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No serious economist should be measuring things in "productivity" today without a number of asterisks behind it. This is pretty well accepted. As a rule of thum

No serious economist should be measuring things in "productivity" today without a number of asterisks behind it. This is pretty well accepted. As a rule of thumb, it's generally safe to ignore anything that uses old measures of "productivity." But that doesn't get clicks.

philipkglass 10y ago
What are old measures of productivity and what are new ones? I know it's dangerous to try to learn things from Wikipedia but I went there to read about Total Factor Productivity, which seems to hinge on the definition of economic output. When I read about output the introduction says Output in economics is the "quantity of goods or services produced in a given time period, by a firm, industry, or country", whether consumed or used for further production. The concept of national output is essential in the field of macroeconomics. It is national output that makes a country rich, not large amounts of money. https://en.wikipedia.org/wiki/Output_(economics) https://en.wikipedia.org/wiki/Output_(economics) Makes sense so far. A rich country is one that has abundant goods and services for its people, regardless of how that abundance comes to be. But then I read the examples below the introduction and everything's measured in money. Which do economists consider a more fundamental measure of Output -- increasing access to tomatoes, or increasing the revenue of the commercial tomato sector? If the latter, that's nuts. It implies that all sorts of smart investments in efficiency and/or self-sufficiency are unproductive or even destructive if they lead to less future paid exchange of goods and services.
- tedsanders 10y ago
  It is a little nuts, but there are three points that make it a little less nuts than it first appears. (1) Inflation correction. If technology makes tomatoes cheaper, now dollars are worth more, counted in tomatoes. Technology is almost by definition deflationary. Economists do try to correct for deflation and inflation in these statistics, though everyone admits it's not possible to do a perfect job. I think this correction partly addresses your concern about measuring goods vs dollars. Inflation measurement tries to keep the ratio of tomatoes to dollars accounted for, so that when we measure dollars, we can do inflation correction to translate into tomatoes. (2) Elasticity. If the cost of tomatoes goes down, then presumably the quantity of tomatoes produced will rise in response. This may increase the overall value of tomatoes produced (though it also may not). Over the arc of human history, technology that makes things cheaper to produce has tended to stimulate overall production. E.g., we work longer hours than many hunter-gatherers. (3) Objectivity. Many economic measurements fail to get what after we really want, which is how much happiness are we producing. But since happiness measurement is even more fraught with error, counting up widgets is hopefully not too bad a substitute. Although it is theoretically flawed, in practice I think it clearly succeeds. The people in countries with high GDPs seem more prosperous than the people in countries with low GDPs. But yeah, GDP is flawed. A state with awful weather where everyone needs to work to air condition their homes will have a both a higher GDP and a lower quality of life compared to a state with great weather.
madgar 10y ago
> But that doesn't get clicks. This is an attack on he article, but the article made quite clear that measuring productivity is notoriously challenging! You didn't have to look far - just the first sentence of the second paragraph: > Measuring productivity is far from easy; it tends to be the residual left over when all other factors have been accounted for. The OECD says it "can often be a measure of our ignorance". You've accused the authors of the article of something here (your vague insult means you can pretend you meant whatever you want after the fact - no point in my guessing what you were accusing). But what I'm seeing is that you responded to a comment without reading the article, and still chose to insult the author of the article, and the publication itself to boot. You could have just answered the parent poster's question directly rather than randomly lambasting media. But that doesn't get upvotes.
- austenallred 10y ago
  My response was to the parent comment, not to the article specifically

philipkglass 10y ago

What are old measures of productivity and what are new ones? I know it's dangerous to try to learn things from Wikipedia but I went there to read about Total Factor Productivity, which seems to hinge on the definition of economic output. When I read about output the introduction says Output in economics is the "quantity of goods or services produced in a given time period, by a firm, industry, or country", whether consumed or used for further production. The concept of national output is essential in the field of macroeconomics. It is national output that makes a country rich, not large amounts of money. https://en.wikipedia.org/wiki/Output_(economics) https://en.wikipedia.org/wiki/Output_(economics) Makes sense so far. A rich country is one that has abundant goods and services for its people, regardless of how that abundance comes to be. But then I read the examples below the introduction and everything's measured in money. Which do economists consider a more fundamental measure of Output -- increasing access to tomatoes, or increasing the revenue of the commercial tomato sector? If the latter, that's nuts. It implies that all sorts of smart investments in efficiency and/or self-sufficiency are unproductive or even destructive if they lead to less future paid exchange of goods and services.

tedsanders 10y ago
It is a little nuts, but there are three points that make it a little less nuts than it first appears. (1) Inflation correction. If technology makes tomatoes cheaper, now dollars are worth more, counted in tomatoes. Technology is almost by definition deflationary. Economists do try to correct for deflation and inflation in these statistics, though everyone admits it's not possible to do a perfect job. I think this correction partly addresses your concern about measuring goods vs dollars. Inflation measurement tries to keep the ratio of tomatoes to dollars accounted for, so that when we measure dollars, we can do inflation correction to translate into tomatoes. (2) Elasticity. If the cost of tomatoes goes down, then presumably the quantity of tomatoes produced will rise in response. This may increase the overall value of tomatoes produced (though it also may not). Over the arc of human history, technology that makes things cheaper to produce has tended to stimulate overall production. E.g., we work longer hours than many hunter-gatherers. (3) Objectivity. Many economic measurements fail to get what after we really want, which is how much happiness are we producing. But since happiness measurement is even more fraught with error, counting up widgets is hopefully not too bad a substitute. Although it is theoretically flawed, in practice I think it clearly succeeds. The people in countries with high GDPs seem more prosperous than the people in countries with low GDPs. But yeah, GDP is flawed. A state with awful weather where everyone needs to work to air condition their homes will have a both a higher GDP and a lower quality of life compared to a state with great weather.

madgar 10y ago

> But that doesn't get clicks. This is an attack on he article, but the article made quite clear that measuring productivity is notoriously challenging! You didn't have to look far - just the first sentence of the second paragraph: > Measuring productivity is far from easy; it tends to be the residual left over when all other factors have been accounted for. The OECD says it "can often be a measure of our ignorance". You've accused the authors of the article of something here (your vague insult means you can pretend you meant whatever you want after the fact - no point in my guessing what you were accusing). But what I'm seeing is that you responded to a comment without reading the article, and still chose to insult the author of the article, and the publication itself to boot. You could have just answered the parent poster's question directly rather than randomly lambasting media. But that doesn't get upvotes.

austenallred 10y ago
My response was to the parent comment, not to the article specifically