Friday, February 1, 2019

TFP Potential: Time Reduction, or Synchronization?

Is progress slowly being diminished? One reason it's difficult to know for certain, is that progress has also become more difficult to measure. In a recent Econtalk with Russ Roberts, Patrick Collison says he's agnostic as to whether possibilities for progress have actually been reduced. However, he is quite concerned about a measured productivity rate which is "declining very rapidly on a per-person, per-hour, or a per-dollar basis." Collison adds that "our per-person productivity seems much, much lower."

Roberts and Collison also note how total factor productivity is a useful framing for this problem. I would add that this still evolving circumstance could be a result of increased economic activity which doesn't readily scale. Since there are relatively more inputs for time based product than output, there is also less overall revenue potential. That doesn't mean we should cut back on time based services provision in order to achieve gains in output, but rather, think differently about the organizational factors involved. Thus far, in aggregate, there's too little time based services output, in relation to the input which is often required in high skill services generation.

Total factor productivity provides macroeconomic clues for envisioning aggregate output and long term growth potential. However, we still conceptualize productivity in linear terms, which means assuming it is always necessary to further reduce time and labour in relation to output. Indeed: One of the more pressing questions now, is how far will societies travel this path to productivity gains? After all, it's an approach which means eventually excluding larger percentages of the population from formal workplaces. Despite the productivity gains - even if some form of monetary redistribution were also involved - there would still be losses in terms of both output potential and consumer demand. Might some remain convinced it is better to sacrifice potential productivity gains, so as to keep citizens gainfully employed?

There are further complexities for how we think about present day productivity, as well. Even though some aspects of non tradable sector activity are notorious for their contribution to output losses, other valuable service activity has been generated which does not require time based product. Indeed, services which don't require someone's personal attention (or specific locations where that attention takes place) now contribute to substantial productivity gains. Fortunately, not all aspects of today's non tradable sector activity are problematic for continued progress and long term growth potential.

Nevertheless, if average citizens are to preserve vital economic roles in the near future, many could still benefit from a non linear perspective on wealth creation. Time arbitrage, or symmetric time matching, could synchronize many forms of time based product which people find valuable. Time synchronization could make if feasible for time based services to become recognized as a valid form of economic output, rather than societal obligation.

Yet how to know which services individuals especially value? Exploratory processes would allow people to decipher what forms of (voluntary) time based services are most meaningful, versus activities which are only tolerated. How "necessary" are the latter, for instance? Once the differences become apparent, societies could more readily measure what individuals hope to encourage and maintain. In all of this, the concept of time as a separate distinct product in its own right, helps tease out aspects of economic measure which matter at a broader level. To sum up, while it is possible to increase productivity via further reduction of time hours in relation to aggregate output, doing so would not necessarily increase output and demand. Time synchronicity could ultimately increase both.

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