profits from being in the same room from time to time,
I can't speak to the general case, but to my experience with big corporations/enterprises.
Automation is rarely implemented, and when it is it's half-assed. And then a year or two later they try again, but the old system remains, and now your workers have to connect two systems manually. And then a year or two later...
Not my domain, I'm busy enough, but in one area of my org there are a ton of people whose job is, at its core, to manually synchronize about six databases. They also interface with customers, so that part can't or shouldn't go away. But they spend 80% of their time (estimate based on friends who worked there) doing that manual sync. Every time someone had the same thoughts as me but the power to do something tried to automate it, they ended up with an extra database that was only partially connected to the rest.
Too many stakeholders, not enough leadership.
On the other hand... maybe corporations are better corporate citizens than we give them credit for (i.e. not everyone is a "Chainsaw" Al Dunlap. who want to shed workers as quickly as possible. Maybe some actually want to keep people employed as long as they can.
https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reor...
There was an insightful article that I can't find for the life of me that claimed this sort of thing was the future of much human work - doing drudge work on the margins between automated systems, that's not worth the cost of automating.
On the former: perhaps the Jevons Paradox at work, or something alligned with it, Baumol's Cost Disease and Amdahl's Law both come to mind.
The Jevons Paradox notes that as a thing becomes cheaper, the total amount of it demanded can increase. A particularly noteable case of this is the cotton gin ("cotton-engine"), which roughly halved or more the cost of removing seeds and chaff from cotton, or alternately, doubled the labour productivity associated with it. A result was a tremendous increase in labour demand, which in Antebellum Dixie meant an increased demand for slaves. The US imported 80,000 slaves from 1790-1809, when imports were banned, then proceeded to increase the number through breeding through the Civil War.
In the case of office jobs -- decreased costs mean an increased demand.
Baumol's Cost Disease has a few elements to it, one is noting that some labour cannot be markedly improved in efficiency. Where physical production and manufacture becomes increasingly efficient, you'll relatively increase the amount of labour elsewhere within the economy, by definition in less-productive roles.
Amdahl's Law similarly notes that in any computer process, parallelisation will serve to increase the significance of the nonparallelisable portion of processing -- if a task is 90% parallelisable and 10% not (by time), then with a tenfold increase in parallelisation will result in roughly 50% of the task being nonparallelisable. The 10% of time is not fungible through parellelisation.
Another factor is being pushed to limits through competition. If other firms are extracting all possible value through increased office-and-administrative tasks -- marketing, HR, and other efficiencies, then companies which don't pursue these ends are at a disadvantage. It's not that there are more gains to be had, but there are the only gains to be had, and you'll lose by not pursuing them.
It's somewhat related (though I'm explaining it poorly) to the tendencies of those under extreme duress to take actions which seem otherwise irrational. Investors will buy high and sell low because they have an increased liquidity need when market prices are low. Dust bowl farmers would increase their farming intensity in the presence of both drought and low market prices because they had fixed debt obligations they had to meet to remain solvent.
(Gordon mentions the investor case in Rise and Fall.)
The "good case" was mechanized typesetting, the Linotype. This produced a huge increase in print shop productivity and a huge increase in the amount of printed material. The result was an increase in printing employment (That lasted until the 1980s; printing today is almost dead as a trade, and print shops have few people in them.)
The "medium case" was glassblowing. The introduction of automatic bottle-making machines did automatically what used to take a skilled team of five men working closely together. Bottle consumption went up sharply, and but employment in bottlemaking did not. The skill level went down, since feeding a bottle-making machine isn't that hard, so wages dropped.
The "bad case" was the stone planer. This was a machine to make stone lintels for the tops of doors and windows in brick construction. The stone planer made it much cheaper to do this. But lintel consumption didn't go up, because lintels are a small fraction of building cost. Lots of men with hammers and chisels become unemployed.
What the Jevons Paradox meansm more specifically, is that the cost of a good or service is reduced. Taking costs as opportunity costs (Krugman, Economics, 2008, "All costs are opportunity costs."), you're making a thing cheaper.
The response depends on what that thing is and what the relative demand is.
Printing (and communications/information in general) is, well, an opportunity for minting money. The capacity to spew more crap is pretty much endless (hence: the modern WWW). Reducing cost constraints will increase output.
The glassblowing case, and skill requirements, are one where you're probably seeing interactions with a larger, oversupplied, labour market. Offer a lower-skilled position, avail a larger pool, and cut labour costs whilst increasing output.
Stone planers meet an intrinsically limited demand, unless you can suddenly increase the demand for the product. Creating an interest in stone statuary, or stone walls, or something of the sort might work. Pet rocks, Beanie Babies, Bratz Dolls, iPods.
That's a marketing problem....
I've been kicking around other areas and interactions of reduced costs.
Reduced travel costs (railroads) made holidays and holiday resorts possible, as well as commuter suburbs. Automobiles increased these trends, and created back-seat sex (mobility, privacy, opportunity, virility...).
Low-to-zero-cost email created spam.
Low-to-zero-cost webhosting, plus copious data and ad networks: weaponised viral clickbait.
Low-cost long-distance service: robocalls, Carol from Account Services, and Microsoft Support calls.
Increased travel almost always introduces more disease vectors -- from the Silk Road to Roman highways to Columbus and the Age of Discovery cross-polinating old and new world diseases. James Burke of Connections suggested that the biggest legacy of the jet airliner age might be in epidemics. He made that observation in the mid-1990s, with hindsight on the AIDS epidemic (one "patient zero" was a flight attendent).
I'm trying to come up with a good general term for these effects -- along with pollution and systemic problems (crime, fraud, corruption, public health crises), I'm leaning toward "hygiene factors" -- things that can reduce your capabilities. Open to suggestions though.
https://www.worldcat.org/title/chapters-on-machinery-and-lab...
TIA finds no matches: https://archive.org/search.php?query=Chapters+on+Machinery+a...
SciHubbed review http://www.journals.uchicago.edu.sci-hub.bz/doi/10.1086/2539...
I'll have to get and scan that.
75% of knowledge worker telecommuters that I've run across who aren't doing tracked tasks are doing very little.
We do have a lot of empty office blocks, especially in midsized cities. Even in NYC, there are plenty of mid rise buildings that are minimally occupied, as automation ate up the armies of clerks who once inhabited them.
In my experience as both and employee and employer, you can't. Even in the office it's not like you can tell people "come up with good solutions". It all turns into make believe work.
As an employer we simply don't hire people anymore who need that type of supervision. As a result our possible talent pool expanded from our city to the entire world.
Marketing has a special feature - in a competitive market, it becomes a zero-sum game. You're putting an ever-increasing amount of money into it, but getting only marginal gains out of it. It's a coordination problem. As the industry grows, you end up with chains - ad companies selling tools and services to other ad companies, that bundle those tools and sell services to other companies, which sell their services to companies that use those services to offset each other's use of those services... I think that's why the ad industry is growing so much. There's a lot of space for bullshit jobs there. One would say, almost unlimited.
My hypothesis: the optimal amount of advertising spend on a big-picture basis is far less than the actual amount, maybe by an order of magnitude - but a competitive market economy won't get there without some heavy disincentives applied by the state or the public (no tax deductions; "centralized" neutral marketing by journals, blogs, Amazon reviews and clubs like Consumer Reports or Stiftung Warentest; heavy penalties for astroturfing/perverting such neutral reviews etc.).
Now we have actual feedback, and the results are tremendously disappointing to everyone except two categories: companies who are completely unknown, and companies who are part of a dominant 2-10 vendor market.
If you are completely unknown, any advertising improves your situation.
If you are a market leader battling for the top few slots in a giant consumer marketplace, huge spending can change consumer perception a little. Getting 2% more sales at the expense of your competitors may be worthwhile.
But the bread-and-butter of advertising was everybody in between those two extremes, and the actual effectiveness is now known to be basically zero.
1) Economic progress from the industrial revolution is about quantity. We learned to make a lot more stuff. The industrial revolution is not quite done, but the impact is less and less every decade. We may never match that quantity growth of stuff because we don't even want more stuff, we only want better stuff. And we're getting better stuff and more variety.
2) Info. tech. IS being mismeasured and it's huge. We're not all imagining it. The economics of info tech are REALLY good except in the official GDP numbers. And arguing that it's not counted in economic measurements doesn't debunk the mismeasurement claim, it supports/explains it. What's more, info tech decimates a lot of industries - music, GPS, newspapers, travel agents, etc. And self-driving cars are probably going to decimate the auto industry and wipe out a lot of logistics related jobs. Everyone(A) will be better off but official GDP will fall.
3) Wages aren't growing largely because the economy needs more skilled and more managerial workers, but we don't seem to be producing a lot of them(B). It's an awesome time to be a skilled worker. Good and growing pay and billboard signs desperately seeking talent. There's no end to work that needs to be done with the right skills. Meanwhile, unskilled workers aren't so useful anymore. They were well off when anybody could sit in an assembly line and produce a lot of stuff. But now unskilled workers don't really produce, they mostly trade their time for other people's time (e.g. by cooking their food) and they do so from a weak negotiating position. I don't see any of this changing anytime soon.
(A) Everyone = the vast majority of people
(B) Anecdotal, I could be wrong
Take Google, for example. The (economic) value that Google provides to me is far more than I pay for, which is zero. It's even far more than what Google makes from the ads it serves me. Google is capturing as revenue only a small fraction of the value it creates. That (and similar cases) are why much of the info tech economic/productivity gain doesn't show up in the official GDP numbers.
If you get a lot of value from something you pay nothing for, and it doesn't increase your job output in dollars and cents, then there's no reason it should increase GDP.
GDP increases are nice, but they are by no means the only important thing to consider. many other considerations must be made when creating or changing public policy.
> something you pay nothing for
So, obviously, yes, if you buy ice cream GDP will go up.
Take Linux + Apache, for example. I can create a business for very little money because those are available to me for free. But are they only economically valuable when they cost money? If I used Windows to create my business instead, that would contribute to GDP, even if my business failed. Two (not perfectly) equivalent products, but one counts as GDP, and the other doesn't. Once you see that "economics" can contain more than dollars, then you see that GDP isn't the correct measure of economic activity.
And if you do, that business shows up in the GDP.
What's the commercial value of a free live streaming app that captures evidence of a (say, for the sake of argument) a police assault, which eventually leads to a riot?
GDP is like a summary of all relevant execution paths through code. But it's really a list of paths that are considered relevant for traditional reasons.
It's not a complete picture, and in many ways it isn't even a useful one - because there's a huge implicit social morality tied up in econometrics that makes assumptions about social value.
Those assumptions are becoming less and less relevant for all kinds of technological, political, and even economic reasons.
[0] - a thing that nicely differentiates those who understand math fundamentals from those who don't - realizing that all theorems have a set of assumptions behind them, and are not valid outside that assumptions
Clean your own house - no GDP.
Pay someone to clean your house - GDP.
Same amount of work is being done, but GDP only counts what is paid for.
If we're talking about how good the economy is, I'd argue that we should count all the good (and bad) that the economy is doing, not just the GDP.
These are indirect costs, but they still have an overall economic effect.
You could argue - perhaps with some justification - that the net value generated by Google search is more than the net economic costs. That would be an interesting thing to try to estimate, and so far as I know no one has attempted it.
But that just highlights the underlying problem, which is that most mainstream economic models are completely unfit for purpose.
We're trying to run a 21st century economy using banking systems that haven't changed in principle since the 15th century, and econometrics that have barely evolved since the 19th century.
And all of that happens with a huge political bias that overestimates the value of some activities - including speculation, and other forms of wealth capture - and underestimates the value of authentic wealth generation.
In fact no one knows how well the economy is doing, because we barely have any idea what an economy is - certainly not in 21st century terms, where "the economy" is clearly a global pattern of resource flows, innovation, and future potential, not just an epiphenomenon of national or corporate accounting.
Not calculating GDP correctly is a tiny symptom of that. A full solution is probably going to need a complete reinvention of the entire field.
The funny thing is, Google basically enables my job. Good luck searching even on StackOverflow without it. Of course I could program without it, but it wouldn't be the same kind of programming, the projects wouldn't be the same, they wouldn't move that fast. Google is an excellent engine for browsing distributed documentation (i.e. all those random webpages detailing how to use the thing XYZ you need).
The people who made Fisher Price toys in East Aurora, NY were made redundant by equally low/moderate skill workers in Mexico and later China. Your undershirt was made in North Carolina until the late 80s, and shifted to a variety of places until it hit the bottom -- Bangladesh.
The IBM people who assembled Power servers in Minnesota were replaced by Mexicans. The Dell folks in North Carolina and Texas were replaced by Mexicans, Taiwanese and Chinese.
What you characterize as low skill work and workers still exists and isn't being automated away to the extent that the average HN commenter would suggest.
I question the value to the consumer as well. The shoes on my feet are made in some mega-factory in Guangdong. They cost more than the shoes I bought a decade ago that were made in Maine, and are of similar quality. IMO there's a lot of middlemen or some sort of self dealing going on -- producing shoes in massive bulk should push prices down, not up.
You have to follow your own rationale here trough.
What happens when mexicans become richer and also concerned about safety at workplace because now they can afford to worry about it?
This is why even china is outsourcing to even cheaper places, robotics or why when production sometimes comes back it's in fully automated factories.
They get canned and the work gets shipped out to China.
Look at infant mortality and mortality to 5 years old in 1800 vs 1850 vs 1900 vs 1950 or so. How much is it worth not watching your children die?
The addition of water and sewage into housing had a huge impact. Dramatically reducing the labor required to live and dramatically reducing disease.
Look at life in 1800 vs 1900 and the percentage working on a farm. It was probably an improvement to live in a town or city and not have to get up at dawn and work in a low productivity farm.
Look at how life expectancy shot up. How much is it worth looking at your grandchildren grow up?
Sure, since 2000 we have vastly better internet connected phones and social networks and it isn't well measured. But what wasn't well measured in the past was probably worth more and was more important for people's lives.
This was my thought. This kind of measurement of the economy conflates maximum potential productivity with market demand, in essence assuming a supply-limited scenario. We've reached the point now where most people in first-world countries have as much as they want of most things that aren't super new, super expensive or super high tech. Production is now demand-limited.
This is not a process that creates value in the same way that using energy more intensively, to spin wheels, lift objects, melt iron, or process chemicals, grows value. In past iterations, we've always had a link between energy intensity and industrial growth.
But now we have a huge demand for new designs that reconsider the same processes, using a similar amount or less energy than before. The amount of labor that can go into designing that stuff is similarly huge. But it's a superstar situation - a few people make big breakthroughs by chance. We are "less" productive on average, routine work doesn't reap the benefits, and capital allocation doesn't have the guarantee of power it used to, in a world where tiny software startups are constantly scanning for a new platform lock-in opportunity. The economy stumbles from one speculative bubble to the next, trying to resume a paradigm of the past. It's a very chaotic, disruption-heavy, what-have-you-done-for-me-lately future that we've built for ourselves, and it's made everyone a little more insecure even as it produces its share of new wonders.
This has many reasons behind it, including political factors such as the decline of unions and increase of free trade.
Perhaps we're entering a period where there are simply too many people for too few jobs. This keeps unemployment high, wages flat, and removes the incentive for companies to invest in automation.
Jobs that aren't labour-intensive are typically higher and higher skilled. IMO there are too few highly skilled people in many skilled professions, especially in countries like the UK, which no longer have a robust apprenticeship system. Shoddy work is the order of the day. If there were more people competing for the jobs, I'd expect lower prices and higher quality.
And tech? It's almost impossible to hire really good people.
Slaves were far too cheap.
A developing thought: the industrial revolution, writ large -- starting with the Medieval industrial revolution of increased use of wind and water power, was in many was a continuously ramping-up circumstance of living close to (but not immediately at) the thresholds of subsistence, having available opportunities for improvement, and having a gradually increasing degree of technical complexity in tapping into those opportunities, which developed as the challenges and opportunities increased.
If you're not testing your limits, you've got no incentive to improve.
If you've pursued some improvement, but are then contented with the results, you'll continue in a "fat and happy" existence. This has occurred in several places and times through human history.
If you're pushing at limits, and are aware of the concept of technological advance, but the resources aren't available, you'll tend to slide into decline. Arguably this happened to the UK following WWI. England had steamed into modernity on the basis of its coal reserves, but switching to oil, without (then-known) reserves, she stumbled and the United States picked up the slack.
(Why the Middle East didn't exploit its own oil reserves earlier is a tremendously interesting question -- whether for want of technology, industrial capacity, or other reasons. I'm planning on looking into this.)
Another possibility is that the technological leaps are simply too great. The Middle East question may have been a case of this, and the West (and world at large) may face that conundrum in switching to renewable or sustainable energy options.
The way economists measure productivity is by the monetary value of the thing produced. Thus, productivity gets tied in with inflation and deflation. Suppose you make widgets, and can make 10 of them per hour. Suppose you sell each of them for $10 bucks. Now suppose inflation hits and the price of the same widgets is all of a sudden $20 per hour. You still only make 10 widgets per hour. But all of a sudden you are twice as productive according to the way the government and economists measure productivity.
The opposite happens when deflation occurs. If your widgets all of a sudden start selling for $5 per hour instead of $10, you will be considered by the official economic analysis to be twice as lazy even if you work just as hard and make just as many widgets per hour.
And there you have your problem. Deflation is hitting everything, but it is hitting industries that benefit from productivity of new technology the hardest. Take a serer cpu made today that can perform 100 times as much work as a server cpu made about 10-15 years ago. Is intel considered a hundred times more productive when they make this cpu that does 100 times more work? Of course not. Their productivity is based on how much the cpu sells for and since per cpu prices have held stable to slightly decreasing over that time, intel's productivity for that particular cpu is deemed to have decreased as well.
Or take pictures. Twenty to thirty years ago there were probably over a hundred thousand people working in photo development shops making pictures for people. Now about a 100-200 programmers (estimated) among Google, Apple, Facebook and yahoo probably provide the vast majority of picture viewing services in America. Is that a great increase of productivity? It should be, because a hundred people are doing the same stuff a hundred thousand were doing twenty years ago. But officially it isn't because picture viewing is considered to be free, so no revenue is assigned to it.
So productivity growth is happening, but unfortunately it is accompanied by large drops in pricing, which make the official measure of productivity look bad.
Why are prices dropping? This has to do with something journalists do not like to talk about -- wage stagnation, income inequality, etc.
. If Gordon is right, sagging productivity figures simply reflect
. the fact that scientific progress doesn’t have as much impact on
. the economy as it once did. Rather than waiting for productivity
. growth and wages to rebound of their own accord, Gordon supports
. policies designed to expand the size and quality of the labor
. force, such as raising the retirement age, letting more
. immigrants into the country, and expanding access to higher
. education.
Regarding 2), I have no doubt that potential immigrants think they can be more productive in the US than elsewhere! But that doesn't imply that their participation in the US labor pool will boost productivity further still.
Why should the US not have many fewer people and why couldn't that be better? There's nothing magical about 315 million people. A much smaller population would be better for ecosystems, global warming, etc. I'd demand the proviso that the population shouldn't be decimated overnight and that the age distribution can't be too skewed (too many youth or too many old). But barring that, I don't see why some lower population (even tenfold fewer) couldn't be "better".
In the past, I'm sure a clothes-washing machine must have felt pretty obvious even if people weren't sure what it was. It's always been a pain to do laundry and there had to have been a wish for some sort of contraption to make it drastically easier, even before knowing what that contraption would be.
When I think of real constraints in daily life, I can only think of things like - the effort of transition from waking to working, commuting, perhaps the convenience of having nutritious food that improves your health, and... what else?
What sorts of things do you think of when you say, "I wish I could just snap my fingers and..."
- Folding laundry
- Setting a table
- Ironing shirts
- Cleaning the house
- Doing taxes
-.....
One day we'll look back on these activities as we look back on hand-washing clothing, drawing water from the town well, burning coal/wood for central heating, etc.
The question is: what will "we" be at that point.
I truly feel that we won't be considered truly civilized as a species until some child has to ask their mother, "Mommy, what was pooping?". The child would then slowly grow more and more horrified as their mother explains what people had to do in their daily lives in the past. "Mommy, that's disgusting! How did people live like that?"
We still have a very long way to go.
In short, productivity growth may be lagging because of AI etc; it's because people have to spend time retraining for jobs not obsoleted by new technologies. He briefly states his rejection of Gordon.
[1] https://www.whitehouse.gov/sites/default/files/page/files/20...
But then again, the problem may be Internet in general - I can't imagine people being able to do so many non-work errands while in the office if it weren't for e-mail in particular.
When people wanted to zone out they read books, usually. Audiobooks were also common. I brought the entire series of Discworld novels in on pdf, and managed to read the entire series while I worked there. I also wrote a bunch of notes down on paper.
Hell, when I was working in warehouses away from computers entirely I'd still zone out during it and mentally work out some ideas for personal projects once I was done with work. Sometimes I actually miss that, since I seemed to have a lot more ideas then.
Point being, you don't need computers or internet for people to find ways not to be 100% productivity machines.
> First, they said, mismeasurement has always been an issue in the information-technology sector, and it was just as big an issue in the period from 1995 to 2005, when productivity was growing rapidly.
If your hypothesis is that non-technological productivity growth has reached its peak but technological productivity growth is accelerating, then this is exactly what you'd expect. And you'd expect the mis-measurement issue to take you much further from the mark then you do now.
Saying that mismeasurement has always been an issue completely ignores the fact that how big of an issue it is relative to other factors may have changed.
> Second, the productivity slowdown hasn’t been confined to sectors in which output is tough to measure: it has been broadly based
This is just stating the contradiction of the original hypothesis. If mis-measurement is an issue, how do you know that it's broadly based?
> And, finally, many of the benefits that we’ve reaped from things like smartphones and Google searches have been confined to non-market activities
While true, it's hard to imagine that things like access to Wikipedia, Stack overflow, instant global messaging, etc..Haven't significantly enhanced productivity for a variety of office workers as well. Not to mention automation technologies a la Amazon's Kiva robots and other factory automation tech.
I wonder if the reason productivity is going down is that the current cohort of 2010s technology companies may actually have the opposite aim: consuming people's attention and time.
Things like social networking, advertising supported businesses, mobile gaming, &c., aren't saving people time at all.
> technological advancement just ain’t what it used to be.
We're about to see millions of human roles vaporize when automated driving hits home. This isn't like the dishwasher or desktop calculator. We've already seen self checkout stations. How long until whole stores are automated? Eg: http://newatlas.com/go/5028
> Many productivity-enhancing new technologies are capital goods—think back to the moving truck.
Bullshit as well. Hardware is rapidly approaching free as services dominate. Plus most of our readers shift capex to opex by cloud hosting, for example. Furthermore, offshoring and free trade means you won't invest in equipment because you're not even making the widgets any more, in house.
> Look at what an ideal kitchen looked like in 1955
Mostly irrelevant when "instant gratification isn't fast enough". Our kids can't even be bothered to microwave something in 30 sec, so prepackaged convenience, dominates households.
Finally, what does corporate malfeasance (eg VW emissions, banking crisis, LIBOR fraud etc) do to productivity?
I think this is a more honest assessment: http://www.businessinsider.com/alan-greenspans-mistake-has-l...
In particular, we're seeing challenges, from within the economic establishment, of the prevailing view of the past 60 years or so that economic growth is normal and perpetual.
On your first point: Gordon illustrates this in exquisite detail, but the impacts of technological innovation (vs. the rate of innovative change disrupting procedures, devices, companies, etc.) have fallen tremendously over the past 150 years. Gordon looks at the period 1870 - 2015, divide roughly into three (almost) 50 year periods: 1870 - 1920, 1920 - 1970, and 1970 - present.
In the first 50 years, you saw virtually all the innovations you will find around you today, in at least some form. Steam power, electrical generation (and light, heat, motion, sound recording & transmission), radio, elevators, cinema, sanitation and sewage (far more responsible for improved life expectency than all the rest of medicine), elevators, skyscrapers, and most of all, petroleum and its consequences: cars, trucks, power tools, plastics, and more.
It's almost easier to list what didn't develop: TV, penicillin, DNA, computers, lasers, nuclear power, gas turbines, and satellite launch capabilities.
What developed from 1920 - 1970 were the applications and utilisations of those technologies.
Gordon notes that the home of 1920 was connected to five networks: water, gas, electricity, sewage, and phone. I'd add two more: the postal and package delivery networks, which whilst not fully end-to-end, provide the foundation of the Amazon of its age, Sears, Roebuck and Company.
The fundamentally new technologies from 1970 to present have been far fewer, almost entirely concentrated into communications, information and entertainment, and have had vastly smaller impacts on work, home life, health, and transport than the innovations of 1870-1920 and applications of 1920-1970. (Again: covered in detail by Gordon.)
On productivity-enhancement as capital goods: I'm finding your argument unpersuasive. Capital equipment, the energy to drive it, and its organisation are key to productivity. Much now derives from how pieces are organised -- WalMart and Amazon are as much logistical companies as anything else. But yes, capital plays a huge role.
Of the kitchen, your third point: again, the contrast is the kitchen of 2015 vs. 1970 vs. 1920 vs. 1870.
In 1920 you may well have had a wood-burning stove (gas was being introduced), no refrigerator, in some homes no running water (Gordon highlights the total amount of hauling that was required in the 1870 home: water, wood, and food in, various wastes out, little arriving on its own).
The change 1870 - 1920, 1920 - 1950, 1950 - 1970, and 1970 - 2015 of kitchen appointments has shown a tremendous fall in rate. That microwave your kids can't be bothered to use didn't exist in the 1970 kitchen, but that's about it.
VW's behavior may well be a consequence of firms pressurised to ever-increasing returns in light of declining rates of growth, or of declining absolute productivity.
I remember the first verse of this song, back in the '90s when economists were wondering if information technology was a productivity sink. All of this new fun stuff was everywhere, but productivity measurements were going down. At the same time, just-in-time inventory management was acknowledged as the greatest innovation since sliced bread---and you can't do that without information technology. And the changes since then have only made IT more central and that has reduced the friction to do essentially everything else.
Final stance: there is no such thing as infinite growth on a finite planet.
Of the good: Gordon's book is a tour-de-force of the past 150 years (nearly) of economic progress in the US, and documents impacts on everyday life meticulously and engagingly. I and numerous reviewers, several of whom I strongly suspected to disagree, find the case he makes for a hump-shaped growth curve -- that is an increasing accelleration from 1870 - 1950, followed by a slowing accelleration, though continued growth, from 1950 to present -- compelling.
Gordon also makes a good case for several of the factors contributing to the exceptionally vibrant growth from 1920 - 1950, including especially the stimulus of World War II and the post-war recovery. But also the very fundamental nature of many of the innovations brought online at the time.
His treatments especially of transportation, communications, healthcare, and household life are spectacular. I recommend them highly.
There are some missing elements though.
Gordon never uses the phrase "Maslow's Hierarchy" -- the pyramid of needs that humans must have met, starting with food, clothing, and housing, and extending through safety and security, social engagement, and self-fulfillment. He does address many of these individually, and notes that early innovations tended strongly to address the base elements, and of the importance of security and predictability (a tremendously under-acknowledged failing of post-1970 economic experience) among individuals.
A possible defense of ongoing growth might be made by seeing the present period as one of a consolidation and development of technologies -- say, very large datacenters and broadband backplanes, as well as increasingly capable mobile devices and programming tools for developing them -- which may see some future breakout. Gordon seems in this, and several other areas, particularly incurious.
Gordon's life work is largely focused on GDP measurement, and he leans very heavily on this. His argument is that GDP underaccounts for true improvements in lifestyle, an argument with some merits, though others argue that it overaccounts by failing to take into consideration diseconomies. It's curious that Gordon doesn't explore alternative quality-of-life measures suggested by many contemporary critics of economic orthodoxy.
More fundamentally, in not addressing them, Gordon raises some very profound questions over the fundamental basis of economics. What is wealth? What is value? How is value associated with cost and price? How should costs of renewable vs. nonrenewable resources be considered? Is energy a fundamentally different economic input? What is the relationship of energy to economic growth? What is technology? What is the mechanism, or mechanisms, by which technology does, and doesn't, promote increased productivity? What are the market-mediated impacts of improved productity, particularly as expressed through the Jevons Paradox, Giffen, and Veblen goods? How does one measure quality? How does one measure the total capacity or capability of an economy?
These aren't easy questions. They are, I'm finding as I research economic theory and its history, less ridiculous, and rather more explored, than I'd have thought. There are some exceptionally notable departures and paths taken in economic theory over time, often poorly addressed in the current curriculum.
As with some of the infrastructure issues above, Gordon's marked disinclination to pick up stones, particularly ones on which sacred cows seem perched, strikes me as a singular weakness of his book.
There are other authors, mostly neglected, who've explored this space. Eric D. Beinhocker's 2006 book The Origin of Wealth, Nicholas Georgescu-Roegen's Entropy and the Economic Process, W. Brian Arthur's work on the economy as an evolving complex system, and others. I see the questions and explorations as deeply related.
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Notes:
1. http://www.nybooks.com/articles/2016/08/18/why-economic-grow... Nordhaus is cited in Gordon for his work on economics of both computers and lighting, and addresses advances of lighting (and underaccounting of these in GDP) in his review. It's an interesting exploration of limitations of economic measurement.
I am particularly interested in this. My intuition tells me that energy is special because it is the only thing that the laws of physics says cannot be recycled. And that, given enough energy, everything else can be.
Entropy is the degree of disorder in a system.
Emergy is source energy (which must be defined in a formal definition, e.g., typically solar emergy) which is bound up in a particular product or energy source.
Of these, time passes (whether you do something or not). Capital is generally not immediately consumed (you might consider enzymes in biological processes as similar). Information isn't consumed (though may decay with time). Raw materials are transformed but fundamentally continue to exist.
The distinction is energy, and in particular energy derived from fuels rather than flows.
The most-mined material on Earth is coal. Oil and gas follow closely. After these, it's sand, gravel, aggregate, and rock -- we never truly left the stone age, we just process our stone far more effectively.
After processing iron ore, you're left with iron or steel, which can, at least theoretically, be recycled. Other materials operate similarly.
Fuel for living beings (that is food) is part of a flux attached to solar power (and mineral cycling), which is renewed annually.
Fuel-based energy isn't. Coal, oil, or gas, once burnt, won't re-accumulate until recharged, on scales of 1,000 to 1,000,000 or more times longer than their use-cycle (that is, we're using coal, oil, and gas 1,000 to 1,000,000 times faster than they were originally laid down). There's a wonderful paper exploring this, Jeffrey S. Dukes, "Burning Buried Sunshine" (2003), availble at stanford.edu, highly recommended.
Vaclav Smil also gets into this dynamic, I in his book Making the Modern World, in which he excludes from consideration food and fuel as materials of the modern world (along with air and water):
Exclusion of food and fuel is justified not only because these two large consumption categories have been traditionally studied in separation (resulting in a rich literature on achievements and prospects) but also because they simply are not sensu stricto materials, substances repeatedly used in their raw state or transformed into more or less durable finished products.
Unlike raw biomaterials (wood, wool, cotton, leather, silk), metals, nonmetallic minerals, and nonrenewable organics (asphalt, lubricants, waxes, hydrocarbon feedstocks) foodstuffs and fuels are not used to build long-lasting structures and are not converted or incorporated into the still increasing array of ephemeral as well as durable industrial, transportation, and consumer items. Foods are rapidly metabolized to yield energy and nutrients for human growth and activity; fuels are rapidly oxidized (burned) to yield, directly and indirectly, various forms of useful energy (heat, motion, light): in neither case do they increase the material stock of modern societies.