mb -
(Right you are -- competition works for commodity markets. Agriculture is an excellent example of what you were saying. However, I assume from Greenie's excerpt that economic numbers capture the process.)
Let me try a slightly different statement. -
Productivity growth, hidden or not, has NO necessary relationship to the investment/business/economic performance of a company, an industry or a statistical economy. (Statistical economy does not include the unmeasurable subjective benefits to consumers of lower prices and increased choices).
As further examples, DRAM and Disk Drive manufacturers may well have unit bit productivity growth rates of (say)40%/annum for some or all factors of production, but more than 100% of the benefit likely flows to consumers.
From a business POV, increased productivity may be either a path to higher profits, or a requirement for survival. Productivity will best flow to the bottom line when the competitors are competent but inferior. If the competitors are not inferior, ROI will be driven towards the risk-free rate. If the competitors are incompetent, ROI is likely to be driven negative as long as the competitors survive.
Commodity status is probably a matter of degree, rather than a black/white absolute. All products at least compete for consumers dollars.
Regards, Don |
