Reviving productivity

by on May 3, 2017 at 10:13 am in Economics, Uncategorized | Permalink

That is a new series on Bloomberg View, here are the beginnings of the symposium.  Here is Clive Crook on productivity as a moral imperative.  Here is Noah Smith on the easy ways to boost productivity.  Here is my piece on the human constraints behind the productivity problem, here is one excerpt:

The logic of the usefulness of face-to-face contact also shapes the geographic distribution of economic activity…

Given all this, at least three answers to the productivity problem suggest themselves. First, we can make online communities more vivid. E-sports, a diverse set of online competitions, have hundreds of millions of viewers. Through the development of internet fandoms and communities, many people now find these activities more exciting to watch than the World Series. Even chess on the internet has proved popular, as commentary and chat rooms make it more exciting for the viewers. The community-building tactics used by e-sports could be applied elsewhere.

Second, we can make face-to-face communities more effective. I am struck by the occasional scorn shown to ex-President Barack Obama for his past as a community organizer. Yet building communities is a critical skill for boosting business productivity in a service economy.

Third, individuals should read and cultivate Stoic philosophy in themselves, whether explicitly or as they might pick up from a best-seller. More self-reliance and less dependence on social cues for doing the right thing will increase economic performance.

There are more installments coming in the series.

1 Gil May 3, 2017 at 10:31 am

The Obstacle is the Way (same author) is another good intro to Stoic principles.

2 Todd Kreider May 3, 2017 at 10:45 am

Noah Smith: “And productivity growth has been slowing in advanced countries since the mid-2000s”

Well, that’s a pretty misleading way to write what has happened with TFP. It was rising up until the worst global recession in 70 years, then *fell sharply* – not “slowing down”, and then began to rise again.

And the entire “low hanging fruit” argument is an illusion only spoken by those not looking even one step ahead and after a great recession. There was not a sudden burst in TFP in the 1990s but notice no stories of low hanging fruit as the internet began to explode around the world.

3 prior_test2 May 3, 2017 at 11:01 am

‘And the entire “low hanging fruit” argument is an illusion only spoken by those not looking even one step ahead ‘

Ah, but Prof. Cowen is, as this subtitle reveals – ‘How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better’

4 Todd Kreider May 3, 2017 at 12:53 pm

“(Eventually) Feel Better” won’t be until the 2040s according to Cowen’s prediction in 2011.

I just realized that there is something funny about when the Great Stagnation was released: January 25, 2011.

IBM’s Watson beat two of the best ‘Jeopardy!’ players just three weeks later on February 15, 2011.

5 carlospln May 3, 2017 at 5:10 pm

‘Something funny’

Yeah, its ‘funny’ that Watson isn’t even a revenue centre in IBM’s reported results.

Some breakthrough.

6 Todd Kreider May 4, 2017 at 12:09 am

I just heard an interview with an IBM spokeswoman about that. Basically, Watson doesn’t exist at IBM because he is so intertwined with everything they do. Watson = IBM.

7 carlospln May 4, 2017 at 1:08 am

You must believe everything IBM says

Watch the birdie!

https://www.crn.com.au/news/ibm-watson-way-behind-target-claims-report-436637

8 Chip May 3, 2017 at 10:49 am

” I am struck by the occasional scorn shown to ex-President Barack Obama for his past as a community organizer. Yet building communities is a critical skill for boosting business productivity in a service economy.”

The scorn arises because 1) he didn’t actually build any communities, and 2) it was clearly a vehicle on his path to political power.

The irony of course is that Romney did actually help build communities – often with his bare hands – and yet he was scorned as a plutocrat. Obama built nothing and is idolized as a saint.

9 FG May 3, 2017 at 10:57 am

What leads you to conclude that “[Obama] didn’t actually build any communities”? It seems hard to prove either way.

10 JWatts May 3, 2017 at 11:41 am

“What leads you to conclude that “[Obama] didn’t actually build any communities”? It seems hard to prove either way.”

Which is pretty good evidence that he didn’t accomplish much. As a rule, we don’t generally credit individuals with significant accomplishments that can’t be independently verified.

11 FG May 3, 2017 at 11:56 am

Dunno. Seems to me like community organizer is a hard thing to measure either way.

12 Rich Berger May 3, 2017 at 12:55 pm

If you read his book, you see that he didn’t accomplish very much. Community organizers are agitators, not builders.

13 derek May 3, 2017 at 1:40 pm

That is why people who have not accomplished anything use it.

I know community organizers. They never call themselves that. They describe what they have actually accomplished if they talk about it at all.

14 prior_test2 May 3, 2017 at 11:04 am

‘and yet he was scorned as a plutocrat’

That is what happens when people who aren’t actually rich can hear you speaking about them. As in this video – https://www.youtube.com/watch?v=slFZ8K2aBoY

15 Gerber Baby May 3, 2017 at 12:16 pm
16 Stormy Dragon May 3, 2017 at 11:07 am

Peter Gibbons: The thing is, Bob, it’s not that I’m lazy, it’s that I just don’t care.
Bob Porter: Don’t… don’t care?
Peter Gibbons: It’s a problem of motivation, all right? Now if I work my ass off and Initech ships a few extra units, I don’t see another dime, so where’s the motivation? And here’s something else, Bob: I have eight different bosses right now.
Bob Slydell: I beg your pardon?
Peter Gibbons: Eight bosses.
Bob Slydell: Eight?
Peter Gibbons: Eight, Bob. So that means that when I make a mistake, I have eight different people coming by to tell me about it. That’s my only real motivation is not to be hassled, that and the fear of losing my job. But you know, Bob, that will only make someone work just hard enough not to get fired.

17 Asher May 3, 2017 at 11:21 am

Brilliant! Let’s maximize utility by changing our preferences! If you don’t care about anything ever, then you are always maximizing utility.

If we are already adopting this path, we could also improve productivity by changing our attitudes towards human freedom and the sanctity of human life. E.g., we could imprison or lash anyone whose productivity is low.

Another alternative would be to adopt a philosophy according to which our current lifestyle is the absolute eternal ideal lifestyle.

Once we allow for improving well-being by altering human nature, the possibilities for improving the human condition are endless!

18 Axa May 4, 2017 at 4:57 am

Mmmmmm, what is the human nature?

19 The Engineer May 3, 2017 at 11:31 am

Who says that cutting regulations will “hurt” the environment, the economy, or workers? When has it ever been tried and shown for that to happen?

Let’s give it a try and see.

We had an amazing natural experiment with the Volkswagen diesel scandal. NOx regulations are completely theoretical (i.e. X grams of NOx emissions translate into Y amount of ozone, which eventually causes Z amount of lung cancers). I call bullshit on the whole enterprise, but in particular all diesel emission controls implemented since 2007 are bullshit. Certainly now that we have this experiment, we can test the bullshit, can’t we?

20 Troll Me May 3, 2017 at 11:58 am

A –> x grams of B

B –> x mols of C

Percentage of C –> estimated effect on lung cancers.

If that is complicated, please do not feel qualified to comment on related policies. However, if you can find which specific part of “Percentage of C –> estimated effect on lung cancers” is wrong, please sound the alarm.

21 The Engineer May 3, 2017 at 2:36 pm

The point is that it is a theoretical exercise. It’s mathematical modeling and guestimating.

22 Troll Me May 3, 2017 at 6:04 pm

Being limited to 2 or 3 decimal places does not mean the first decimal place is wrong.

Maybe concepts like logical induction or deduction are more useful than thinking of it as a “theoretical exercise”.

23 JWatts May 3, 2017 at 12:03 pm

I wouldn’t say that Environmental regulations are useless and I believe that if we were to cut enough out it would cause real harm. However, it seems likely that the marginal value for US environmental regulations over the last 20 years is far lower than the marginal value of the regulations from the preceding couple of decades.

One positive change would be if all estimated Federal environmental regulatory cost were included in the Federal budget every year. The approximate cost of $350 billion per year is quite large and it’s worth being aware of the number and the potential growth of the number.

24 P Burgos May 3, 2017 at 12:38 pm

For a lot of regulations, especially those that have an impact on health, the cost benefit analysis would likely come down to how you estimate the value of a Quality-adjusted-life-year (QALY). So how you determine whether or not Obama’s regulations on Mercury emissions from power plants cost x amount of dollars would come down to how much you value the lives of the people benefitting from the reduction in airborne toxins. But I think this scales more generally to anytime regulations are used to deal externalities. The direct costs are easy to calculate, but the value of the indirect costs (or benefits) are likely to be very sensitive to assumptions in the model.

25 Troll Me May 3, 2017 at 1:34 pm

I’m not sure the federal budget is right place for that.

But if someone’s going to do work on “Green Accounting”, or “Green GDP”, which accounts for things like ecosystem services (water filtration, pollination services for agriculture, etc.), then it would be hard to take someone seriously if they were not at least interested to have a reasonably accurate presentation of those costs which are to be weighed against benefits through such regulations.

26 Ray Lopez May 3, 2017 at 11:51 am

Yawn. Without reading any of these links, I bet if you do “CONTROL + F” plus type “patent” or “IP” you’ll not get a single hit. Yet these authors claim to be experts in enhancing productivity? In fact, if anybody finds any mention of patents in any of these articles I’ll agree to do almost anything the person wants for me to do online, including stop posting here for a while. Any takers? Msgkings this is your chance…

27 Anonymous May 3, 2017 at 12:03 pm
28 msgkings May 3, 2017 at 12:55 pm

You’ve already lost, the Noah Smith link has this phrase: “and legal institutions like patent systems to encourage innovation. ” And this: “Intellectual property law is a third area that seems ripe for smart pro-growth reform”

OK, before I hand down my sentence, any suggestions from other posters here? I was going to have Ray stop posting for the rest of May but he’s amusing in his trollery. If I get no suggestions that’s what I will tell him to do.

29 Ray Lopez May 3, 2017 at 1:24 pm

Oh no, I saw that too just now…S.O.B. Well, go on, your loss if I stop posting here.

30 msgkings May 3, 2017 at 1:27 pm

I agree it’s more fun with you here, which is why I’m asking the crowd for other ideas.

31 Ray Lopez May 3, 2017 at 1:30 pm

Of interest, the Forbes article that Noah Smith links to about reforms in patent law has this howler: “So, we’ve constructed the patent system: people have a 17 year exclusive right to such public goods” published in 2013, when in fact since June 8,1995 the term of patent protection is not 17 years from issuance but 20 years from filing of the patent. So the Forbes ‘patent expert’ is 18 years behind the times.

32 P Burgos May 3, 2017 at 2:11 pm

How about a picture of Ray and his fiancee wearing bikinis?

33 msgkings May 3, 2017 at 2:16 pm

Both of them wearing bikinis? I don’t think I could handle it.

But the picture idea is good. I declare that Ray must post a picture of himself and his fiancée who’s half his age, wearing whatever he wants. Ray, does this work for you?

34 Ray Lopez May 3, 2017 at 5:53 pm

No, that would be too much. I will take a voluntary ban from posting here for one month, ending June 1. TC can see how much traffic is down (or up!) in that time…

35 msgkings May 4, 2017 at 12:41 am

LOL not unexpected. Bye Felicia.

36 ChrisA May 3, 2017 at 12:04 pm

Relaxing with my amazing device that can access just about any media I want, for free in high resolution colour . I guess I can survive this “low productivity growth” world.

In other words this is a crisis of measurement not reality.

37 Anonymous May 3, 2017 at 12:13 pm

Tyler admits that this “low productivity growth” world is “better for some people.” I too think he might underweight that. But there is no doubt that the future prosperity of other people, those not satisfied yet, is tied to productivity growth.

It’s possible that some of those “not satisfied yet” could be, by designing a better lifestyle within constraints of the current economy .. but probably not all. Some probably do need that productivity growth.

Noah’s suggestions look fine.

38 Gerber Baby May 3, 2017 at 12:29 pm

Tyler addressed this criticism in The Complacent Class: it’s not really free. You bought the device and you bought your internet access.

And also, couldn’t you have said the same thing about productivity in the 1950s? “Productivity growth is even higher, look at the free TV and radio we’re getting.”

39 ChrisA May 4, 2017 at 2:45 am

Yes my iPad and Internet is not free but it can do what it used to take weeks in seconds, how is that not massive productivity growth?

40 psmith May 3, 2017 at 2:11 pm

Yeah, who needs flying cars when you have cat gifs, amirite?

41 MarkB May 3, 2017 at 5:01 pm

Did you miss the nytimes article on all the flying car startups (seriously, google it)?
Peter Thiel’s complaint may become outdated…
And what about self-driving cars? Much more interested in those. And those are on their way…

42 harpersnotes May 3, 2017 at 12:47 pm

Face-to-face productivity: 1. Introduction of television to regions is associated with increases in obesity, so that got me thinking about Putnam’s Bowling Alone book and the decline of community face-to-face social interactions (walking to store together, going to dances, saying hi to neighbors…) Putnam’s ideas initially were about the effectiveness of major civic reforms in Italy but quickly expanded to include economies. Having more personalized internet interactions ~might~ work, but smells a little of trying to cure the problem of tv with more tv. Many are the subtle cues of direct social interaction, as perhaps better appreciated by those who once expected Second Life and other simulations to be the next big thing. Contra McLuhan, the Global Village metaphor for the rise of world television has ties that are too weak to forge prosperity. 2. Recently I was reminded of the classical psychology experiment in 1954, Robbers Cave, which resembled in some very rough way Golding’s Lord of the Flies. It almost seems the creation of a strong ‘us’ requires a ‘them’ (or an ‘othering’.) (Briefly: Kids left largely alone at a camp site played and interacted awhile, then learned of another mysterious group.) The point being that people tend to think of face to face interactions making somehow making people nicer and more cooperative — Not so much maybe, especially if it is unevenly distributed. 3. Combining 1 and 2, do you get Pinker’s decline of violence?

43 A Definite Beta Guy May 3, 2017 at 1:03 pm

Bravo for the novel take on productivity problems. Tyler hits on an oddity of the era and diagnoses this as a major productivity problem: why does so much business and learning activity have to occur face-to-face? Why can’t we leverage our communication tech better? Why is the supposedly Flat World smashing into Himalayan mountains around Silicon Valley and Manhattan?

The problem is the near-death of functioning business community. Businesses and economics aren’t top-down machines with engineers hammering and replacing various cogs: they more closely resemble complicated rain forests where insects pollinate, tree roots hold moisture, and life supports an overarching ecosystem. Business practices spread through the community via memetic evolution, as does a great number of valuable practices. It’s how we learned to bake fabulous soufflés long before we understood the science behind them. This evolution requires a good degree of turn-over and flow between systems.

Tyler didn’t state it in the piece, but both AT and TC have noted the growing productivity gap between frontier firms and average firms. To the extent there’s a broader productivity problem, this has got to be part of the problem, and part of the solution has got to involve fixing this, and policies that don’t address it are at best a partial solution.

Building better communities? That’s definitely a good idea.

Now the question is: How? Where? Maybe we can’t do anything at the federal level, but what can activists and states do? What cities are the best options to build future Silicon Valleys? I’ll bet on some of the Rust Belt cities here. I think they’ll fare better than Sunbelt or Southeastern cities.

As for Noah’s answer: we can only build so many high-rises in the Bay Area, and we’ve already allowed in lots of highly skilled immigrants, which doesn’t seem to have arrested our productivity slowdown at all.

44 msgkings May 3, 2017 at 1:31 pm

“We can only build so many high rises in the Bay Area”: I doubt they are even close to that limit.

But you ecosystem metaphor is a good one. The problem is these things can’t be mandated top-down, it’s not just a ‘government can’t make shit happen’ problem, it’s that emergent things kind of follow their own logic.

45 Matthew Young May 3, 2017 at 3:32 pm

Mark to market more often so we know what to fix.

46 Alex May 3, 2017 at 6:26 pm

I’ve been wondering something for a while. Can someone explain to me why productivity varies more between nations than within them? Why isn’t it possible (in the long run) for some jobs to keep increasing in productivity in a society while other jobs stagnate?

47 carlospln May 4, 2017 at 1:52 am

“Why isn’t it possible (in the long run) for some jobs to keep increasing in productivity in a society while other jobs stagnate?”

It is. Fracking is more productive in 2017 than in 2020 [‘learning curve’ + better technology]

But my barber still requires 20″ to cut my hair!

https://en.wikipedia.org/wiki/Baumol's_cost_disease

48 carlospln May 4, 2017 at 2:56 am

Erk! “Fracking is more productive in 2017 than in 2010”

FIXED!

49 JJ May 4, 2017 at 1:15 am

Someone has never read open chat in twitch.tv

Seriously, anyone using online gaming ‘communities’ as an example of how to build positive communities has never got a whiff of the rancid cesspool that is reflected in that community.

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