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To: pater tenebrarum who wrote (127780)	10/7/2001 9:45:15 AM
From: Don Lloyd	Read Replies (2) \| Respond to of 436258

hb - As a dedicated believer in recycling, (NOT!), the following was my recent rant on productivity in response to an observation that higher future returns on stocks would be expected from increases in American productivity. - This is a common fallacy, and an erroneous expectation, in my opinion. Most increases in productivity are generally available to all and the expected benefits are competed away, and more often represent a required investment in an attempt to survive, rather than an increase in profits and return on investment. As productivity increases, more and more of the existing capital structure becomes obsolete and is destroyed. For an increase in productivity to increase profits for a given firm, the firm must have a sustainable competitive advantage, and the financial strength to make the required investments. As productivity enhancements apply the evolutionary guillotine to the departing firms, their shareholders certainly do not experience the 'higher future returns on stocks'. It is the suppliers of productivity-enhancing capital equipment that typically reap most of the financial benefits of the productivity improvements. However, even they are vitally dependent on the viability of their potential and actual customers, to whom they have provided a double-edged sword. If increases in productivity are not matched by increases in the addressable market, the resulting over-capacity will often decimate the selected sector. Even the survivors will be severely injured as long as the losing firms remain in the process of liquidation and depress prices. A long term demonstration of this is the U.S. agricultural sector, in which a long term increase in productivity of 3.5% per annum over at least one and a half centuries has resulted in an enormous continuing level of consolidation, even after massive taxpayer and consumer subsidies. Of course, consumers, as consumers, benefit from the lower final product prices that the increases in productivity and competition produce. This increase in the standard of living helps illustrate the fact that an economy cannot be accurately characterized by relying on the parts of the economy that appear to support the illusion of measurability. It also means that a given sector subject to high rates of productivity growth increasingly tends towards economic irrelevancy as its falling or stagnant product revenues (and employment) come to represent a smaller and smaller proportion of total economic activity. Regards, Don

To: pater tenebrarum who wrote (127780)	10/7/2001 10:52:51 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 436258

Merrill Lynch's chief economist on how hard policy makers are "working on your behalf">> interactive.wsj.com But offsetting all the bad news, Mr. Paulsen said, are policy decisions intended to get the economy rolling again. "The entire focus of every policy official around the globe is aimed at creating capital gains in your portfolio," he said. "It's nice when you think about how hard a lot of people are working on your behalf."