Monday, September 3, 2007

US Leads

In a new productivity study (still searching for the study itself) reported by MSNBC and the Associated Press.

The US comes out on top in total production per worker and second in hourly productivity. Norway edges us in part because of oil revenues.

I have long been concerned about productivity statistics. Typically my attitude towards statistics is that they are ultimately just the mathematical product of several measurements and should be treated as such, no more, no less.

However, productivity is a bit different. It is the closest a statistic comes to answering our most important question: How effective is an economy in allowing people to achieve the most goals in our fundamentally limited time on earth.

Production per hour is important because hours are the stuff of life. The fewer we have to spend toiling to survive the more we have to devote to whatever makes surviving worthwhile.

So what about hourly productivity. Well one problem is that it doesn't count people who want to work but can't find a job. In particular we could raise our productivity just by forcing less productive workers out of the market. This theoretical possibility wouldn't be important if it weren't for the fact some popular policies do exactly that.

Expanding unions and raising the minimum wage can both raise hourly productivity, but they do so by forcing out the weaker members of the workforce. This doesn't seem like the type of activity we want to capture.

Yet, simply averaging in the unemployed isn't right either. After all, they are likely unemployed because they are less productive. Simply slotting them into the denominator would suggest that they are just as productive as the average working member of society.

So at this point I am at loss for the "right" statistic on such an important matter.

12 comments:

Anonymous said...

Karl, you're famous now. Dubner, from the Freakonomics blog wrote a paragraph about you. (about the shadow blog of Freakonomics). Go Karl!

knzn said...

...we could raise our productivity just by forcing less productive workers out of the market. This theoretical possibility wouldn't be important if it weren't for the fact some popular policies do exactly that.

Such policies tend to be more popular in other high-productivity countries (with the possible important exception of Japan) than they are in the US. Which should make it that much more impressive that the US ends up on top.

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