Comments on: US and international productivity

By: Larry V.

Larry V. — Sat, 27 Nov 2004 01:51:43 +0000

comparing productivity per hour to anything except your own business is obsurd, the only thing productivity per hour should be measured against is your own ability to manage a profitable business,so dont kid yourself,into thinking to much about how to compare it JUST DO IT, worrying about someone else creates to much complacency about averages, move on and make money.

By: Guy

Guy — Mon, 22 Nov 2004 19:16:08 +0000

Remi asked a bunch of questions: < > Not sure exactly what you are asking here. Pizza deliveries are counted in GDP calculation. Obviously if the underlying consumer preferences vary from country to country, this will make cross-country welfare comparisons in terms of GDP per capita (even more) dubious. < > Not sure what you are asking here. The US exports a lot of services since those are becoming increasingly tradeable.

By: remi

remi — Mon, 22 Nov 2004 14:31:22 +0000

Speaking of GDP What is the relevance of comparing the GDP of 2 countries. For example what is the value of pizza deliveries in the US ? When most of our GDP is services and with very little % of industrial product made in US remain to be exported?

By: abb1

abb1 — Mon, 22 Nov 2004 10:07:07 +0000

The United States uses a method called ‘hedonic regression’ which involves pricing characteristics (in the case of computers, these would include processor speed, disk drive capacity and so on) rather than specific items. By contrast, most European countries use older methods involving matching specific models. OK, but the manufacturing sector constitutes only – what? – about 15% of the US economy? I doubt that any CPUs or hard-drives are produced by the US labor at all. It’s mostly services and information/communication technology. How do you quantify output of a software developer: lines of code written? I guess I expected a less hazy metric for something as fundamental as ‘productivity’.

By: Jeff Rigsby

Jeff Rigsby — Mon, 22 Nov 2004 05:20:04 +0000

Guy wrote: “China’s productivity growth is probably faster than that of the US (haven’t seen the growth accounting figures — much of their fast growth presumably comes from factor accumulation), but their productivity levels in most industries are much lower.” I live in Shanghai and I think this is almost certainly true. Economic growth here has been very strong for most of the past two decades or more, yet the country still has a very serious unemployment problem. In fact it appears that the job market (except for people with great English and other skills) is getting tougher and tougher despite the rapid growth in GDP —which implies very, very strong growth in output per worker. There seem to be three elements driving this growth: a) capital accumulation, as Guy suggests—the personal savings rate here is around 40 percent; b) human-capital accumulation—levels of educational achievement are rising very quickly; c) growth in multifactor productivity—mainly driven by the very rapid contraction of employment in agriculture and in state-owned industry (the two lowest-productivity sectors). The last factor may become less important in future. One of the big news items here over the summer was that factories in South China are having trouble recruiting unskilled workers, because the rural labor force has begun to dry up. Just a few thoughts from the other side of the world.

By: John Quiggin

John Quiggin — Sun, 21 Nov 2004 23:36:13 +0000

“But now I get it – it only matters how much stuff you produce, the quality is irrelevant” On this point, reread the post.

By: roger

roger — Sun, 21 Nov 2004 23:34:44 +0000

abb1, actually, the problem was that the Soviet union had notoriously bad productivity—all those pipeline workers getting drunk on the stuff they were supposed to use to defrost the pipes, all the faked stats from the outlying provinces. If, in fact, they had produced shoddy goods for export, that wouldn’t be bad in itself. U.S. goods were notoriously shoddy in the 19th century, but they were also cheap. The Soviets embedded their imitation first world industrial infrastrucute in a third world export structure—metals, oil. And so they sank, down and down… As for Lenin, he presided, in the last year of his life, over a mixed economy experiment—NEP —which was, looking back on it, the rational way for the Soviets to evolve to the kind of welfare state political economy Sweden successfully achieved. Although of course as any Trotskyist knows in his heart, without a Soviet Europe, the Leninist experiment was doomed anyway.

By: abb1

abb1 — Sun, 21 Nov 2004 21:54:51 +0000

Well, this is odd. I always thought that productivity is measured in units of output, but some months ago I got into an argument (perhaps on this very site) and a whole group commenters convinced me that in the post-industrial society the only way to measure productivity is the dollar-value of the output. So, I shouldn’t believe everything I read on the internet, I guess. Althought, IIRC, it did make sense at the time – to use market value instead of quantities. But now I get it – it only matters how much stuff you produce, the quality is irrelevant. Well, that’s true – there’s a lot that going on out there. The Soviet Union probably had the highest productivity of ‘em all, just like Mr. Lenin promised – all those billions tons of iron, all those idenitical shoes and coats, millions and millions of them, probably still sitting in warehouses somewhere… Lol.

By: John Quiggin

John Quiggin — Sun, 21 Nov 2004 21:22:52 +0000

abb1, productivity is measured in terms of quantities, so price changes are factored out.

By: abb1

abb1 — Sun, 21 Nov 2004 20:49:38 +0000

John, doesn’t it create an escher-style paradox, when something goes up-up-up and ends up being below? Let’s say I write essays on economics in the US and you write essays on economics in the EU. I write one essay/hour and sell it for $100 and you write one essay/hour and sell it for E100. $1=E1. We have equal productivity, correct? Let’s say 5 years later I now write 2 essays/hour (better spell-checker) and sell them for $200. You still write 1 essay/hour and sell it for E100. But now $1=E.50. My productivity doubled. Your productivity hasn’t changed. Yet in absolute terms (value of output/hour) we still have the same prodictivity. How is it possible?

By: John Quiggin

John Quiggin — Sun, 21 Nov 2004 19:59:27 +0000

abb1, each country’s productivity growth is estimated from its own national accounts, so currency fluctuations have no (direct) effect. roger, you’re correct, and I’ve developed most of these points in earlier posts. ramster, the Chinese central bank will lose a lot when the yuan is eventually revalued.

By: ramster

ramster — Sun, 21 Nov 2004 19:47:01 +0000

“The dollar has already declined against other currencies, such as the yen and euro, and has now reached a record low against the euro. Combined with strong productivity growth, relative to the rest of the world, this ought to produce a rapid turnaround in the US trade deficit. Whether it will do so remains to be seen.” How does this square with the Chinese policy of pegging the yuan to the US dollar? Doesn’t the peg mean that the declining US dollar won’t affect trade balances between the US and China? A yuan pegged to the dollar is going to give Chinese goods the same price advantage globally that US goods would have (assuming a continuing decline in the dollar compared to other currencies). I suspect that China will see a greater trade advantage than the US in such an environment. The Europeans seem to be the prime candidates for getting screwed in this scenario (especially the big exporters). The peg doesn’t seem sustainable though. What price (if any) is China paying by maintaining the peg?

By: guy

guy — Sun, 21 Nov 2004 17:28:34 +0000

Tom wrote: >>What degree of productivity would it take to compete with the Chinese? Until the U.S. can do that, all this discussion seems to be beside the point.< < Huh?? China’s productivity growth is probably faster than that of the US (haven’t seen the growth accounting figures—much of their fast growth presumably comes from factor accumulation), but their productivity levels in most industries are much lower.

By: roger

roger — Sun, 21 Nov 2004 15:52:58 +0000

John, you rather missed my point. It may be true that the U.S. cannot keep running trade deficits; but I am not sure how it can be true, after 25 years of trade deficits, that the company or government purchasing a T note is betting on it. A better story about their motivation is needed in your analysls. The incentives, it seems to me, are mixed, but my guess is that international lenders are generally counting on the size of America’s economy to leverage its difficulties, if it ever has any, in terms of paying back its debts. If this is so, then if traders start betting against America, they may be motivated by sub-incentives—not the worry that America will economically shrink, but that America is cheapening the dollars in which it is paying back its debts. This scenario has much less to do with productivity as a factor, and more to do with the politics of credit. The government has pretty clearly signalled that it neither intends to rein in spending nor to tax to pay for it. So the third option is clearly to cheapen the money in which they pay for their borrowing. If traders gain this perception, they do have the option of going elsewhere with their money. In order to prevent that, the U.S. would have to award them some kind of premium for their willingness to loan—i.e. a greater interest rate. And if oil prices actually keep rising, this will tighten money dramatically, etc, etc. All of which might actually have the unexpected result of—making the American economy shrink. Or at least bringing about a recession of some kind. Which in turn would lead to a narrowing of the trade deficit in the old fashioned way—people would generally have less power to purchase.

By: tom

tom — Sun, 21 Nov 2004 14:54:56 +0000

What degree of productivity would it take to compete with the Chinese? Until the U.S. can do that, all this discussion seems to be beside the point.