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If there is one thing that confuses me, that is productivity. You start doing the thing you were doing twice as fast earlier, thus your productivity doubles. K

If there is one thing that confuses me, that is productivity. You start doing the thing you were doing twice as fast earlier, thus your productivity doubles. Kind of, assuming that the price of your product does not change due to your increased productivity. If the price halves at the same time (e.g due to competitive pressure because you were not the only one to figure how to spend half the time doing same thing) your productivity measured in dollars did not change at all. Weird. You do twice the stuff at same time than before and now I claim your productivity did not change. Makes no sense whatsoever. So did your productivity increase or not? I have no clue. Even further confusion. Your increased(?) productivity just caused that with same amount of money people can by more of your stuff, i.e deflation. Now, why the heck, given the massive increase in productivity(?) during the last century, we have seen inflation, not deflation? Makes no sense to me. It looks to me like we would need to have more words for different kinds of productivity. Because at least I am confused as heck what that word actually means...

Sebb767 7y ago
The problem here is that you measure your productivity in revenue instead of something like products per hour. This is not inherently wrong, but then the benchmark is keeping your revenue by not loosing it to your competitor, who is also automating. Also, if your market isn't already saturated, you can even sell more of your product without dropping the price. It really boils down to the fact that selling is what brings money, not producing.
SiVal 7y ago
why the heck, given the massive increase in productivity(?) during the last century, we have seen inflation, not deflation? Because the money supply increased even faster than the goods & services supply. Goods and services are traded in an economy, but finding a way to exchange A (ex: shoes) for B (ex: chicken nuggets) is such a chore that economic activity is limited. Money is a solution, like a hub city for air travel: the easiest way to guarantee a route between all pairs of nodes in the network. Trade shoes for money, then trade money for chicken nuggets. You're still trading shoes for nuggets, but now it's much easier, which helps everyone. Everything gets priced in money (say, "dollars"), but if something is mispriced, arbitrage takes place. Buy an underpriced thing for a few dollars, trade it directly for an overpriced thing, then sell the overpriced thing for a lot of dollars. Money for nothin'. But once others catch on, they demand trade terms that give them the profit, changing prices until they can't be arbitraged. So everything gets priced relative to everything else, and all prices can be expressed in "dollars". If the maker of dollars decides to increase the supply by a factor of ten and no change in goods & services takes place, You have ten times as many dollars being offered for the SAME goods and services as before. Arbitrage will quickly push all prices to where the goods and services still have the same value relative to one another but their price relative to the dollar has changed by a factor of ten. Everything is "ten times as expensive" in dollars but not in terms of what people really need: other goods & services. If you make the same number of generic shoes, twice as many generic electronic widgets, and ten times as many dollars, shoes will be traded for ten times as many dollars ("price" goes up 10x), and even widgets go up by 5x, because although productivity made 2x as many widgets, the number of dollars went up 10x.
analog31 7y ago
Another way to look at it, is that your productivity equals your salary, i.e., marginal value added per unit of factor input. You work the same number of hours or years. You receive the same money. So your productivity is the same. For the employer, the productivity of their capital investment has increased. You might be able to increase your productivity if you can leverage a salary increase, or figure out how to sell the automation to your employer for more than your salary, or sell it to others.
JoeAltmaier 7y ago
Folks often assign the output of automated systems to the creator. This seems a fallacy. The output of an engineer creating an automated system is, the automated system. The output of the automated systems is the product of … the automated system. Who owns that? In a capitalist system, whomever paid for it. This is quickly becoming an issue. As industrial output is rapidly becoming exclusively the product of automated systems, the 'worker' becomes irrelevant. The limit is, none of us do appreciable work for standard goods. And since we're not working, we're not getting paid, and we can't afford the goods. We're gonna need a new system.
- rfhjt 7y ago
  It's been like that since the Stone age. The reason it's like that is the fundamental forces that drive humans: greed, cruelty, ego and all that. Hard to expect someone in power to not get more power if he's blinded by greed. How many people do you know that voluntarily spend 25% of their income on those who are lower on the social ladder? I don't know anyone, myself included.
- iudqnolq 7y ago
  But isn't the value of the automated system the engineer produced to the business the sum of the value the system will create minus what has to be spent on it (compute power, maintenance). (Emphasizing to the business to avoid a tired argument about value really being what the market will pay. In technical econ terms by value I mean the private benefit of the consumer of the automation)
  - JoeAltmaier 7y ago
    That 'tired argument' is how capitalism works. So like it or not, an Engineer is paid the going rate. The value of the automated system is clear. The value of the engineer is the automated system. Which might be quite expensive, but nothing like the value of its output.
    - iudqnolq 7y ago
      I was trying to talk about the value the engineer produces from the perspective of their employer, which is separate from what that employer is willing to pay the engineer. In economics terms, I'm talking about the consumer surplus (the employer is the consumer of the labor the engineer produces, and has a surplus because they get more value than they are paying). I called it a tired argument not because it definitely isn't true but because I'm tired of people shutting down unrelated conversations with it to look smart. A simple scenario that shows these are separate concepts: Suppose we have an extremely dumb firm that pays the engineer a trillion dollars to create an product that can make whoever owns it a billion dollars. Suppose we have an extremely dumb engineer that charges a different firm $1 to produce the same product. Suppose both firms are trying to sell the automation to a third firm. Their expenses are a sunk cost; this firm isn't going to pay the dumb firm that overspent any more. The value of the product is (generally) separate from your cost of making the product.

Sebb767 7y ago

The problem here is that you measure your productivity in revenue instead of something like products per hour. This is not inherently wrong, but then the benchmark is keeping your revenue by not loosing it to your competitor, who is also automating. Also, if your market isn't already saturated, you can even sell more of your product without dropping the price. It really boils down to the fact that selling is what brings money, not producing.

SiVal 7y ago

why the heck, given the massive increase in productivity(?) during the last century, we have seen inflation, not deflation? Because the money supply increased even faster than the goods & services supply. Goods and services are traded in an economy, but finding a way to exchange A (ex: shoes) for B (ex: chicken nuggets) is such a chore that economic activity is limited. Money is a solution, like a hub city for air travel: the easiest way to guarantee a route between all pairs of nodes in the network. Trade shoes for money, then trade money for chicken nuggets. You're still trading shoes for nuggets, but now it's much easier, which helps everyone. Everything gets priced in money (say, "dollars"), but if something is mispriced, arbitrage takes place. Buy an underpriced thing for a few dollars, trade it directly for an overpriced thing, then sell the overpriced thing for a lot of dollars. Money for nothin'. But once others catch on, they demand trade terms that give them the profit, changing prices until they can't be arbitraged. So everything gets priced relative to everything else, and all prices can be expressed in "dollars". If the maker of dollars decides to increase the supply by a factor of ten and no change in goods & services takes place, You have ten times as many dollars being offered for the SAME goods and services as before. Arbitrage will quickly push all prices to where the goods and services still have the same value relative to one another but their price relative to the dollar has changed by a factor of ten. Everything is "ten times as expensive" in dollars but not in terms of what people really need: other goods & services. If you make the same number of generic shoes, twice as many generic electronic widgets, and ten times as many dollars, shoes will be traded for ten times as many dollars ("price" goes up 10x), and even widgets go up by 5x, because although productivity made 2x as many widgets, the number of dollars went up 10x.

analog31 7y ago

Another way to look at it, is that your productivity equals your salary, i.e., marginal value added per unit of factor input. You work the same number of hours or years. You receive the same money. So your productivity is the same. For the employer, the productivity of their capital investment has increased. You might be able to increase your productivity if you can leverage a salary increase, or figure out how to sell the automation to your employer for more than your salary, or sell it to others.

JoeAltmaier 7y ago

Folks often assign the output of automated systems to the creator. This seems a fallacy. The output of an engineer creating an automated system is, the automated system. The output of the automated systems is the product of … the automated system. Who owns that? In a capitalist system, whomever paid for it. This is quickly becoming an issue. As industrial output is rapidly becoming exclusively the product of automated systems, the 'worker' becomes irrelevant. The limit is, none of us do appreciable work for standard goods. And since we're not working, we're not getting paid, and we can't afford the goods. We're gonna need a new system.

rfhjt 7y ago
It's been like that since the Stone age. The reason it's like that is the fundamental forces that drive humans: greed, cruelty, ego and all that. Hard to expect someone in power to not get more power if he's blinded by greed. How many people do you know that voluntarily spend 25% of their income on those who are lower on the social ladder? I don't know anyone, myself included.
iudqnolq 7y ago
But isn't the value of the automated system the engineer produced to the business the sum of the value the system will create minus what has to be spent on it (compute power, maintenance). (Emphasizing to the business to avoid a tired argument about value really being what the market will pay. In technical econ terms by value I mean the private benefit of the consumer of the automation)
- JoeAltmaier 7y ago
  That 'tired argument' is how capitalism works. So like it or not, an Engineer is paid the going rate. The value of the automated system is clear. The value of the engineer is the automated system. Which might be quite expensive, but nothing like the value of its output.
  - iudqnolq 7y ago
    I was trying to talk about the value the engineer produces from the perspective of their employer, which is separate from what that employer is willing to pay the engineer. In economics terms, I'm talking about the consumer surplus (the employer is the consumer of the labor the engineer produces, and has a surplus because they get more value than they are paying). I called it a tired argument not because it definitely isn't true but because I'm tired of people shutting down unrelated conversations with it to look smart. A simple scenario that shows these are separate concepts: Suppose we have an extremely dumb firm that pays the engineer a trillion dollars to create an product that can make whoever owns it a billion dollars. Suppose we have an extremely dumb engineer that charges a different firm $1 to produce the same product. Suppose both firms are trying to sell the automation to a third firm. Their expenses are a sunk cost; this firm isn't going to pay the dumb firm that overspent any more. The value of the product is (generally) separate from your cost of making the product.