4 ms·

The middle class never got any money for being more productive in the 90s and aughts. Maybe they're wising up. Also, virtually every market is dominated by car

The middle class never got any money for being more productive in the 90s and aughts. Maybe they're wising up. Also, virtually every market is dominated by cartel, duopoly, or monopoly conditions, and companies are often satisfied with that position, so investment is down.

thetrumanshow 11y ago
Another way to say this is that the normally-presumed cause/effect relationship is actually backwards here. I.e. If you aggregate the outputs of industry over a long enough period, higher wages cause higher productivity and not visa versa. This is a fun thought-experiment.
- theseatoms 11y ago
  A related concept: https://en.wikipedia.org/wiki/Efficiency_wage https://en.wikipedia.org/wiki/Efficiency_wage
pcarolan 11y ago
The capture and transfer of wealth is really well illustrated by looking at profit per employee. http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-new-metrics-of-corporate-performance-profit-per-employee http://www.mckinsey.com/business-functions/strategy-and-corp...
- digikata 11y ago
  The other interesting thing about that data is that the average number of employees per business has more than doubled from 1995 to 2005. This hints that there is a scaling limit to the conventional business wisdom that larger businesses are able to operate more efficiency.
- deleted 11y ago
  [deleted]
tryitnow 11y ago
While I agree with your statement, it's not terribly germane to Cowen's argument. What he's saying is that all the fuss over Silicon Valley technology is not warranted when it comes to actual productivity gains. This is a really important point because it suggests two different way of conceiving of technology: 1) how economists define technology, viz something that allows us to do more with less 2) what laymen consider technology: the latest gee whiz gizmo marketed by Silicon Valley The economic definition is a lot stricter in some ways - and broader in other ways. The takeaway is that in economic terms we really haven't experienced much technological evolution. I find that to be pretty believable.
- TheOtherHobbes 11y ago
  No, the takeaway is that economic terms themselves haven't experienced much evolution. What does productivity mean when your economy is increasingly powered by data, not money? As a wild generalisation, there are two kinds of economic model - the political model, where the point is to use rhetoric to enhance power differentials between social castes, and the evolutionary model, which considers economic activity a proxy measure for collective intelligence and opportunity. We're in a transition period where the former model is peaking and about to[1] crash, and the latter model is becoming more sharply defined. In the former model an abundance of data is a bad thing, because the market value of any specific type of data crashes towards zero. In the latter model an abundance of data is a good thing, because it increases the possibility of invention and innovation. And an abundance of data refinement tools is even better. Which is a more accurate measure of productivity? [1] For very poorly defined bounds of "about to". I'm guessing more than decade, less than a century.
  - williamcotton 11y ago
    Can I pay my rent in data? For humans like me who pay their rent in dollars, GDP is a perfectly reasonable way to measure productivity. What kind of "evolution" are you talking about? I think all you're pointing out is that Silicon Valley is extraordinarily bad at attributing value to data. It's not the roll of economics to fix that problem. Economics deals with real things like people buying food and having to pay rent and pay actual taxes. If Silicon Valley can't figure out a way to get translate "data" in to "thing I trade to my landlord so he doesn't call the cops", well, then Silicon Valley is wasting everyone's time.

thetrumanshow 11y ago

Another way to say this is that the normally-presumed cause/effect relationship is actually backwards here. I.e. If you aggregate the outputs of industry over a long enough period, higher wages cause higher productivity and not visa versa. This is a fun thought-experiment.

theseatoms 11y ago
A related concept: https://en.wikipedia.org/wiki/Efficiency_wage https://en.wikipedia.org/wiki/Efficiency_wage

pcarolan 11y ago

The capture and transfer of wealth is really well illustrated by looking at profit per employee. http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-new-metrics-of-corporate-performance-profit-per-employee http://www.mckinsey.com/business-functions/strategy-and-corp...

digikata 11y ago
The other interesting thing about that data is that the average number of employees per business has more than doubled from 1995 to 2005. This hints that there is a scaling limit to the conventional business wisdom that larger businesses are able to operate more efficiency.
deleted 11y ago
[deleted]

tryitnow 11y ago

While I agree with your statement, it's not terribly germane to Cowen's argument. What he's saying is that all the fuss over Silicon Valley technology is not warranted when it comes to actual productivity gains. This is a really important point because it suggests two different way of conceiving of technology: 1) how economists define technology, viz something that allows us to do more with less 2) what laymen consider technology: the latest gee whiz gizmo marketed by Silicon Valley The economic definition is a lot stricter in some ways - and broader in other ways. The takeaway is that in economic terms we really haven't experienced much technological evolution. I find that to be pretty believable.

TheOtherHobbes 11y ago
No, the takeaway is that economic terms themselves haven't experienced much evolution. What does productivity mean when your economy is increasingly powered by data, not money? As a wild generalisation, there are two kinds of economic model - the political model, where the point is to use rhetoric to enhance power differentials between social castes, and the evolutionary model, which considers economic activity a proxy measure for collective intelligence and opportunity. We're in a transition period where the former model is peaking and about to[1] crash, and the latter model is becoming more sharply defined. In the former model an abundance of data is a bad thing, because the market value of any specific type of data crashes towards zero. In the latter model an abundance of data is a good thing, because it increases the possibility of invention and innovation. And an abundance of data refinement tools is even better. Which is a more accurate measure of productivity? [1] For very poorly defined bounds of "about to". I'm guessing more than decade, less than a century.
- williamcotton 11y ago
  Can I pay my rent in data? For humans like me who pay their rent in dollars, GDP is a perfectly reasonable way to measure productivity. What kind of "evolution" are you talking about? I think all you're pointing out is that Silicon Valley is extraordinarily bad at attributing value to data. It's not the roll of economics to fix that problem. Economics deals with real things like people buying food and having to pay rent and pay actual taxes. If Silicon Valley can't figure out a way to get translate "data" in to "thing I trade to my landlord so he doesn't call the cops", well, then Silicon Valley is wasting everyone's time.