Friday, 15 May 2009

Increasing productivity

Over at the TVHE blog Matt Nolan comes up with a new way of increasing productivity, shooting half the population!

My first question for Matt is, Why only half? If shooting half increases productivity wouldn't shooting three quarters increase it even more? Second, I'm worried about which half he plans on shooting. If he shoots the most productive half his plan may not work. Third, What if productivity is linked to the size of the population. If a bigger population gives us bigger markets and returns to scale, could this not result in more efficient use of resources and thus greater productivity? Fourth, as what is important to living standards is increasing productivity over time, does Matt plan on shooting half the population each year? And if so for how long? Paul Krugman makes an important point when he says,
Economic history offers no example of a country that experienced long-term productivity growth without a roughly equal rise in real wages. In the 1950s, when European productivity was typically less than half of U.S. productivity, so were European wages; today average compensation measured in dollars is about the same. As Japan climbed the productivity ladder over the past 30 years, its wages also rose, from 10% to 110% of the U.S. level. South Korea's wages have also risen dramatically over time. ("Does Third World growth hurt First World Prosperity?" Harvard Business Review 72 n4, July-August 1994: 113-21.)
Last, and most importantly, At what point will Matt have to shoot himself? :-)

My basic point is, of all the things a government could get excited about, increasing productivity is properly one of the least harmful things. More output is what we value and having a government do what it can, which isn't all that much, to help this isn't a bad thing. In the past government have worried about other things and our productivity growth has suffered because of it and with it has gone our standard of living.


Matt Nolan said...

Hi Paul,

Good post :)

I would note that I agree with what you are saying - I'm just sick of people talking "productivity" instead of actually thinking about costs and benefits.

When it comes to shooting people I think the policy is described in more detail here:

And when it comes to shooting myself I have to remember I am the social planner in my example - so I have to stay till the end :P

Paul Walker said...

Didn't Shakespeare say, "The first thing we do, let's kill all the social planners."?

Matt Nolan said...

I can understand why - but I don't think that is a policy a social planner would implement ;)