The logic that I go through in the diary applies equally to sustainable increases in productivity (such as the increased productivity caused by wind farms displacing coal miners who used to be digging coal to power coal power plants) and non-sustainable ones (such as bigger earth-moving machines displacing coal miners for mining coal).
But it is extremely relevant to the issue I bring up in the second half: For simplicity, I have assumed here that a labour productivity increase does not decrease productivity w.r.t. other input variables (electricity, iron ore, land use, hardwood, etc.). If this is not the case (and it usually isn't), then obviously industrial production would have to actually decrease in order to maintain the same environmental footprint. That would further increase the need for reducing man-hour input in order to remain in compliance with our long-term survivable ecological footprint.
But adding this complication makes for a less straightforward argument, and one that can more easily be dismissed by the claim that Technology Is MagicTM. It could be argued that technology can sometimes increase labour productivity without decreasing productivity w.r.t. other input variables. What the version I've put in the diary does is to show that even if we make the most ludicrous assumptions about technological progress that can possibly be made without violating the laws of physics, we'll still need to accept industrial planning and shorter work weeks if we want to avoid mass unemployment and mass extinction.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Individuals do get more productive if they increase their knowledge, skills etc. Then they can use capital to better effect.
But they are no more productive if they use more Capital: it's the capital that's productive, not them.
Capital - in the form of property in productive assets - is independently productive of Labour, in that it has a use value independent of Labour.
Neoclassical economists have been funded by the rich to promulgate this bollocks because if all value is assumed to originate with Labour than there's no reason to tax Capital is there? "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
So how is capital independently productive?
I think it's more that capital is a bullshit game played by people who monopolise these assets for their own personal benefit. It's a bizarrely persuasive game, but it's still just a con trick - like someone selling you something you already own, and then persuading you that you owe them a debt because of it.
What I mean by independently productive Capital is property/ownership of productive assets.
In my view the key productive assets are:
(a) Location
(b) Energy
(c) Knowledge
In the Coarse Economics which I have worked out for my own delectation, these are the Factors of Production. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Commercial banking was originally developed to make it possible for farmers to grow their production, and also to insure against a poor harvest. The lender took on risk of loss of capital in exchange for a profit.
This was often used abusively, but investment - in the sense of sponsoring innovation and activity - isn't itself a negative thing. Nor is building up social reserves to hedge against future problems.
The problem is that these social relationships tend to be used abusively by default, and they also attract people with abusive personalities.
The social problem is that there's a split between personal and commercial/political morality.
Individuals are expected to act non-criminally in their social contacts and are punished for transgression. But in business and politics, sociopathy is rewarded and seems to be valued. It's non-sociopathic behaviour which is devalued and punished by loss of influence and personal opportunity - which in extreme, and sometimes not so extreme cases, can mean anything from mild aggravation, to homelessness, to death.
This is a very odd thing, and hard to justify, never mind explain.
It's not inherently extractive - it's just used that way by default.
Equity - in the form of shares in Joint Stock Limited Liability Corporation - is indeed inherently extractive. It exists so that rentier shareholders can make money from money.
Banking/credit creation as currently practised is also extractive to the extent that it is carried out for the profit of rentier shareholders. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Let's say I have some spare cash here and that city over there needs a windmill.
The windmill won't happen without funding. So I invest in the windmill project, the city gets a windmill, I get my original money back plus a return.
Overall, that's a net win for everyone.
Now let's say I have some spare cash here. I invest it with Trader B who puts together a portfolio which includes Corporation A, because he knows that Corporation A offers excellent and quick returns.
Immediately there's a difference in motivation. I'm not interested in funding a project, I'm interested in making as much cash as quickly as possible.
Company A is an M&A house. It makes its profits through hostile takeovers.
You can guess what happens next. Corporation A leaves a trail of lost opportunities and diminishing possibilities in its wake. But I have my quick 30% return, so I don't care.
That's clearly extractive.
The problem is that there's no financial or social distinction between investing and sponsoring, and raiding for profit. The shares, the trades and the markets used to mediate these relationships are indistinguishable.
It's the social disconnection that makes the process extractive, because it doesn't include social costs in the transaction.
If Corporation A had to pay a wealth destruction tax (or some other form of compensation) its business model would become obsolete overnight.
it's the stone truth.
by social you could say ethical, same difference.
you succinctly describe the moral fault line whence the Great Quake cometh.
'blind eye' indeed. practically a whole society playing bingo on a raft going over niagara.
beam me up scotty ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
At heart, you have risks, and you have rewards, and these can be improperly assessed, and unfairly allocated, under any system.
Ultimately, it depends on incentives, social and monetary. If you can make a lot of money gaming the system, and this is seen as "success", then you will game the system, however well it is designed.
My job as a banker, on any project, is to try to outthink the people that will try to game the system, and put contractual safeguards so that they can't do it. It can also mean, simply, choosing to not work with some people because, no matter what safeguards you put, if they are in bad faith they will always find a way to fleece you - or try hard enough that you waste a lot of resources preventing them from doing it.
Just like there are no manthematical models that give you an exact number on what risks you are taking in a project, there is no legal framework that will protect you against human nature.
Thus the need for bankers, exercising judgement and able to understand what the underlying project hypotheses are and to evaluate them. It's, fundamentally, a qualitative job, not a quantitative one. In the long run, we're all dead. John Maynard Keynes
IMHO these partnership mechanisms are emerging in use - as did Income Trusts and Royalty Trusts in Canada and Australia - because they share risk and reward in a pre-distributive (sharing gross revenue or production) way that some investors find attractive.
It is therefore possible using such frameworks to raise necessary credit or investment "Peer to Peer" from stakeholders.
This is clearly more efficient - Coops call it the "Cooperative Advantage" - than to go to unproductive rentier credit or investment/speculation intermediaries who are interested only in making money from money, as opposed to being paid for the use of value/ money's worth such as location, energy or knowledge.
The need for banking as a service remains, both for:
(a) managing the process of bilateral Peer to Peer credit creation;
(b) bringing together Peer to Peer investors in productive assets with investment in productive assets.
Why go to to the trouble of setting up completing claims over productive assets - ie those of secured debt and equity - when it is simpler and less conflicted (not to mention fairer) to share production proportionally?
But your point re human nature is absolutely valid. Although I believe that the partnership framework is capable of aligning stakeholder interests in an optimal way, that still does not mean that people will agree, or continue to agree. Partnerships are not a magic bullet, because human beings are fallible. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
For each possible pairing of these input and output variables, you can define a productivity - that is, you can measure the output variable in question, measure the input variable in question, and divide the two. This is clearly an interesting number, almost no matter what resources you use as input and output - including man-hours. Whether it is meaningful to attempt to optimise the productivity w.r.t. any given (input,output) pair is another question entirely. But this does not detract from the fact that productivity in terms of some output w.r.t. some input is an interesting number to know.
You can then put these productivities into Leontief matrices, and you could define an absolute productivity increase as one in which every element of the matrix increased (resp. decreased, for those in the rows that have some form of pollution as output). But that takes us rather far afield from the original topic under discussion.
Technology Growth and Efficiency are regarded as two of the biggest sub-sections of Total Factor Productivity, the former possessing "special" inherent features such as positive externalities [i.e. profit margin; see MFP] and non-rivalness [sic! s/b monopoly conditions] which enhance its position as a driver of economic growth.
I wonder, why? Could it beeeeeeeeeeee, diminishing marginal cost of labor (L), where HUMAN substitute MECHANICAL input, so accelerating rate of profit captured per unit ouput per hour? I think so. Typical Forrester sell-sheet circa 2001:
Benchmarking Technical Productivity Business process change contributes to prodctivity growth, but efficiency gains for US firms varied widely over the past decade. Execs should benchmark their recent performance --and turn to eBusiness for the next wave of productivity growth. [BWAH!] ... Process change. ...ERP systems, for example, have helped firms like Saab coordinate orders across business units ...Resource allocation. ...Technologies for better logistics administration ...By contrast, primary goods industries like steel have been slower to adopt these technologies...Knowledge sharing. As firms globalize, they are using techlogies like corporate portals to share critical information across the enterprise. CAD software and product-development databases, for example, helped contribute to electronics manufacturers' 10.6% average annual TFP growth...
Business process change contributes to prodctivity growth, but efficiency gains for US firms varied widely over the past decade. Execs should benchmark their recent performance --and turn to eBusiness for the next wave of productivity growth. [BWAH!] ...
Such peculiar strategy of capital formation has paid off both corporatists and entrepreneurs for centuries, explaining in part a historical tendency in political speeches to understate the ever expanding universe of fungible "labor" components (enjoying tax credit allowances).
TFP is also dependent on estimates of the other components [of LABOR]. A 2005 study[1] on human capital attempted to correct for weaknesses in estimations of the labour component of the equation, by refining estimates of the quality of labour.
"Quality-adjusted labor": An interesting topic covered by numerous economists at NBER and OECD. Consider Oliner and Sichel, Cummins and Volante.
See also Multifactor productivity which expresses more explicitly correspondence of terms of production to terms of price structure. Which is helpful to the curious, when the ol' S-D fails to predict dislocations of effective demand and producer output, in aggregate. Diversity is the key to economic and political evolution.
