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Productivity Mystery


I listen to Planet Money and The Indicator pretty regularly. One theme that's come up a few times is the issue of the productivity mystery. This was the topic for The Indicator yesterday. The mystery is: As technology advances, we should get more productive. However in the last few decades we have not observed that periodic advancement.

The formula is roughly:

Stuff produced / Time spent working

Like mentioned in this episode, I believe there is no mystery. Below I address each of the theories in the episode as an armchair economist with absolutely no background in the subject aside from being an avid listener.


I agree with the theory here. I'd be surprised if we are measuring production effectively. It would be interesting to know how models account for new forms of products in information and digital assets.

Labor is cheap

This is probably a cause as well, but for a different reason than mentioned in the episode. In the episode, it's proposed that when labor is cheaper than automation then we favor labor. However, I believe the reason is more nuanced.

I belive we as humans would rather employ somebody at a low wage than replace them with a machine. This is compounded by the fact that organizational structures are complex. For example: the CEO of a midmarket or enterprise company is unlikely to know that a manager hired their friend as a favor over automating a task.

There is no mystery

True, but not for the reasons stated. Technology is accelerating productivity. Unfortunately, cultural and societal expectations are holding us back from realizing those gains.

We are getting better at producing things, but people aren't cutting back hours worked. Think about it, if we get more efficient at producing goods, it takes fewer people to produce those goods. Yes, that translates into fewer hours worked, but it also leads to jobs lost. But people aren't just going to stop working. There are cultural and social forces at work which require that we keep working.

Welfare in the majority of countries (by population) typically sucks. You can't stop working even if you want to because you have to feed yourself.

Lag time

True. When our culture shifts to accept the fact that not everyone has to work and support those individuals in that decision, then we'll start to see productivity gains again.

In conclusion

Productivity is still advancing, but it's unnoticeable as long as everyone is still expected to work. I would be interested in hearing about how economists think about unemployment as it relates to productivity, as it seems logical to assume that the larger the population of non-employed [1] members of society there are, the higher I would expect productivity to be. If we could automate everything that society needs to operate (food, shelter, etc), what would that look like in terms of productivity measurement?

[1] Avoiding the term unemployment because of it's implications: must be looking for work, etc.