From the Economist: Economic productivity

Lafayette · May 7, 2016

The Economist, Buttonwood,

The art of being useful

Excerpt:

ONE of the economic mysteries of recent years is why productivity gains have been so slow. It is a big issue for the developed world since, with workforces likely to stagnate or shrink as the baby boomers retire, productivity will have to do all the work of generating economic growth. The pessimists ... argue that modern technology, like the iPhone, is nothing like as transformative as late 19th and 20th century innovations such as electrification or the car. The optimists say that mankind is only just beginning to exploit the potential gains of the internet and that GDP measures may not be capturing all of the recent gains.

A new paper from the Kansas City Fed highlights a very simple reason for recent sluggishness; that the economy has seen a further shift to services. American manufacturing workers are 10% more productive than the average; miners (another sector to lose ground) are more than twice as productive. The share of hours worked in manufacturing has been trending down for three decades but slipped further in the last two years; mining employment (this includes oil) has dropped from 904,000 in September 2014 to 720,000 in March 2016. By itself, these changes may have knocked 0.7% a year off productivity.

All this recalls the old feeling that those who work in manufacturing are simply more "useful" than those who work in services. Economists tend to pooh-pooh this distinction; a manufactured plastic bucket is hardly more valuable than the software that allows us to navigate, for example. The anti-service prejudice may simply be a relic of an earlier age when coal, steel and cars were the big employers. Go back in history even further and some people argued that farming was much more important than manufacturing.

Still, there are some tricky questions. Productivity in the services sector is much harder to measure (what's the output of a call centre?) and sometimes harder to improve (would a 5-minute haircut be better than a 30-minute cut?). Manufacturing generates lots of spin-off service jobs, from the accountants who audit the firm's books to the shopkeepers who sell the resultant goods or the restaurants that feed the factory workers.

Beyond all the wailing and gnashing of teeth we see in the media (and on this forum), there's some good news in the above linked article. Particularly about shop-floor productivity, for which the US is not that bad a place in which to produce. It all depends upon what you are producing for marketing in one of the richest market-economies in the world. (A larger one being the EU, in population but not GDP, but I wont rub-in that fact.)

I happen to think that Manufacturing over the long-run is not our best bet. Except, except, in those industries that have earned the qualification as "strategic". But, what does that mean? It means, for instance, a great long time ago mining coal was a Strategic Business. The coal went to steam-water that passed through huge fans that, in turn, were the electricity dynamos for a burgeoning Industrial Age.

But, is that any longer the case? No, since we have mastered atomic energy and a good number of alternative sources. Well, the same for Industrial Productivity. Since the advent of the China Price in the early 1990s, there are a great number of hard-goods that we can no longer build because the manpower component is too great and too expensive. We just cannot compete with the China Price.

One further point to be made: The services industries have a higher component of "knowledge" than "know-how" involved. On the shop-floor, you learn the know-how of riveting aircraft wings. It's up in Engineering Department that it is "knowledge" that designs newer, faster and more economic commercial jets.

MY POINT?

And, so, what does that little-story mean?

That we need absolutely to be investing in both "know-how" and "knowledge" acquisition to prepare our children's future. It's not for us to decide what they will want to do. It is up to us, however, to help them find their way to either. Because a Tertiary Education will offer them either two-year training in "know-how" or 2- or 4-year education in "knowledge". Their natural abilities and ambition will decide which.

Regardless of which, it is this core education that will allow them to find their place in a market-economy, not only as Consumers but also as Producers (which is the Key Duality of our existence that no one escapes).

And we can ONLY accomplish that for our young by making Tertiary Education either free, gratis of for nothing (for some) or as least-costly as possible (for others). The quality-outcome of their lives depends mostly upon further education beyond secondary-schooling ...
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joG · May 7, 2016

Lafayette said:
The Economist, Buttonwood,

The art of being useful

Excerpt:

Beyond all the wailing and gnashing of teeth we see in the media (and on this forum), there's some good news in the above linked article. Particularly about shop-floor productivity, for which the US is not that bad a place in which to produce. It all depends upon what you are producing for marketing in one of the richest market-economies in the world. (A larger one being the EU, in population but not GDP, but I wont rub-in that fact.)

I happen to think that Manufacturing over the long-run is not our best bet. Except, except, in those industries that have earned the qualification as "strategic". But, what does that mean? It means, for instance, a great long time ago mining coal was a Strategic Business. The coal went to steam-water that passed through huge fans that, in turn, were the electricity dynamos for a burgeoning Industrial Age.

But, is that any longer the case? No, since we have mastered atomic energy and a good number of alternative sources. Well, the same for Industrial Productivity. Since the advent of the China Price in the early 1990s, there are a great number of hard-goods that we can no longer build because the manpower component is too great and too expensive. We just cannot compete with the China Price.

One further point to be made: The services industries have a higher component of "knowledge" than "know-how" involved. On the shop-floor, you learn the know-how of riveting aircraft wings. It's up in Engineering Department that it is "knowledge" that designs newer, faster and more economic commercial jets.

MY POINT?

And, so, what does that little-story mean?

That we need absolutely to be investing in both "know-how" and "knowledge" acquisition to prepare our children's future. It's not for us to decide what they will want to do. It is up to us, however, to help them find their way to either. Because a Tertiary Education will offer them either two-year training in "know-how" or 2- or 4-year education in "knowledge". Their natural abilities and ambition will decide which.

Regardless of which, it is this core education that will allow them to find their place in a market-economy, not only as Consumers but also as Producers (which is the Key Duality of our existence that no one escapes).

And we can ONLY accomplish that for our young by making Tertiary Education either free, gratis of for nothing (for some) or as least-costly as possible (for others). The quality-outcome of their lives depends mostly upon further education beyond secondary-schooling ...
_______________________________

Free is almost always a bad idea. But that is tertiary education knowledge.

Lafayette · May 7, 2016

joG said:
Free is almost always a bad idea.

Why? The sun is free. The air is free. Secondary schooling is free (at public schools).

Why not tertiary education? It's just one (necessary) step up the Competency Latter. And all the reasons that convinced Americans in the early 20th century to make secondary schooling free, gratis and for nothing are identical today.

(A wee bit of the History of Education in the US, here.)
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joG · May 7, 2016

Lafayette said:
Why? The sun is free. The air is free. Secondary schooling is free (at public schools).

Why not tertiary education? It's just one (necessary) step up the Competency Latter. And all the reasons that convinced Americans in the early 20th century to make secondary schooling free, gratis and for nothing are identical today.

(A wee bit of the History of Education in the US, here.)
___________________________

Maybe you might want to read up on the economics of the free lunch. And maybe i should remind you of the changes in financial, technical and social technologies since general education, social security and other social programs were more efficient in public hands. When Bismarck introduced his programs there was no alternative to public organization and even in FDRs times or even into the 1950s in the US or maybe till the 1980s in countries destroyed in the war public systems still made some sense as they might now for the ghettos and poor. But otherwise?
The only real reason that they are still free is political. The street would revolt, if it had to pay for its own costs.

Lafayette · May 8, 2016

NOT BAD

joG said:
The only real reason that they are still free is political. The street would revolt, if it had to pay for its own costs.

The reason people are free is because "they want to be free". Even if it's you in the US or some poor soul dying in a refugee camp in Syria. Freedom is instinctive and at the very heart of Maslow's Hierarchy of Needs.

There is no way whatsoever to climb that hierarchy towards attaining Self-Actualization without freedom of thought and discourse (speech and writing).

You and I are discoursing in this Debate-Forum because of that singular need inherent in all of us - the Freedom of Speech and its resulting discourse/debate. And those who think that either a BigMac or a Megabuck are the essentials of life are seriously deluded.

"Muney, muney, muney - show me da muney" is not everything in life.

We must also take into consideration that, when one "notion of freedom" does not permit "another notion of freedom" to exist; then quite plainly intellectual freedom does not exist in that country. Those countries today are Russia, China and North Korea to the worst degree - all the remnants of Communist Orthodoxy.

Not bad for the earth as a whole, given what existed only 30 years ago - but still not good enough ...

POST SCRIPTUM

I, for one, and you, for another, must recognize how important it is to human development that we disagree. How lucky we are to be able to do so.

It is only by debate that we can arrive at viewing the way forward. That and the ability to vote our own view of the way forward. Which is true freedom. Because one without the other is never sufficient.
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