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Musings Report 2018-33 8-18-18 Why Is Productivity Slowing?
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For those who are new to the Musings reports: they are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
Why Is Productivity Slowing?
As the accompanying chart shows, productivity in the U.S. has been declining since the early 2000s. This trend mystifies economists, as the tremendous investments in software, robotics, networks and mobile computing would be expected to boost productivity, as these tools enable every individual who knows how to use them to produce more value.
One theory holds that the workforce has not yet learned how to use these tools, an idea that arose in the 1980s to explain the decline in productivity even as personal computers, desktop publishing, etc. entered the mainstream.
A related explanation holds that institutions and corporations are not deploying the new technologies very effectively for a variety of reasons: the cost of integrating legacy systems, insufficient training of their workforce, and hasty, ill-planned investments in mobile platforms that don't actually yield higher productivity.
Productivity matters because ultimately producing more value with every unit of energy, every tool and every hour of labor is the foundation of higher wages, profits, taxes and general prosperity.
I have two theories about the secular decline in productivity, and both are difficult to model and back up with data, as they are inherently hard to quantify.
1. Mobile telephony and social media distract workers so significantly that the work being produced has declined per worker/per hour of paid labor.
2. Public and private institutions have become grossly inefficient and ineffective, soaking up any gains in productivity via their wasteful processes and institutionalized incompetence.
Other commentators have noted the drain on productivity as workers constantly check their mobile phones and social media accounts--up to 400 times a day is average for many people.
"Addicted" is a loaded word, so let's simply note the enormous "able-to-focus-without-interruptions" gap between those who only answer phone calls and limit social media to a few minutes per day in the evening during off-work time, and those who are distracted hundreds of times throughout the day.
Some tasks can be interrupted without much loss of productivity, but most knowledge-based tasks are decimated by this sort of constant distraction--even though the distracted worker will naturally claim that their productivity is unharmed.
The list of public institutions that now demand absurd wait times for minimal or even defective service keeps growing. The California Dept. of Motor Vehicles (DMV) now soaks up to eight hours of waiting in line to complete mundane tasks. Employees have been caught napping for hours, and those waiting for service note the lines finally start moving in the last half-hour of the day when the employees are motivated to process the people in line so they can go home.
The court system is equally Kafkaesque, building permits that once took hours to process now take months, and so on. In the private sector, it's becoming increasingly difficult to fix problems created by the corporations themselves.
The core dynamic in my view is that public institutions and corporate cartels lack any mechanisms to enforce accountability; there is no competitive pressure on the DMV or courts, and essentially zero competitive pressure on monopolies such as Facebook and Google and cartels such as the big healthcare insurers.
Quasi-monopolies like Microsoft and Apple force tens of millions of users to re-learn new versions of software, detracting from productivity rather than enhancing it, despite their claims.
Other types of planned obsolescence are equally destructive.
With no mechanisms in place to enforce accountability and efficiency, there is no accountability or efficiency. And so these monopolies and cartels can be as wasteful, inefficient and unaccountable as they want.
If we look at the economy as a whole, we find it is dominated by monopolies and cartels, public and private. No wonder overall productivity is declining: much of the economy is becoming less productive because there are no feedback loops to enforce productivity gains on these dominant, unaccountable sectors.
Highlights of the Blog This Past Week
If You Want to Survive this Election with Your Mental Health Intact, Turn Off the "News" and Social Media Now 8/17/18
Our "Prosperity" Is Now Dependent on Predatory Globalization 8/15/18
Technocrats Rule: Democracy Is OK as Long as the People Rubberstamp Our Leadership 8/13/18
Best Thing That Happened To Me This Week
My sister-in-law visited from Oahu and cooked for us--always a treat to eat a good cook's meals.
Musings on the Economy
After seven years of Market Musings, I've decided to widen the focus of this section to the entire economy. This gives me a wider palette for commentary, with the goal of increasing the value of the Musings to you.
We all know the world needs to transition away from fossil fuels, especially coal, and the solution is alternative energy, broadly speaking renewable energy, though as energy expert Nate Hagens once told me, "renewable" often just means "replaceable," i.e. solar panels, windmills etc. have a lifespan and need to be replaced.
This is rarely mentioned in reports on the expansion of alternative energy: if we go out 25 years, we'll need to invest money just to replace 20-year old solar installations (20+ years seems to be the assumed lifespan of most photovoltaic panels, though there are plenty of components in the system that can fail in less than 20 years).
So if the world is investing $250 billion annually (as this report suggests) in alt. energy, as the size of the total installed base expands, more money will have to be invested to replace existing syste,s which are wearing out/reaching the end of their utility.
This means the sum invested in alt. energy will have to rise, lest all we end up doing is replacing existing systems as they reach the end of their utility.
This report breaks down investment in alt. energy by region, and what's important in my view is the decline in investment in Europe, China and elsewhere as austerity tightens spending or extremely loose credit standards and interest rates start creeping higher.
This is problematic, as the majority of people want more energy, not less, in the future. Yet if we under-invest in alt.energy (still approximately 3% of total global energy consumption if we subtract hydro/dams), then alt. energy will remain a thin sliver of total energy production.
I see conservation/DeGrowth as the ultimate affordable solution, but reducing energy demand and increasing efficiency also require investment. As a very rough guess, I would reckon the global economy should be investing $1 trillion a year in conservation/alt. energy production if we are going to make a real dent in fossil fuel dependency.
Clean Energy Investment Trends, 2Q 2018 (78 pages)
From Left Field
The global implications of the Turkish lira crisis (via LaserLefty)
The social ideology of the motorcar: This 1973 essay on how cars have taken over our cities remains as relevant as ever
The Anatomy of a Crisis: A Strong Dollar and Disappearing Liquidity
Is Capitalism Killing Us? (via Chad D.)
Corporate Media Join in Editorializing for Press Freedom... for Themselves (via LaserLefty)
Overdose Deaths Reached Record Level of 72,000 in 2017, New Estimates Show
Big media companies are branching into health care. Here’s why (via LaserLefty)
More Bridges Will Collapse: Two disasters in Europe are the latest examples of the decline of infrastructure—as an idea as much as a physical thing.
Why California Cities Are Becoming Unlivable
One of the largest banks issued an alarming warning that Earth is running out of the resources to sustain life
You’re Not As Smart As You Think You Are And It Leads To Political Gridlock
Crazy Rich Asians Is Going to Change Hollywood. It's About Time (via Maoxian)
"Absorb what is useful, discard what is useless, and add what is specifically your own." Bruce Lee
Thanks for reading--
charles |
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