
Why Is Productivity So Weak? Three Theories - Osiris30
http://mobile.nytimes.com/2016/04/29/upshot/why-is-productivity-so-weak-three-theories.html?_r=0&referer=
======
toufique
Possibly because it's a lot easier today to generate income without
"producing" or creating new value.

"Sayer argues that the past four decades have been characterised by a transfer
of wealth not only from the poor to the rich, but within the ranks of the
wealthy: from those who make their money by producing new goods or services to
those who make their money by controlling existing assets and harvesting rent,
interest or capital gains. Earned income has been supplanted by unearned
income."

Source:
[http://www.theguardian.com/books/2016/apr/15/neoliberalism-i...](http://www.theguardian.com/books/2016/apr/15/neoliberalism-
ideology-problem-george-monbiot)

~~~
StanislavPetrov
That true, but it also has to do with the way productivity is calculated. If
Joe borrows $10,000 from John, and loans $10,000 to Jill, and Jill uses that
$10,000 to pay back the money she owes John, that counted as $30,000 worth of
productivity as far as GDP is concerned. "Economic activity" does not equal
productivity. If the government hires one person to dig a hole, and another
person to fill it in, that's "economic activity" but it sure as hell isn't the
productivity that GDP says it is.

~~~
matt4077
No, borrowing and repayment are not included in GDP.

But there are some almost similarly absurd situations. If you paint your
garden fence and your neighbor plants some potatoes, that doesn't count into
GDP. However, if you buy your neighbors potatoes, and she pays you to paint
her fence, those exchanges become relevant (ignoring the fact that small stuff
like this is hard to measure).

This is more relevant than one might think. Considering one of the largest
economic developments in the last half century was the integration of women
into the labour force, growth statistics would look quite different if were to
assign a fair value to unpaid housework they used to do.

~~~
Sharlin
If you need potatoes but don't feel like growing them yourself, and you like
(and/or are better at) painting fences, then exchanging favors (whether or not
involving currency) creates value - it's a positive-sum game.

~~~
matt4077
Yes, absolutely! It's the tenet No 1 of a market – when people freely exchange
something, both are better off. (No 2: there's some stuff that you can't do
without cooperation).

But in the potato-case, all the potato-value and great-fence-you-have-there-
value gets added to GDP, where realistically, output only grew by whatever the
increase of efficiency was.

~~~
tonmoy
Yes, but apart from the women's integration into the workforce scenario, how
relevant is this? It doesn't feel like that huge trades happen with
"transaction of favor", instead all probably use money.

~~~
Spooky23
Big examples:

Grandparent childcare.

Eldercare.

------
meric
Or maybe, just maybe, companies find it cheaper to hire new employees due to
the number of people who permanently couldn't find jobs, than to invest in
increasing productivity. The past 8 years of overestimating economic growth by
central banks have clearly shown hope is not sufficient to boost the economy
on its own. Central bank balance sheet have exploded, exploding price of
assets, making in unattractive for businesses to invest. They would rather
perform stock buybacks from borrowing money, send it to investors to be
consumed. In terms of real physical capital (as opposed to financial), the
American economy is actively divesting. Any supposed GDP growth from the
current monetary policy is due to capital being actively consumed, increasing
spending temporarily. The data showing lack of productivity growth supports
this pessimistic scenario. Central banks will do well to hike interest rates,
collapse the markets, destroying the zombie and hangers on companies, so their
physical assets go on firesales, releasing physical capital at massively
deflated prices, for well run and well managed companies to gobble up. Only
this will rejuvenate the American economy and return its status as the world's
economic growth powerhouse.

Remember, the current Silicon Valley boom started in the mid-2000's due to the
collapse of costs of IT, with the advent of cheap Internet and cloud
computing, not because of low interest rates. The cost of building capital got
so low from 1999 people were doing it in their parents basements eating ramen.

~~~
jordanb
That's supported by the observation in the article that companies are not
investing much capital in improving productivity.

If you've ever seen video of a Foxconn factory you've seen the rows of people
carefully placing ICs onto circuit boards. In fact, there are machines to do
that. They're called pick and place machines[0]. They've existed for many
years. But labor in China is cheap enough that it often makes more sense to
pay humans to do it manually than to invest in automation.

[0]
[https://en.wikipedia.org/wiki/SMT_placement_equipment](https://en.wikipedia.org/wiki/SMT_placement_equipment)

~~~
eitally
I'm not 100% certain but I'm pretty sure you don't know what you're talking
about.

There are several types of components that require surface mounting on PCBs.
By far the most common are things like resistors & capacitors that are machine
placeable. But others, like BGAs and through-hole components, often require
hand placement because they require hand soldering and can't go through a wave
solder machine. Additional possible complications are boards with components
placed on both sides, or multi-layer boards with non-standard solder. Finally,
Debug/Repair stations are always manual.

Source: Masters in operations research and 15 years experience writing factory
control software for one of Foxconn's direct competitors & largest trading
partners.

~~~
mrob
BGAs are nearly impossible to hand solder. You can theoretically do it by
flipping them upside down and soldering individual wires to each ball, but
this is very difficult, unreliable, and harms signal integrity. It's
completely unsuitable for production and even for prototyping it's basically
never done.

Through hole components are commonly hand placed or hand soldered because
there are only a few on the board, not enough to make machine placement/wave
soldering cost effective. Additionally, some through hole components have
shapes that make machine placement difficult.

~~~
quietplatypus
Yeah that comment jumped out at me as sketchy the second I saw that...

"15 years" in operations and isn't even aware of this basic fact.

------
koliber
There are two things to consider when talking about productivity. The best way
I can explain it is with a little story.

There was a contest where contestants had to find a box in a forest based only
on a photograph of an item. There were two contestants. One was a spry young
fellow who has never been to this particular forest. The other was a limping
60 year old woman who has lived nearby and knows these woods like the back of
here hand.

The pistol fires and off they go. The young man takes off running. He runs
here, runs there, runs circles, looking for something familiar from the photo.
His endurance is uncanny and his ability to jump across branches second-to-
none.

The lady looks at the photo and studies it. After a few minutes, she takes her
walking stick and limps off. She recognized the rocks in the photo and knows
more or less where to go to find the box.

The young fellow is much more productive in "miles ran per hour", or "acres
searched", or in "O2-consumption-per-mile" metrics. For the lady, the above
metrics are dismal. However, she beats the man in the most important "boxes
found" metrics.

Nowadays, in the US, a lot of the grueling and repetitive work is done by
machines. In order to be successful (whatever that means) you often don't need
to run quickly, but you need to know where to go and how to get there. So what
if 151 million people are working 1789 hours per year (1) for a total of 27
billion hours worked, if a good number of those hours are productively spent
doing things which are in the end deemed useless, are unnecessary, or are done
incorrectly.

It all comes down to quality vs. quantity in the end.

(1):
[https://stats.oecd.org/Index.aspx?DataSetCode=ANHRS](https://stats.oecd.org/Index.aspx?DataSetCode=ANHRS)

~~~
VOYD
+100.

------
TheSmiddy
I spend over 30% of my time at work (pleb level helpdesk) doing busy work that
generates no actual benefit to the business other than making it easier to
track the real work I do. If we were more trusted to do the right thing or the
tracking of our work was better automated my job could be done with half the
staff.

The entire company has similar inefficiencies at every level that have all
been introduced over the last decande and especially the last two years. From
all accounts this seems to be a pretty similar trend happening all across
large businesses in Australia and I assume America as well.

~~~
majewsky
> If we were more trusted to do the right thing

Is that trust justified? Not on the scale of you, but on the scale of everyone
working the helpdesk in your company.

While I will concede that many management tasks could be optimized away, or
just plainly removed without replacement without impacting performance
negatively, these tasks do exist for a reason.

~~~
Delmania
> Is that trust justified? Not on the scale of you, but on the scale of
> everyone working the helpdesk in your company.

Why did you hire that person, and then not train him correctly?

------
OliverJones
Productivity is measured in cash value produced per hour.

So, what happens when the products people make get cheaper? I daresay filling
station employees have declining productivity right now under that measure
even if they pump more gas than a couple of years ago.

The people at Micron / Crucial are similarly less productive. I can buy a
shiny new 4GiB RAM stick for $20, when two years ago it was $80. It's just as
good, and that company is a good one. But still, their products have less cash
content to them.

In a decade when energy cost/use patterns are in flux, are we mismeasuring
productivity? In an age when human population is very high indeed, does it
makes sense to use a productivity metric that encourages more-more-more?

I wonder if it makes sense to measure productivity using some longer-term
measure? How many hours must a person work to gain an hour of artificial light
at night? (There was a study about this a few years back, but I can't find
it.) The advent of LED lamps and solar charging has caused this measure of
productivity to soar, especially in developing cultures.

~~~
thrownaway2424
My favorite example along these lines is health care. If USA ever gets a
reasonable health care system both GDP and productivity are going to plummet,
even though everyone will be objectively better off.

------
mysterypie
The whole premise that bigger GDP is greater productivity sounds like BS. The
economists say, If you got more money for the things you made/did, you must
have been more productive.

But to use a computer analogy: 40 years ago, $100 got you the home version of
pong (a primitive computer game) -- today the same inflation-adjusted money
would get you something mind blowing.

Whoever produced today's game is in some sense _a million times more
productive_ than the creators of pong (as brilliant as those developers were
for the time).

As far as I can see, GDP or cost is not the correct measure of productivity.
Trying to connect GDP with productivity is like linking stock market
performance to the outcome of the Super Bowl -- there _might_ be a relation
but it's very very very remote and tenuous.

~~~
sien
The people who use GDP are aware of this. The thing is that no one has come up
with anything better.

It's also worth noting that GDP missed things before that were a lot more
important than clock cycles.

In 1800 in the US about, say 1/3 of children died before they got to 5. This
wasn't captured in GDP. But it's a far bigger deal to watch children die than
to play games on a faster computer.

Years of healthy life also shot up, mostly prior to 1950 in the developed
world. How much is it worth to see your grandchildren grow up because you live
longer and healthier and children don't die as much?

This all comes from the fantastic book 'The Rise and Fall of American Growth'
by Robert Gordon. It might be worth checking out for you. It goes on about
what GDP doesn't measure but still uses it to show that productivity isn't
rising like it used to and shows the implications of that.

~~~
mysterypie
> The people who use GDP are aware of this. The thing is that no one has come
> up with anything better.

For what it's worth, I too cannot think of anything better. And good points
about all the other things not captured by GDP.

But given that GDP is a terrible measure of productivity, shouldn't the result
be: We don't know how to measure productivity on a nation scale so let's stop
pretending that GDP meaningfully measures it?

Thanks for the book recommendation. For anyone else who's interested in
checking it out I found chapter 1 available here:
[http://press.princeton.edu/titles/10544.html](http://press.princeton.edu/titles/10544.html)

~~~
patrickk
""Some of the volume data, such as power and rail freight and even (bank)
credit, are interesting because there is less incentive to massage them at the
local level. But they reveal only part of the truth, not the entire truth," he
said.

"This would be a useful measure for steel and cement production. I'm not sure
how well it would measure retail sales.""

This is what one Chinese official uses to get a better sense of the economy
rather than relying on massaged numbers. It's still far from perfect
obviously, but I find it interesting.

[http://www.reuters.com/article/us-china-economy-wikileaks-
id...](http://www.reuters.com/article/us-china-economy-wikileaks-
idUSTRE6B527D20101206)

------
thatfrenchguy
Thomas Picketty says because the share of capital versus the share of salaries
is up by ten points (and usually people notice it, hence all the raising
inequalities and the crazy billionaires that "deserved it").

Also, because we're still working 40 hours a week in a world, especially in
computer science, where that makes zero sense.

~~~
awinter-py
shocking that the nyt article doesn't mention wage, salary or profit.

------
Jedd
I am about two-thirds of the way through Paul Mason's 'Postcapitalism - A
Guide To Our Future'. It's a book recommendation I got from some HN comments
on a UBI story a while back.

The happy / neutral / depressing theories (more hypotheses) don't cover all
the possibilities, of course.

Weirdly, while the 'depressing' scenario is badly described (is the placement
of a computer in front of ever office worker an example of 'innovation'?), the
initial premise -- that productivity is / has peaked -- may be accurate, iff
we try to measure productivity today the same way we have done for the past
hundred years. And that's kind of the problem -- we don't currently have
appropriate metrics for productivity in a market increasingly based on
information, let alone where information components of products are
approaching zero cost.

Anyway, I'll pass-on the hive mind's recommendation of Mason's book - I'm yet
to finish it, and even further from being convinced of the soundness of all
his arguments, but it's the most interesting book on economics I've read.

~~~
omegaham
> we don't currently have appropriate metrics for productivity in a market
> increasingly based on information

I like this xkcd comic for a great representation of this:
[https://xkcd.com/1629/](https://xkcd.com/1629/)

How, exactly, do you quantify the productivity of someone who makes some
obscure library for a tool that provides monitoring services for some other
utility that...

Hell, my own job is hard enough to quantify. I do defect analysis at Intel,
looking for defects in chips with a scanning electron microscope. Sure, my
output of samples is pretty easy to track, but what's the actual productivity
of my work? I am one very, very small cog in a very, very big machine that
somehow shits out fantastically small computer chips at the end. How important
is my role? Er, I'm not quite sure. All I know is that I'm paid good money for
what I do, and I work 12-hour shifts and am frequently asked to work overtime.
But not once have I been told, "Hey, thanks to the defects that you and your
team found, we got the information needed to increase wafer yield by X! You're
doing great work!" Nope. Chips come in, pictures go out, engineers do Stuff
with those pictures, and that's about as far as I can tell.

How do you measure the productivity of my work? The engineers who use the data
I create to tell other people to make changes in the process? The guys who
make the tools that I use to do all of this? The janitor who cleans the
wastebaskets of the guys who make said tools? We keep going farther and
farther down the rabbit hole, and it doesn't get any clearer.

~~~
Jedd
Some great points. Trying to evaluate your usefulness or productivity based on
income doesn't seem safe - nor does any connection with essentialness of what
you do. Even trying to connect it to numbers of people who could do the same
thing seems to have sufficient exceptions to make me wary of turning that into
even a lowly rule of thumb.

Increasingly I'm tending to agree with a group I would previously have
dismissed as Ludicrously Optimistic Socialists -- though the S word may not be
quite right there -- in that pretty much everything is going to have to
change, in huge ways, if we're to retain any kind of stability in the
developed world.

I also work in the tech industry, as a consultant, but about 75% of my output
is creative / people-related -- but that still means my part of the industry
is going to shrink by at least 25% in the near future as smart machines are
brought online to do the non-people/creative bits. It's fascinating to talk to
people with various jobs, and ask them how long they reckon it'll be before
what they do will be done by a computer / machine. Most people are hugely
optimistic about the level of sophistication they bring to the table, and
their consequent relative safety in the workforce.

~~~
EdSharkey
What happens when automation starts to produce more physical, intrinsically
valuable goods, though? I'm thinking of developments that don't just eliminate
jobs, but also increase personal security.

Like, what if farming becomes primarily robotic. But, in the process of that
transformation, each of us ends up with solar-powered, open-source driven
backyard robots that tend gardens where the produce did not require pesticides
nor chemicals to grow. Perhaps even raw materials for 3D printing and
manufacturing of some household items could be raised as backyard crops.

You'd have less need to buy things that you need to survive, and so less need
to work. Society probably will need to trend more socialistic, but perhaps
automation will wind up allowing unemployed people to live more independent
and self-sufficient than they can today.

~~~
majewsky
Then the new kings will be the people who build these farming robots. (Unless
we get easily reproducible open-source designs for these.)

~~~
EdSharkey
Yes, I believe that open source hardware and firmware would become an
imperative if one actually intended to rely on robot-grown food as a
supplement/replacement for store bought food. You wouldn't want to risk having
Google revoke your license to eat.

------
Spooky23
Look at that chart. I don't think that general productivity swings that
widely.

The other thing to consider is that productivity tools like automation and
outsourcing can bite back. When you lose your competency in "non-core"
activity, you're now beholden to a vendor, whose incentives are often not
aligned with the business.

Also, we have lots of middlemen skimming profits for services of questionable
value. My underwear was made in North Carolina in 1990, now it's made in
Bangladesh or China, but costs more. That money is going somewhere!

~~~
majewsky
The chart shows productivity _increase_. Productivity itself is never
shrinking.

------
jcfrei
Usually not a fan of zerohedge, but they sometimes make some insightful
graphs: [http://www.zerohedge.com/news/2016-04-01/waiters-and-
bartend...](http://www.zerohedge.com/news/2016-04-01/waiters-and-bartenders-
rise-record-manufacturing-workers-drop-most-2009) They show how waiters and
bartenders increased dramatically relative to manufacturing jobs. So it seems
to me that high value/margin production is much more likely to be automated
and results in big productivity gains for those companies. These workers then
find jobs in low production value jobs (or businesses which require low
capital investment - for lack of a better word). Ie. machine operators turn
into waiters. In summary the productivity gains in one industry are offset by
more staff in another. There's more staff in the service industry working for
lower wages (think UBER, etc.). Is that plausible? And is there a productivity
analysis for each industry?

~~~
raverbashing
Yes, ZH can be a good source of info, but it has to have an amount of
filtering and de-sensationalizing

------
dv_dt
My theory is that many big employers have structured to carry more part time
employees over fewer full time. Worse, many part time employees are working
two or three jobs to stitch together enough wage to live. Both part time work
and multiple disjoint work contexts reduces efficiency.

Also, there are fewer and fewer small to midsize businesses and too many huge
businesses. Somewhere between, the ideal scaled company actually has the
highest productivity, but we've been skewing larger and larger which is also a
drag on productivity.

~~~
iofj
It doesn't just do that. A careful reading of the establishment survey will
tell you that the unemployment ratio is

unemployment = total jobs reported / people saying they're in the labour force
(ie. who have a job or collect unemployment)

Part time jobs count as a fulltime job. So a poor person with 2 jobs is
counted twice as employed, and long-term unemployed are excluded from the
figures. It is hard to imagine, given the successive changes to this variable
that this is an accident.

In reality the unemployment ratio should be:

people that are employed/people that could be employed

people that could be employed needs to be approximated, so I'm using the
"working age population" figure.

I'm sure it's a total coincidence that the first ratio is 5.5%, showing a
constant, if excruciatingly slow, decrease under the current administration
(except during the GFC in 2008) and the second ratio is currently 25.8%, and
shows a constant increase (except for the last 2 months) under the current
administration. Caveat: I'm pretty sure the actual 25.8% figure is overstating
matters, the changes in the figure are real: they represent either people who
enter the workforce and can't find jobs, or people who get fired. Given
anecdotes, and sentiment, I'm much more inclined to believe the latter : that
there has been a constant increase of the unemployment figure since around
2006, extremely fast increase during 2008-2009, to ~12-13% followed by a
slower increase after that, currently at 16% or so.

It is also funny that both figures start do diverge, immediately following a
change in the way unemployment is calculated. One wonders ... which of those 2
things is cause, and which is effect.

~~~
coredog64
As I understand it, U1-6 is calculated via statistical sampling. They call
people and ask them questions to determine which category they are in. U6
includes people currently holding a part time job but wanting a full time job.
U6 is significantly higher than U3 (the usually touted "unemployment rate"),
but I don't know how to extract numbers that would show the results of a move
to more part time workers.

~~~
Lawtonfogle
>They call people

Do they adjust for the bias introduced by using a phone survey? I would
hypothesize that job holders are more likely to have a stable phone connection
than the unemployed.

~~~
firebones
Having been on the business end of a BLS survey for a year, they do more than
call. They visit in person for an in-depth interview at the start, then follow
up by phone for a very detailed interview every month for a year. If you're
not available by phone (or don't call back, or they can't get in touch), they
will send someone out to find you.

The questions are very detailed and probing, and they have additional
questions each month related to some special surveys that they conduct (e.g.,
food spending and availability). We'd typically have to spend about 20 minutes
giving answers.

The methodology seemed pretty sound to me, certainly not anything that would
be skewed by phone access. (It might be skewed by people being completely off
the grid, for instance, people not measured in the US Census, but I would
guess their methods can correct for that.)

------
a3n
Lots of new jobs, but lots of them are part time, and lots of those are
"flexible schedules." So there's a lot of churn, both within the day as part
timers come in and out, and within the week as they get scheduled and cut.
After a certain amount of productivity, you need motivated people to get more,
and where's the motivation, besides fear of losing a job, in that world.

And then there's the further churn from people who have more than one flexible
schedule job, and the inevitable day when they're scheduled for both jobs. So
they lose one job, and the employer eventually replaces them. Training and
churn.

If more people had full time jobs with realistic chance of advancement, and
therefore identity with the employer, I think productivity would increase
nicely.

------
rumcajz
Rational response to the economy that -- for whatever reasons, productivity
increase, wealth transfer etc. -- is able to satisfy all the demand by putting
just a fraction of the population to work is to create bullshit jobs that
nobody needs and that don't add to productivity. I've written about it here:
[http://250bpm.com/blog:44](http://250bpm.com/blog:44)

------
phkahler
Another option is that "producing" is related to "consumption" and people's
free time and resources have become saturated. If this is the case, perhaps we
should reduce the number of hours worked to increase the demand side of the
economy ;-)

------
antoinevg
Productivity increases don't boost GDP if no one has money to buy the
goods&services being produced.

This is why you need to watch out for steep income inequality between the
managerial and working classes.

------
powera
Or maybe "productivity growth" will have to stop at some point; even at 1%
year over year, that makes 1000x growth in 700 years.

Barring space travel, it's hard to even imagine 1000x growth over the next 700
years in any real sense (as opposed to just adding zeros to currency), and
completely absurd to imagine 1 million times growth over the next 1400 years.

~~~
marvin
Massive improvements in standard of living are certainly conceivable. I can't
speak for how the maths work out, but if you e.g. consider potential
improvements that have no physical law preventing them:

    
    
        - Eliminating the requirement to work for a living
        - Eradicating disease (including mental health 
          and first-world diseases as obesity, RSI and diabetes)
        - Reducing health problems related to aging, increasing
          the number of healthy years of the population, 
          increasing life span
        - Eliminating aging altogether, enabling replacement of
          organs and body parts with improved artificial versions
        - Achieving sustainable energy production and transport
        - Eliminating the need to perform unwanted boring tasks
        - Fully-immersive virtual reality
        - Automating production of goods and services to such a
          degree that everyone in the world has access to the 
          same standard of living that the richest have today
    

The sky is the limit, so to speak. One obviously has to think outside the box
of what the world looks like today, but the limits of economic growth are in
physical terms far, far beyond where we are today. This is even without
considering the very distant possibility of compelling space habitats that
could support greater populations than Earth.

~~~
patrickk
Not to mention the potential impact of the usual breakthroughs that are always
just 20 years away like working nuclear fusion reactors, quantum computers and
AGI. Having AGI could mean productivity growth so stratospheric than humans
are essentially obsolete.

------
Alex3917
The basic math in this article seems questionable. If Americans worked an
extra 1.9% and output was up 1.9% then that doesn't mean productivity was
flat, because the marginal labor is unequal.

~~~
nobody_nowhere
Amen. Further, I think there's a lot of evidence of actual "productivity"
concentrating in fewer and fewer workers as the labor force continues to
segment into high-productivity knowledge and low-productivity service jobs.

------
dschiptsov
Why, in 90s we have to hard code HTML to make a website. Then PHP emerged, and
then WordPress and Joomla and countless themes - making a shitty website
became very productive. What happened next? Crappy WordPress sites were not
cool, so the Rails era began. Making of big crappy websites became very
productive. Nowadays there are React and other indispensable stuff to make
very cool crappy websites. The productivity soared - one could make Bootstrap,
React, Mongo, NodeJS hello-world website in a half of a day.

But if content is crap productivity of making site does not really matter, and
if content still is a king, no fucking hipster's frameworks are required
(hello, Craigslist and this very site).

Same thing happen today with ML tools and techniques. One could download and
install Tensorflow in 15 minutes (I am so clever!) - a huge boost of
productivity, and then one has to apply ones own brain, which is, usually, not
near as productive.

That's why.

~~~
SixSigma
That's the same argument as

I used to have to make my own hammer, and then I could buy them at the store.

~~~
dschiptsov
Not exactly.)

------
venomsnake
I have revolutionary idea - if we create environment where people have a
decent chance of making something out of their life - they may have incentive
to work smarter. We don't have productivity increase, because we have nowhere
to put it. Elites are fine, the bottom people have no expendable income and
the middle class is nonexistent.

------
p4wnc6
Open plan offices are another sign of this. They exist to foster status
effects that go hand in hand with the modern shift to intensive pursuits of
rent seeking. As a developer if you're asked to work in non-private
conditions, it's a huge signal most of the time that your actual productivity
isn't important.

------
googletazer
Misplaced incentives and wrong motivation for workers is the reason for low
productivity. Lack of recognition plays a part too.

If your betters mainly motivate you by fear of losing your job and getting
kicked out, which is how most jobs starting from wallmart and ending at larger
tech companies are, how productive can you really be? Part of your mind is
already in the wrong place because you're going to be thinking "whats next for
me if the worst thing happens?"

This is one of the reasons productivity may get a large increase with
introduction of basic income, if it ever happens. Intrinsically motivated
people who get recognition for their work (likely because they'll be working
for themselves) can dedicate 100% of their mindpower to what they're working
on.

------
trashtoss
If the rewards of productivity increases accrue to capital, what is the
incentive for labor to improve their productivity?

------
jernfrost
There are so many problems with these sorts of measurements anyway. My own
country Norway had on paper rapid productivity growth simply because our main
export oil increased in value. A lot of the productivity before the great
recession was just an illusion caused by the broken financial industry. The
inflation of the asset bubble looked like economic growth and hence
productivity growth.

Hence what if productivity growth is just normal today? It is simply what it
is when financial wizards aren't there to hide the truth.

Anyway perhaps people should stop being so obsessed about GDP and productivity
numbers as they are distorting reality. If more people get sick or do more
crime GDP will increase as health care and police produce more services. More
people in prison also produce prison services adding to GDP. But none of this
really adds to the well being of the population or the economic strength of
the country.

------
IndianAstronaut
Possible that increased productivity means increase in knowledge required for
the job. But people are unable to keep up with those increasing knowledge
requirements.

I see this on my team a lot. We are pushing hard to spread newer and more
efficient programming and data analysis techniques, but people remain stuck
and unwilling or unable to learn.

------
known
The Self-Attribution Fallacy

Intelligence? Talent? No, the ultra-rich got to where they are through luck
and brutality.

[http://www.monbiot.com/2011/11/07/the-self-attribution-
falla...](http://www.monbiot.com/2011/11/07/the-self-attribution-fallacy/)

------
facepalm
"151 million Americans count themselves employed"

Whoa - that would be 47% of the population? Or even higher if you only count
percentage of population eligible to work (no kids or pensioners)? That number
must be wrong?

~~~
djur
67.4% of Americans aged 15-64, as of 2013. Working age population is around
200 million.

There's still a decent number of single-earner married households out there --
roughly 25% of all married households. That accounts for some. 13.5% have no
earner at all. That's mostly retired couples, but there's also some who are
permanently disabled.

Labor force participation rate has hovered in the mid-60% range for a long
time -- it increased over most of the latter 20th century, plateaued in the
'90s, and dropped a lot during the Great Recession. The main change is that
the rate dropped a lot for men -- from 87% in 1948 to 69% in 2014 -- and women
increased from 32% to 56%. (Yes, men are still over 10 percentage points more
likely to be employed than women in the US.)

~~~
sievebrain
US Labor force participation drops during recessions, recovers afterwards, but
never to the same rate as before the recession. Basically every recession
removes some people from the working economy permanently.

------
seibelj
Perhaps the next big change could be in transportation and infrastructure. If
someone could reasonably commute to Boston from NYC (or vice versa) via a
250mph bullet train, wouldn't that increase productivity?

~~~
meric
If and when the central bank finally sends the interest rates up the
stratosphere, real estate and equipment prices will collapse to a fraction of
its current value, which will make infrastructure like you mentioned possible.

~~~
ktRolster
_If and when the central bank finally sends the interest rates up the
stratosphere_

Why do you think they will?

~~~
meric
When they hit limits of monetary policy and stop digging into the hole they
are in. Japan is the closest to such a limit. It has relentlessly pumped money
into stocks and bonds and now all the JPY does is move up.

~~~
nitrogen
Assuming for the moment this is true, what does that imply for near- and mid-
term planning purposes for the average software developer with bills to pay
but also spare cash to invest?

~~~
meric
In the medium term - the prices of stock markets are driven by capital flows.
Even the price of a money losing company is going to go up if the pension
funds[1] are buying it.

Central bank pulling liquidity out when they finally realise their monetary
policy is only making the inevitable worse, will mean a lot less money to flow
into various investments.

Therefore, avoid investments that have gone up in the past few years, that
went up because of monetary policy (e.g. direct central bank buying, lowering
of reserve ratios, lowering of interest rates). Avoid government bonds, avoid
municipal bonds, avoid companies that have leveraged up for stock buybacks,
ruling out S&P 500. Avoid companies whose stock prices are fueled by margin
loans (e.g. tech unicorns). Avoid energy companies that have been limping
along because they keep borrowing at low rates. Avoid companies with debt.

In January 2016, the only sector that fulfilled all of these requirements were
the junior gold miners - the collapse of gold prices since 2011 has wiped out
all but the strongest gold mining companies. They have little debt, high
margins, lots of cash and very profitable compared to their share prices. The
junior gold mining stock index GDXJ[2] has went up 111% in 3 months.

Of course, now that they're going up, margin loaning investors are piling in,
and it's no longer as safe as a rock as it was in January 2016. I'd wait and
see if GDXJ corrects back to the mid 20's, and then I'd buy more. (I have 130%
of my portfolio in gold miners at the moment, so I'm biased.)

The next sector to look for is overseas iron ore and oil producers. When
finally the collapse of iron ore & oil prices has wiped out all the highly
indebted and poorly performing companies, you will see the strongest of the
bunch go on fire sale shopping spree. Those will be good buys. I think it will
happen in 12-24 months. I think we're currently still in the clean up phase at
the moment - lots of dead man walking companies hanging on desperately. The
Chinese stimulus plan that lit a fire on iron ore prices in the past 2 months
is going to prolong this phase for a while yet.

[1] Pension funds are big.

[2]
[https://au.finance.yahoo.com/q/bc?s=GDXJ&t=1y](https://au.finance.yahoo.com/q/bc?s=GDXJ&t=1y)

~~~
SixSigma
> when they finally realise their monetary policy is only making the
> inevitable worse

How come _you_ realise it and those in charge of the policy are ignorant of
the fact ?

~~~
meric
The Federal Reserve is very well aware[2], cyclical movements in the economy
promotes the creative destruction required to grow the economy in the long
run.

At the same time, it's mandate given by the Congress is to minimise cyclical
movements in the economy, through maintaining price stability, maximising
employment, and moderating long-term interest rates.

Regular periods of price volatility, temporary, massive fall in employment,
and sharp interest rate volatility are required for releasing ineffectively
used capital and labor in the economy, to be hoovered up by stronger
businesses. But the Federal Reserve's mission isn't to promote creative
destruction for long term economic growth. It's mission is to maintain
economic stability, _even if it is anaemia to long term economic growth_. In
fact, it's mandate doesn't even mention economic growth or productivity.

Why do politicians create a Federal Reserve to do this, and to let it keep
this mandate for the past hundred years? Why does President Obama want Federal
Reserve to maintain economic stability, even as it corrodes American economy,
month by month, year by year?

It's election year, and President Obama wants to convince the world the
American economy is doing great.

 _Reject pessimism, cynicism and know that progress is possible. Progress is
not inevitable, it requires struggle, discipline and faith._ [1]

[1] [http://www.theguardian.com/us-news/2016/apr/23/barack-
obama-...](http://www.theguardian.com/us-news/2016/apr/23/barack-obama-london-
visit-young-people-key-to-changing-the-world)

[2] [https://www.chicagofed.org/publications/economic-
perspective...](https://www.chicagofed.org/publications/economic-
perspectives/2004/2qtr-2004-part-4)

 _Because a firm’s failure frees the labor and capital it employed for use at
a more profitable entrant, this process may be described as creative
destruction. Although there are costs associated with creative destruction,
such as the lost labor of temporarily unemployed workers, it benefits an
economy in the long run by moving productive resources into more profitable
uses._

[http://www.federalreserve.gov/pubs/feds/2006/200623/200623pa...](http://www.federalreserve.gov/pubs/feds/2006/200623/200623pap.pdf)

 _Explaining Cyclical Movements in Employment: Creative Destruction or Changes
in Utilization_

[https://www.federalreserve.gov/faqs/money_12848.htm](https://www.federalreserve.gov/faqs/money_12848.htm)

 _The Congress established the statutory objectives for monetary policy--
maximum employment, stable prices, and moderate long-term interest rates--in
the Federal Reserve Act.

The Federal Open Market Committee (FOMC) is firmly committed to fulfilling
this statutory mandate._

~~~
pjc50
_temporary, massive fall in employment, and sharp interest rate volatility are
required for releasing ineffectively used capital and labor in the economy, to
be hoovered up by stronger businesses_

This argument really needs more economics to back it up, because the trouble
with the "creative destruction" line of reasoning is that you get the
destruction first and the creation is far from guaranteed.

A big fall in employment is something that has real human consequences in
misery, ill-health, and even death. Likewise a capital collapse tends not so
much to release capital as destroy it - both in terms of capital values and
actual physical capital of abandoned buildings. Detroit's vast areas of
abandoned real estate aren't capital that's freed, they're capital that's
destroyed one burnt-out building at a time.

Stability is vastly underrated. There are plenty of less stable economies and
they do less well. Stability enables planning.

Also, your interest rates/capital investment argument is the wrong way up. The
normal understanding of how interest rates affect inflation is that high rates
reduce inflation by reducing investment ( e.g.
[http://www.bankofengland.co.uk/monetarypolicy/Pages/how.aspx](http://www.bankofengland.co.uk/monetarypolicy/Pages/how.aspx)
). Raising rates makes it less attractive to make physical investments and
more attractive to just leave the money in bonds. Conventionally to encourage
more investment we need _lower_ interest rates.

~~~
meric
_This argument really needs more economics to back it up_

Japan has been engaging in this kind of monetary policy for over two decades.

Bloomberg: "Japan Must Let Zombie Companies Die"[1]

 _A big fall in employment is something that has real human consequences in
misery, ill-health, and even death._

I don't think that's a valid argument to prevent short-term unemployment at
all costs. Winter brings death to trillions of leaves every year. Does that
mean it should be stopped? Half a decade ago Detroit's situation was hopeless.
Detroit declared a long overdue bankruptcy in mid-2013. By mid-2015, it's
described as a "revival template for struggling U.S. cities"[2]

 _Also, your interest rates /capital investment argument is the wrong way up._

I'm afraid it is the right way up. The effect you're describing is only valid
in the short-term, but it is completely the opposite in the long term. In the
long run, nominal interest rates = real interest rates + inflation[3]. As you
raise nominal rates, real interest rates remain constant, and inflation must
_rise_ to compensate. To encourage investment in the long run, we need
_higher_ interest rates. Lower interest rates increase spending in the short
term, following the effect you've described. In the underlying economy, this
increase in spending is funded by consumption of real capital. (e.g.
refraining from capital maintenance and using the funds for consumption
activities instead.)

[1] [http://www.bloombergview.com/articles/2016-01-20/japan-
must-...](http://www.bloombergview.com/articles/2016-01-20/japan-must-let-
zombie-companies-die)

[2] [http://www.usatoday.com/story/opinion/2015/07/06/fixing-
detr...](http://www.usatoday.com/story/opinion/2015/07/06/fixing-detroit-
mismanagement-housing-transit-revitalization-strategy-struggling-us-cities-
column/29577383/)

[3]
[https://en.wikipedia.org/wiki/Fisher_equation](https://en.wikipedia.org/wiki/Fisher_equation)

~~~
pjc50
_In the underlying economy, this increase in spending is funded by consumption
of real capital. (e.g. refraining from capital maintenance and using the funds
for consumption activities instead_

Surely it's funded by expanded credit - after all, that's the transmission
mechanism for this?

And I said that raising nominal rates causes inflation to fall, so I think
we're agreeing there. Which in the current environment would imply CPI _de_
flation and the ills thereof.

~~~
meric
_And I said that raising nominal rates causes inflation to fall, so I think we
're agreeing there. _

Sorry, fixed it. Ugh.

------
jboydyhacker
Productivity gains are usually driven by business investment. ZIRP (zero
interest rates) and large accumulation of debt in strange parts of the economy
and caused businesses to be reluctant to invest. Without that capital
investment productivity tends to stagnate and growth mediates around 1-2%
which is precisely where we are.

------
huherto
Perhaps what we produce is limited by what we can consume.

If we assume that wealth is not concentrating at the top like many people say;
it is possible that people are not consuming. Not because they don't need
things, but because they can't buy them.

------
sharemywin
It could be that the industry the jobs being created aren't more productive. A
server at a restaurant wouldn't add a lot of high productivity value.

------
mback00
Because we increased the number of jobs in the public sector, because we
instituted a healthcare system where we get less for paying more into it (and
one that makes it attractive for business to decrease permanent labor),
because our tax policy makes it more attractive for business to hold money
overseas, and because government through regulation continually makes it more
difficult for individuals to succeed and produce a good or service.

------
pmyjavec
Facebook revenue up, productivity down, coincidence? You decide !

------
ilaksh
Economics is not a real science. Start over by building measurement and
regulation into society by integrating technology.

