Productivity mismeasurement: it goes both ways

July 4th, 2016 at 10:59 am

Many economists, myself included, argue that among our greatest concerns is the slowdown in productivity growth, as the growth of output per hour (that’s how productivity is measured) is a key determinant of living standards (yes, the distribution of productivity growth is another key determinant; in our age of inequality, growth is necessary but not sufficient to raise middle class living standards and lower poverty; but it sure is necessary!).

Some critics of the slowdown hypothesis argue that we are undercounting output, and thus systematically undercounting output per hour. I and many others find this hypothesis wanting, but an article I read in the NYT this AM got me thinking about a corner of this debate that tends to be overlooked: virtually every mismeasurement argument focuses on how technology is making us better off that are not counted in the national accounts, but some technologies push hard in the other direction.

The article¬†focuses on tech support, which is often not only unbearable and enraging for users trying to find out how to restore their files after their cat erased them, but can be deliberately set up to be so, in order to save costs and discourage their use. One could say the same thing about phone menus in general. They are typically one of the many ways technology is used to externalize labor functions that were formally internal, which is a cost shift onto those of us endlessly pushing buttons in hopes that maybe we’ll find a person, and maybe that person will deign to help us.

If we were accurately measuring the output of tech service industry, such inconveniences would score as a negative.

There are other ways in which we fail to capture quality deterioration in our national accounts. Air travel is often raised as a poster child. Infrastructure deterioration is another. If you try to commute into DC, where parts of the Metro are shut down making our already terrible rush hour traffic even worse, you see an electronic sign over the highway that “helpfully” says, “Rethink your commute.” Perhaps I lack imagination, but I’ve rethought it, and all I can come up with is driving or taking the Metro.

End of the day, technology probably provides us with more mismeasured good stuff than bad stuff. To be clear, and this is very important, to make the case that productivity growth is faster than we think, you have to show that mismeasurement has worsened, and there’s little evidence to support that claim. In fact, there’s some to the contrary–we’re actually doing a little better in capturing tech’s benefits, which sadly implies the slowdown in productivity growth might be even a little worse than we thought.

But anyone seriously considering this mismeasurement hypothesis must consider both sides of the equation. There’s no point in denying the existence of the often hellish worlds of tech support and phone menus.

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5 comments in reply to "Productivity mismeasurement: it goes both ways"

  1. Smith says:

    Why would anyone need to invest in productivity gains when wages are stagnant?
    There are three thoughts.
    1) Productivity increases thereby allowing wages to grow without causing inflation.
    2) Tight labor markets and the demand for wage increases put pressure on capitalists to increase productivity either through investment in machines, better management, or better processes and smarter workers.
    3) A combo of the 1) and 2)

    Guess what? It could be mostly 2), no wage pressure, no productivity growth.


  2. Joseph Browning says:

    I term things like this Inconvenience Capitalism. It what happens when companies see better bottom lines by providing worse customer service. Eventually entire industries, and entire markets, adopt these worse for the customer behaviors.


  3. Smith says:

    It’s common sense that monopoly and oligopoly, lack of anti trust enforcement fosters poor customer service and no incentive to increase productivity (you control prices). Think of the old Bell System, as in “One ringa dingy, two ringa dingy…” https://www.youtube.com/watch?v=CHgUN_95UAw No more Ma Bell, instead we have mergers of cable giants
    I can’t decide whether to start my own bank, or my own cable company, or my own automobile company.


  4. Fred Donaldson says:

    Early 19th century cotton growers in our South were the ultimate productivity experts. Their unbridled capitalism brought productivity up by eliminating worker wages and freedom to petition for better working conditions. Nazi Germany and Soviet Union leaders also found slaves a major wage expense savings.
    The lesson is that saving money by cutting expenses may be good business, but it is not necessarily good for our society and our pursuit of happiness. Numbers measure numbers, often ignoring that more and more money for less and less goods, leads to great wealth for the powerful, growing misery for the rest of us.


  5. Robert Salzberg says:

    I spent over an hour today reviewing and rejecting assigned work because the clients weren’t in my designated area. I had previously communicated a few times about this ongoing problem without resolution. But I billed the company for my non-productive work created by administrative incompetence.

    Work created by incompetence is still logged as productive work but sure doesn’t increase productivity…makes digging holes and filling them up seem rational by comparison.


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