The wisdom of Garett Jones

by on November 5, 2009 at 8:40 pm in Economics | Permalink

Workers mostly build organizational capital, not final output. This explains high productivity per 'worker' during recessions.

That is from Twitter, the link is here.

Russ R November 5, 2009 at 10:25 pm

“This explains high productivity per ‘worker’ during recessions.”

You know what else improves productivity per worker during recessions?

Firing all the slackers, thereby motivating your remaining employees to work extra hard so they don’t get the axe next.

Jacob Wintersmith November 5, 2009 at 10:55 pm

Is there a contest for most profound or important thing said in the space of a tweet? That surely makes the short list.

JSK November 6, 2009 at 12:28 am

If workers build “organizational capital”, why not maximize the number of workers at all times? Or are the “excess” workers superfluous? Why hire them then during the upswing?

babar November 6, 2009 at 1:37 am

sounds ok at first blush, but think about it.

why wouldn’t reducing staff reduce organizational capital at least proportionally? do you expect, say, managers to be able line workers?

and just looking at the numbers, why wouldn’t the productivity of managerial workers decrease strongly if they had fewer workers and processes to manage?

why would not the value of organizational capital be extremely compromised if the “recalculation” hypothesis were mostly true? if the economy is changing what it does, then the “brains” of the operation are going to be highly leveraged in their knowledge — they are going to be deeply misallocating what few resources they have.

so, um, he didn’t explain the whole world in a tweet.

Zamfir November 6, 2009 at 3:43 am

SRP, that makes of course a good story to tell to Fortune magazine, for the rest it just means that working there is an eternal risk of losing your job on a whim. If I thought my boss did stuff like that, I would be reading the job ads right now.

Habermas November 6, 2009 at 5:32 am

The problem is that this story coexists perfectly with Leftists cries of consolidation of power by the owners of capital. Delong, over at his blog, rescinds his mockery of such tales after looking at this quarter’s productivity numbers. Like many disputes between the Left and the center-Right, the argument reduces to narration rather than fact.

mulp November 6, 2009 at 11:22 am

If “organizational capital” means patents, product research, product design, product testing, which are counted as capital on the tax and accounting balance sheets, the data say it is far from “most”. And if the “modern” idea (since 1981) is that isn’t useful, that means capitalism is unproductive, especially in hard times when your products aren’t compelling enough to be flying off the shelves.

We once called this “eating your seed corn.” But this shows my age and my entering engineering in the late 60s and 70s when building capital was the national mission. I see the national mission to be consuming capital since about 1981, because capitalism requires too much sacrifice.

harlan November 6, 2009 at 12:59 pm

Um, the very simple explanation is that less productive people get laid off and lower return projects get canceled. You cut the fat first. It’s called creative destruction, look it up. This is not that complicated an issue.

JSK November 7, 2009 at 2:55 pm

@Andrew: Is it your mission to be portray the stereotypical young American male? Not all phenomena are adequately captured by sports metaphores.

Um, the very simple explanation is that less productive people get laid off and lower return projects get canceled. You cut the fat first. It’s called creative destruction,

Isnt this “diminishing marginal returns”?

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