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Potentially, but my take is that this is unlikely to explain the productivity puzzle.

I think your question is asking whether we are mismeasuring the value of dollars over time. And certainly there are worthy criticisms of inflation measurement, and good reasons to think that they overstate inflation as a result of undermeasuring quality improvements. But these flaws are not unique to recent history, so by themselves, they cannot explain why productivity growth has ostensibly slowed.

One way to sidestep the issue of statistical dollar measurement is to just read direct history of past time periods. Doing so has given me a much richer appreciation for the radical transformations caused by industrialization, urbanization, electrification, etc. A terrific article on this subject was published last year in the New York Times, comparing the years 1870, 1920, and 1970:

https://www.nytimes.com/2016/05/15/upshot/what-was-the-great...

The article was inspired by Robert Gordon's lengthier book, The Rise and Fall of American Growth, which followed a somewhat similar structure:

http://amzn.to/2jc6zkF

His descriptions of 1870 really made me appreciate how truly impoverished the average person was in those days. The rise in quality of life as electricity and automobiles and running water percolated through society over the next 50 years was radical, far more radical (in my view) than getting computers and the internet and phones, as monumental as those achievements have been.

Ultimately, it's impossible to objectively compare value across different situations. But my own semi-informed take is that productivity growth is indeed slowing.




I have read a lot of history about chemical process industries, energy, and allied sectors. I'm trying to compare inputs and outputs of processes without invoking dollars: number of laborers, tons of sulfuric acid, megawatt hours of electricity...

My impression is that many commoditized products continue to see decent year-over-year improvements in the ratio of inputs to outputs. But if economists don't care about material input:output ratios, only currency-values, then improvements-plus-fierce-competition could look like stagnant productivity. You would need process improvements plus GDP growth to recognize productivity gains; flat GDP per capita and simultaneous shrinking inputs of matter and energy wouldn't count.


But productivity is defined as GDP/unit of labor. If it takes less labor to make a unit of GDP (because less inputs were needed), then the productivity statistics should show that. They shouldn't miss it. Even if those efficiency gains cause the prices of output to fall, inflation adjustment should, in theory, address that. So I don't think that greater efficiency can explain the productivity puzzle, at least not by itself.




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