Because 'productivity' when bare can have different kinds of technical meanings and thus is subject to different kinds of interpretation, it is also liable to become a tool of rhetorical manipulation. This happens so frequently with 'productivity' because of its knee-jerk positive valence that it's now reasonable to presume that unless an author adds a modifier to specify which particular kind of productivity is meant, then manipulating the audience is precisely what he is attempting to do.
For example. There is "Real Productivity", the ability to transform quantities of capital and hours of labor into measurable units of goods and services. If I have two identical coffee-making robots in Caracas and Carmel, the fact that a cup of coffee goes for 50x more in Carmel does not, from this perspective, make the machine "more productive" if you move it to a different set of geographic coordinates.
There is "Nominal Productivity" in which everything is measured in dollars without regard to local differences in wages, cost of living, the eviction from the local marketplace of the low-surplus, price-sensitive parts of the demand curve, etc.
You can also imagine "Utility Productivity", but that's tricky. We can usually measure inputs vs outputs in comparable units, and we can measure money flows in dollars, but we can't measure whatever hedonic qualia are experiences by conscious market participants or the metaphysical construct of 'utility', the levels of which we can only infer from particular conceptions of it.
Let's say in alternative reality cheaper-housing San Francisco and Bay Area Billionaire is willing to pay $100 for a cup of coffee but he gets to enjoy a lot of surplus because the going market rate is $5 or whatever. Ok, now the rents go into the stratosphere, all the non-millionaires have to pack their bags, the number of coffees sold declines by 99%, but the remaining barista still makes the same number of coffees per hour she did before, only now the price is $100. Well, we can reasonably assume the Billionaire still gets the same utility from that one coffee, though not from the opportunity cost of the $95 of surplus he now transfers through the coffee shop to local landlords and governments. So, wait, what happened to utility and productivity again? The point is that you can try to simply define the prices that highest bidders pay in a constrained marketplace as 'utility' but it's now how most people understand that term, or what they would agree with in terms of growth maximization goals.
Here are some examples of how that approach yields results that would strike most people as absurd.
Monopoly / Labor Union Scenario. The Labor Union gets an agreement for higher wages by turning the 'competitive' companies in that sector into a cartel that limits production to lower supply and raise the average price per unit output. Each guy does the same amount of real work per day, but gets paid more, and the overall level of production and surplus is down. But we can cheer because this contract has "raised worker productivity" in that sector? Um, sure it has.
YIMBY wins scenario. The Bay Area YIMBYs triumph politically and remove all limits to building in the whole metro. Mini-Tokyo gets built and rents decrease 50%. With a cheaper cost of living, business real estate rent is cheaper, and new baristas can be hired for lower wages, and so the price of coffee goes down. Barista productivity has now plummeted. Tragedy! Right? Why is it not a tragedy if we are supposed to favor more productivity, and here, according to this definition, it went down?
Again, advocates can use any kind of definition of productivity they want so long as they avoid misleading the audience by being forthright about which particular meaning they are employing.
"If I have two identical coffee-making robots in Caracas and Carmel, the fact that a cup of coffee goes for 50x more in Carmel does not, from this perspective, make the machine "more productive" if you move it to a different set of geographic coordinates."
I couldn't bring myself to read your whole comment but I liked this almost as much as the quote of Erdmann.
I've always had a hard time understanding how (or maybe believing that) productivity of an economy, as opposed to a single product, could be reasonably measured. Counting items seems to have too many problems. Output value does too. Besides the coffee example, what if I double output for given inputs and the price drops about half? Quality creates all kinds of hazards too. Cars last far longer than they used too. If price doubles and the product last three times as long, how is that captured? Or what about a cheap printer with expensive ink vs more expensive printers with cheap ink? The list of complications is endless and I expect many are not rounding errors.
Erdmann's point is similar to one I have often seen made about high French labor productivity: it's not that France is such a productivity powerhouse, it's that their labor regulations price all the lower-productivity workers out of the labor market.
Arnold says it was the Harvard faculty that pushed out Summers. In fact, it was a large radical minority of only one of the faculties that did it. The majority just kept their heads down. There were some science faculty I know who went to the meetings to argue against Summers's ouster, but they told me that unlike the Leftists whose academic work is political BS, they have to get up in the morning and be at work in their lab at 8 AM, so can't stay all night. Summers didn't even try to defend what he had said, which was clearly correct, probably because he didn't want to open up a rift with the Democrats' activist base. Instead he unsuccessfully granted huge money ($50 million) to try to buy off the feminists. He was succeeded by one of them, Drew Faust. (Faust means "fist" in German). Of course the Board is useless; this is the case across the elite institutions, where board seats are sold for large donations to people who regard the position as a social and business asset, not a responsible job. The minute there is any strife that would affect the value of the asset, they immediately move to quiet it down, which means no support ever for any matter of principle that comes up from Leftist demands. At Harvard, it is even worse, since many of the Board members, and especially the Chair, are themselves committed ideologues and agents of the Democratic Party. The billionaire Chair, Penny Pritzker, was Obama's campaign finance chief.
Pushing out the poor CAN be productivity enhancing for the local area if it reduces the externalities of underclass dysfunction. Of course, this is not the case in places like San Fransisco, but it is common across highly segregated cities especially in the Northeast. And anyway its mostly a zero sum game.
I think your last point is a specific example of a more general heuristic I've noticed over the years. I don't have a pithy way of stating it, but it's:
A percentage metric is reliable if the change comes from the numerator, and it is unreliable if the change comes from the denominator.
There's an awful lot of sketchy political stats thrown around where the underlying problem is a change in the denominator that's mistaken for--or mis-represented as--a change in the numerator.
I really like the quote of Erdmann but I'd say your mention of the poor is a bit off unless "poor" includes people making a bit more than median income. Either way, you have me wondering about the income distribution for people leaving CA. And people have been leaving most rust belt states so I wonder about their income distribution too. Another related question is how much productivity would vary by location if one controlled for education level.
Can you please run Tyler’s critique of Harvard’s governing board through your grader? Here are two of my observations about it.
1. Cowen doesn’t provide evidence to back his assertion that Harvard’s board is mediocre. He says.
‘The point I would like to add, if I may be a bit rude, is that Harvard, upon closer examination, seems to have a quite mediocre governing board. I believe there are a few exceptions on the list of names, but nonetheless I see a lot of evidence for a critical mass of poor decision-makers, many of them also lacking in courage. Furthermore, they are bad at the things they are supposed to be good at.”
And.
“But in fact the board of “the Corporation” is a big, big disappointment (WSJ), relative to the rest of the institution. Harvard seems to do best when the relevant decisions are not being made by the governing board.”
2. Nor does he say what is wrong with the incentives of the board.
“More fundamentally, viewed as a political economy problem, I don’t see which are the institutions or incentives in place to make the board really, really good, as it ought to be. Nope.”
Erdman: The reasoning will be wrong, but the concussion will still be correct: the difference in marginal productivity is a measure of the economic cost of the land use restriction.
"Erdmann suggests that a naive economist might think: Look at how much more productive people are in SF than in rural Texas."
6 years ago, ahem: https://www.arnoldkling.com/blog/disaggregating-the-economy-california/#comment-476624
Because 'productivity' when bare can have different kinds of technical meanings and thus is subject to different kinds of interpretation, it is also liable to become a tool of rhetorical manipulation. This happens so frequently with 'productivity' because of its knee-jerk positive valence that it's now reasonable to presume that unless an author adds a modifier to specify which particular kind of productivity is meant, then manipulating the audience is precisely what he is attempting to do.
For example. There is "Real Productivity", the ability to transform quantities of capital and hours of labor into measurable units of goods and services. If I have two identical coffee-making robots in Caracas and Carmel, the fact that a cup of coffee goes for 50x more in Carmel does not, from this perspective, make the machine "more productive" if you move it to a different set of geographic coordinates.
There is "Nominal Productivity" in which everything is measured in dollars without regard to local differences in wages, cost of living, the eviction from the local marketplace of the low-surplus, price-sensitive parts of the demand curve, etc.
You can also imagine "Utility Productivity", but that's tricky. We can usually measure inputs vs outputs in comparable units, and we can measure money flows in dollars, but we can't measure whatever hedonic qualia are experiences by conscious market participants or the metaphysical construct of 'utility', the levels of which we can only infer from particular conceptions of it.
Let's say in alternative reality cheaper-housing San Francisco and Bay Area Billionaire is willing to pay $100 for a cup of coffee but he gets to enjoy a lot of surplus because the going market rate is $5 or whatever. Ok, now the rents go into the stratosphere, all the non-millionaires have to pack their bags, the number of coffees sold declines by 99%, but the remaining barista still makes the same number of coffees per hour she did before, only now the price is $100. Well, we can reasonably assume the Billionaire still gets the same utility from that one coffee, though not from the opportunity cost of the $95 of surplus he now transfers through the coffee shop to local landlords and governments. So, wait, what happened to utility and productivity again? The point is that you can try to simply define the prices that highest bidders pay in a constrained marketplace as 'utility' but it's now how most people understand that term, or what they would agree with in terms of growth maximization goals.
Here are some examples of how that approach yields results that would strike most people as absurd.
Monopoly / Labor Union Scenario. The Labor Union gets an agreement for higher wages by turning the 'competitive' companies in that sector into a cartel that limits production to lower supply and raise the average price per unit output. Each guy does the same amount of real work per day, but gets paid more, and the overall level of production and surplus is down. But we can cheer because this contract has "raised worker productivity" in that sector? Um, sure it has.
YIMBY wins scenario. The Bay Area YIMBYs triumph politically and remove all limits to building in the whole metro. Mini-Tokyo gets built and rents decrease 50%. With a cheaper cost of living, business real estate rent is cheaper, and new baristas can be hired for lower wages, and so the price of coffee goes down. Barista productivity has now plummeted. Tragedy! Right? Why is it not a tragedy if we are supposed to favor more productivity, and here, according to this definition, it went down?
Again, advocates can use any kind of definition of productivity they want so long as they avoid misleading the audience by being forthright about which particular meaning they are employing.
"If I have two identical coffee-making robots in Caracas and Carmel, the fact that a cup of coffee goes for 50x more in Carmel does not, from this perspective, make the machine "more productive" if you move it to a different set of geographic coordinates."
I couldn't bring myself to read your whole comment but I liked this almost as much as the quote of Erdmann.
I've always had a hard time understanding how (or maybe believing that) productivity of an economy, as opposed to a single product, could be reasonably measured. Counting items seems to have too many problems. Output value does too. Besides the coffee example, what if I double output for given inputs and the price drops about half? Quality creates all kinds of hazards too. Cars last far longer than they used too. If price doubles and the product last three times as long, how is that captured? Or what about a cheap printer with expensive ink vs more expensive printers with cheap ink? The list of complications is endless and I expect many are not rounding errors.
Erdmann's point is similar to one I have often seen made about high French labor productivity: it's not that France is such a productivity powerhouse, it's that their labor regulations price all the lower-productivity workers out of the labor market.
This is also the case for Spain (11.60% unemployment rate), and probably Greece (12.30%).
Arnold says it was the Harvard faculty that pushed out Summers. In fact, it was a large radical minority of only one of the faculties that did it. The majority just kept their heads down. There were some science faculty I know who went to the meetings to argue against Summers's ouster, but they told me that unlike the Leftists whose academic work is political BS, they have to get up in the morning and be at work in their lab at 8 AM, so can't stay all night. Summers didn't even try to defend what he had said, which was clearly correct, probably because he didn't want to open up a rift with the Democrats' activist base. Instead he unsuccessfully granted huge money ($50 million) to try to buy off the feminists. He was succeeded by one of them, Drew Faust. (Faust means "fist" in German). Of course the Board is useless; this is the case across the elite institutions, where board seats are sold for large donations to people who regard the position as a social and business asset, not a responsible job. The minute there is any strife that would affect the value of the asset, they immediately move to quiet it down, which means no support ever for any matter of principle that comes up from Leftist demands. At Harvard, it is even worse, since many of the Board members, and especially the Chair, are themselves committed ideologues and agents of the Democratic Party. The billionaire Chair, Penny Pritzker, was Obama's campaign finance chief.
Pushing out the poor CAN be productivity enhancing for the local area if it reduces the externalities of underclass dysfunction. Of course, this is not the case in places like San Fransisco, but it is common across highly segregated cities especially in the Northeast. And anyway its mostly a zero sum game.
>> "Are students, faculty, and administrators to be selected for the content of their character or for the shape and color of their genitalia?"
Classic!
I think your last point is a specific example of a more general heuristic I've noticed over the years. I don't have a pithy way of stating it, but it's:
A percentage metric is reliable if the change comes from the numerator, and it is unreliable if the change comes from the denominator.
There's an awful lot of sketchy political stats thrown around where the underlying problem is a change in the denominator that's mistaken for--or mis-represented as--a change in the numerator.
I really like the quote of Erdmann but I'd say your mention of the poor is a bit off unless "poor" includes people making a bit more than median income. Either way, you have me wondering about the income distribution for people leaving CA. And people have been leaving most rust belt states so I wonder about their income distribution too. Another related question is how much productivity would vary by location if one controlled for education level.
Arnold,
Can you please run Tyler’s critique of Harvard’s governing board through your grader? Here are two of my observations about it.
1. Cowen doesn’t provide evidence to back his assertion that Harvard’s board is mediocre. He says.
‘The point I would like to add, if I may be a bit rude, is that Harvard, upon closer examination, seems to have a quite mediocre governing board. I believe there are a few exceptions on the list of names, but nonetheless I see a lot of evidence for a critical mass of poor decision-makers, many of them also lacking in courage. Furthermore, they are bad at the things they are supposed to be good at.”
And.
“But in fact the board of “the Corporation” is a big, big disappointment (WSJ), relative to the rest of the institution. Harvard seems to do best when the relevant decisions are not being made by the governing board.”
2. Nor does he say what is wrong with the incentives of the board.
“More fundamentally, viewed as a political economy problem, I don’t see which are the institutions or incentives in place to make the board really, really good, as it ought to be. Nope.”
Erdman: The reasoning will be wrong, but the concussion will still be correct: the difference in marginal productivity is a measure of the economic cost of the land use restriction.
"I can make people more productive just by imposing more costs on their production!"
Most Blue Cities and States reached this epiphany a long time ago, and have been implementing it in policy for generations now. With gusto!