Thursday, January 22, 2015

Growth and the Productivity Conundrum

Where to begin...after reviewing a recent spate of posts and related material about productivity issues and the need for further growth. Concerns about work in an age of automation have also made their way to Davos this year. One good visual of late is Exhibit 2 of a recent McKinsey Report, which illustrates a sharp decline in the need for labor in the decades ahead. The graph projected 1.8% productivity growth from 2014 forward. What's more the need for labor (supposedly) falls away, well before the year 2064.

Regular readers know, that I don't believe this sorry state of affairs to be an inevitability. However, with no substantial change in reasoning in the years ahead, further social breakdown could ensue. Which is why I talk nonstop, about knowledge use systems for potential employment and an improved growth trajectory.

However, this would be a project for citizens in their own environments, instead of yet another layer of responsibility for government environments. While many on the left continue to hope for combined (i.e. more inclusive) investment in government and private industry, too many competing interests are involved for real growth to be freed at national levels. And private interests on the right don't necessarily prioritize the role of services as a growth component.

What's more, not everyone thinks of services in the broad, indeed desirable terms which they actually exist. Hence I was pleased to find a good, explanatory post from Dietz Vollrath several days earlier, in this regard. He's not the only one who is giving the services sector a closer look. Of service sector jobs, Timothy Taylor writes:
The jobs question all around the world is the extent to which service-sector jobs can provide a broad base of careers for a wide range of skills levels.
Until recently, developed nations were able to generously contribute to the service sector through fiscal means. However, what Dani Rodrik refers to as "premature industrialization", made it more difficult for developing nations to rely on a similar strategy. Only consider the additional growth gains of the twentieth century, when the "home advantage" of traditional manufacture on the part of developed nations gave them greater fiscal freedom. During the social democrat period according to Chris Dillow, the UK experienced growth at 2.5% (instead of 2%) between 1946-79.

Indeed this was a golden window of opportunity moment, when governments found it easier to pay for knowledge (as a growth component) through fiscal means. That makes it all the more difficult, to imagine the need for knowledge use to "step out on its own" through direct and monetary means. Another question - as Chris Dillow noted - how to increase growth without simply feeding every special interest which promises more jobs? I would add: how to envision growth - and work potential - which addresses what individuals want on direct monetary terms?

While labor force participation faces continued challenges from automation, some aspects of knowledge use exist at a more personal level. In these instances, personal time is among the most important products that individuals seek. What's more, a marketplace for time value is important not just at a social level, but also in monetary policy terms. Time arbitrage also makes it possible to measure knowledge use gains as they accrue to specific populations.

A rise in services productivity, translates into a rise in the overall quality of the services hour as measured in knowledge use systems. Applied time use settings which utilize high skill levels are quite different from other product formations. The value of high skill positions has not only been increased by their relative scarcity, but also an ongoing struggle for both participation and access. Unfortunately, this has contributed to the growing reality of a missing marketplace.

Dietz Vollrath spoke of a similar form of missing marketplace in developing countries. When a marketplace does not exist for available resources or product, this limits the production separation functions for families, between social production and family consumption. While reading his post, the comparisons to the limited knowledge use marketplace of the U.S. immediately sprang to mind. Think about this quote:
If markets are missing completely, or so unreliable as to effectively be missing, then household separation fails. The extreme case is easier to think of. If a household is completely autarkic, and can trade with no one else, then it can consume only what it produces.
To some degree this holds for the missing marketplace of time value in today's developed nations. How many skills sets do we now rely on for our own use that we cannot utilize effectively in the marketplace? These may or may not be skills sets that are even useful for our families. The list has been growing over time, and now includes far more skills sets than what many workplaces once required.

Exchangeable skills capacity is further compromised if one is not effectively employed, or else employed trying to use time in the "wrong" (!) ways - that is, ways which threaten the value of someone else's time (see link at bottom of post). If our ability to produce is not up to certain standards, or is otherwise not wanted for other reasons, time use is mostly beneficial in a singular sense, in spite of whatever investment is involved. It's autarky all the way down, for the most precious resource we've got. Why would governments which have thrived from the tremendous coordinating benefits of capitalism, want the rest of us to lose the ability to coordinate among ourselves?

More thoughts from the Vollrath "Market Failures" post:
In a non-separating economy without markets, giving a family a tractor and technical training is kind of a waste. If they're well off for a developing country they've got two hectares of land...Yes the tractor can alleviate some of the workload but it's overkill. You'd spend more than half your time just turning the tractor around trying to plow that small of a space. Moreover, the tractor would sit idle for the vast majority of the year. Without markets, most investments and improvements in technology are not worth it.
Pure investment strategies (let's give everyone a bag of fertilizer!) are unlikely to be as effective without the markets in place that allow people to take advantage of that investment.
It's not much of a stretch to imagine the lack of a local marketplace for vegetables in a developing nation, as the lack of a local marketplace for time use in a developed nation. Vollrath's "fertilizer for all!" example immediately reminded me of Obama's recent "community college for all!" announcement. More investment! Yeah that's the ticket! And the marketplace for this additional mind "fertilizer" exists...where? It exists where we allow it to. And that's the problem, right now. Can I say this enough? No.

On that note, this post about productivity conundrums wouldn't be complete without an example of the destructive desire, to keep knowledge perfectly and wonderfully scarce. One can only hope that the authorities in question do not win this battle:

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