I disagree with AG's claim about productivity. Almost surely it has fallen to zero. This is due to the way they measure productivity which is essentially impossible to measure. How valuable is an idea?
You might have heard one hack on the committee say that people already have their productivity enhancements in place like computers, and reductions of employees, so how could productivity be strong? The guy was a hack, but he had a valid claim. It isn't strong, but it is a diminishing factor.
It's well worth investigating how productivity is measured. The measure is ambiguous:
The traditional measure of labor productivity—output per hour—was first published in 1959, and represents the culmination of a long series of developments in productivity measurement in the Bureau.
1. Output, measured net of price change and inter-industry transactions
2. is compared to labor input, measured as hours at work in the corresponding sector.
How clean is the measure for output? They base it on prices and transactions. What if there is inflation? They have to adjust it. Based on what? Price change! Transactions change isn't sufficient because it doesn't tell you what is added. It's only turnover. That's why they add the prices changed aspect. They presume that that tells you the added value when it may only be telling you more about how much extra money the FED is creating.
As far as the labor input is concerned, is that what AG's WinXXX productivity is based? It seems that computers increase the time you work, but enable you to increase the volume of results. The question is if there is enough added value in each increment of volume to justify the extra hours worked. There is also the aspect of possibility. Whereas there might not be the added value but it may not be possible to create the volume without the computer and the volume has become apparently necessary. Also, productivity isn't only measured by computer enhancements. The main issue is how much effort is put out rather than how many hours. Is that measurable?
Historically it has been the case that in similar circumstances to the current evolving environment productivity measures fall. Either inflation erodes it or labor inefficiency rises due to layoffs. This isn't optimal because one person has to do the work of two and they can't do it effectively.
The whole issue is murky and doesn't need to be computed. It does if you're under the theory of demand management. Why does anyone need a productivity measure? In a free market that's all taken care of without fine tuning. Instead, what we have is central bankers making money supply decisions based on their assessment of productivity. It's just another random input. |
