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One data item that has always bothered me has been worker productivity. If this is measured by how much "profit" a firm earns per worker (or per hours worked) then it is easily distorted. Here's an example.

One of the basic claims is that the rise in IT fueled the huge increase in productivity in the US over the past two decades. This is certainly an important factor for things like back office record keeping, transaction process and supply chain management. When I first started investing I had to call the broker to put in an order. He then had to call his floor person who had to walk over to the trading desk place a hand written order with the specialist and then repeat the whole thing in reverse when the order was executed. Now I just click the mouse a few times and computers do the rest. The cost of trades has gone down to 1/5 of what it used to be without adjusting for inflation.

But the aspect of the economy which has been ignored in the calculation is the shift from making physical "stuff" to dealing in information. A factory worker running a machine in an auto plant can just do so much per hour. Even when replaced by robots there are still limitations. So his productivity has a limit. When his job is outsourced to China and the new working class moves into, say, derivatives instead the picture changes.

Now a person can control millions in economic activity per day, and there is no physical limit to how big a transaction can be processed. Selling one share and one million shares requires about the same physical effort. This person may earn his firm millions per year in fees and commissions. His productivity is, thus huge by the usual measure, but in reality he has produced nothing. Entirely too much economic activity these days is of this type. It can't continue. Bubbles based upon financial speculation always pop whether they are in tulip bulbs, South Sea investments or exotic financial instruments.

My variation on the old joke: how many financial traders does it take to change a lightbulb? An infinite amount they never learned any real-world skills.

I'd like to see some discussions of "productivity" which factor in the changing nature of work.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Thu Mar 29th, 2007 at 11:10:59 AM EST
One of the basic claims is that the rise in IT fueled the huge increase in productivity in the US over the past two decades. This is certainly an important factor for things like back office record keeping, transaction process and supply chain management.

[...]

But the aspect of the economy which has been ignored in the calculation is the shift from making physical "stuff" to dealing in information. A factory worker running a machine in an auto plant can just do so much per hour. Even when replaced by robots there are still limitations. So his productivity has a limit.

Actually I don't agree at all. IT has increased productivity extremely much in industry, at least in Swedish industry. Worker productivity has risen strongly in the steel works, paper mills, mines and refineries.

No one ever cares to check the statistics, but at least in this country it's in the industry where producutivity has increased most strongly, far quicker than in the private or public service sectors.

The logical conclusion of this is of course that the politicians do everything to destroy our industry and instead promote the "service" sector.


Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Mar 29th, 2007 at 12:04:01 PM EST
[ Parent ]
The Sweden economy, from a macroeconomic POV, tends to pass benefits of higher productivity to the worker.  In the US the benefits are passed first to management and then to the stockholders.  

Also don't the industries you mentioned, in Sweden, generally produce for speciality and other niche markets where quality is important?    


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Thu Mar 29th, 2007 at 08:04:48 PM EST
[ Parent ]
When I hear about automation increasing worker productivity, I sometimes think of the productivity of a factory that only needs one worker -- huge, presumably.

In principle, a factory might need no workers at all. Would worker productivity then be infinite, the denominator having become zero?

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Fri Mar 30th, 2007 at 03:18:16 AM EST
[ Parent ]
Which brings up the question, "What are they producing so much better?"  Smog?  Barbie Dolls?  Incontinent Ordinance?  Cars?  

The business press is full of these gee-whiz, feel-good, statistics.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Mar 30th, 2007 at 06:00:03 PM EST
[ Parent ]

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