tag:blogger.com,1999:blog-2546602206734889307.post6260704825049589099..comments2024-03-18T11:12:51.114+00:00Comments on mainly macro: The OBR, productivity and policy failuresMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-2546602206734889307.post-32729726300610322152017-10-10T20:16:23.895+00:002017-10-10T20:16:23.895+00:00In my simple opinion, growth in a consumer economy...In my simple opinion, growth in a consumer economy comes from people having enough money to spend to create growth. Low and falling incomes shouldn't surprise anyone if growth falls, meaning in the past people borrowed to increase growth, they have now reached beyond that possibility, and can't even do that now.<br /><br />This Graph is a good indicator of how that has come about over the decades, where businesses could pay higher wages, but have refused to do so, bringing the economy to the point we are today.<br /><br />http://www.thestand.org/wp-content/uploads/2015/07/ss-productivity-earnings.jpg<br /><br /><br /><br /> Mervyn Hydehttps://www.blogger.com/profile/10509054505553883594noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-57936151727959537302017-10-10T16:12:16.984+00:002017-10-10T16:12:16.984+00:00Just a quick question - actually not so quick - wh...Just a quick question - actually not so quick - why do we assume that productivity growth reflects technical progress and innovation. In particular, why do we assume that the causality involved is increased innovation leads to increased GDP per capita, and not visa versa. Afterall, at least without imposing causality, GDP/capita and productivity would track each other pretty well (notably Total GDP doesn't track productivity since 2007, but then also GDP and GDP per capita are also decoupled.) <br /><br />I first thought about this when looking at wages in which it seems to be the same story - wage growth in Economic Theory is dependent on increased efficiency. But why not without making these assumptions simply suggest that wage growth is dependent on increased GDP. <br /><br />Afterall, intuitively, if GDP rises for largely exogenous factors (eg. Norweigian GDP will rise if the Oil price rises) then we can well imagine a situation in which Norweigian GDP/Capita rises and also wages rise even though there has been no real labour market efficiency. <br /><br />One suggestion I have is that we only really have one model of understanding GDP growth - that it is driven by productivity and efficiency gains. And so we therefore impose the causality on productivity and say that it is low because there have been no real efficiency gains in the economy. When we know that isn't true - what's actually happened is that GDP/capita has stagnated, and because the only way we can explain this is because of 'productivity stagnation' we say that GDP/capita has stagnated because of productivity when actually it has stagnated because of the financial crises and policy mismanagement. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-629793632514680432017-10-10T15:34:27.201+00:002017-10-10T15:34:27.201+00:00Indeed. It was the 10+ years prior to the crash t...Indeed. It was the 10+ years prior to the crash that we should be looking at to understand the crash itself and its aftermath.<br />Also, protecting RBS from bankruptcy was a bad idea: keeping resources non-productive.StuartPhttps://www.blogger.com/profile/13748038209546648459noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-86474339899521374842017-10-08T07:36:23.791+00:002017-10-08T07:36:23.791+00:00You don't mention labour market "flexibil...You don't mention labour market "flexibility" as a factor in the lack productivity growth. Productivity growth is spurred by shortages of labour so that innovation is needed to make the most of all available employees. If there is an ample supply of people unable to turn down zero-hours contracts at minimum wage or less then why not replace say car wash machines with hand car washes? Why would the robot fruit picker machines have a point? And if we have the resulting low wage economy, then those low waged workers won't be able to afford to buy much so can such low productivity will nevertheless provide supply surplus to what they can afford. stonehttps://www.blogger.com/profile/07670385074640188296noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-65106554445617180752017-10-07T10:44:28.850+00:002017-10-07T10:44:28.850+00:00To my simple mind Productivity is the substitution...To my simple mind Productivity is the substitution of capital for labour. For some while now the cost of Labour has been falling so a significant incentive for its substitution is also reducing. Until very recently Labour has been in plentiful supply as there has been a surplus labour pool the U.K. has accessed on demand, again a disincentive to Labour substitution.<br />The growth sectors in the U.K. Economy have principally been in sectors where substitution of labour is difficult allied with the fact the majority of employment created by those sector expansions has offered Minimum Wage vacancies that have been sufficient to attract the necessary volume of Labour from the surplus available. Globalisation itself will also engender a decline in wage levels in the higher wage economies whilst generating an increase in wage levels in the original low cast wage economies. I'm afraid I don't see the 'missing' productivity gains as much of a mystery at all.Johnbhttps://www.blogger.com/profile/09694479587834247002noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-25663105334712978292017-10-06T12:24:56.126+00:002017-10-06T12:24:56.126+00:00"Discoveries are still be being made in unive...<em>"Discoveries are still be being made in universities around the world, and we know innovations are still being implemented by leading UK firms." </em><br /><br />As you know, it's not that simple - to take a discovery from the lab to market takes a mixture of pure research, applied research and development, carried out in academic, government and private sector facilities. That complex innovation landscape changed a lot in the UK in the twenty years leading up to the financial crisis - in the wrong direction.<br /><br />To repeat myself from my last comment, the R&D intensity of the UK economy fell from more than 2% in the early 80's to a low point of 1.55% in 2004, in contrast to what was happening both in other developed nations and in the fast-developing countries of the far east. We'd expect this to be a leading indicator of a reduced rate of innovation, so I don't think you can argue the timing is wrong for a late 2000's decline in productivity growth.<br /><br />I don't doubt for a moment that bad macro policies exacerbated and prolonged the productivity slowdown, as you say. But neither do I see that one can entirely rule out, as you seem to do, any contribution from the pronounced structural changes that happened in the UK economy in the years running up to the crisis, including, but not limited to, its declining R&D intensity.<br /><br />A final comment about causality - it is very tempting to look at plots of productivity growth vs time and assume that the financial crisis must have caused the productivity stagnation. And indeed, for all the reasons you talk about, a sharp recession would be expected to give a short-term downward jolt to productivity. But taking a longer term view, one might also wonder whether the coincidence might arise at least in part because the same root causes were contributing both to the financial crisis and to a slow-down in innovation - such causes might well include the excessive financialisation of the economy.<br />Richard Joneshttps://www.blogger.com/profile/14903725016360886470noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-87547844615826158772017-10-06T10:35:39.383+00:002017-10-06T10:35:39.383+00:00Does this mean that after Brexit when firms can no...Does this mean that after Brexit when firms can no longer source the labour they need and the uncertainty associated with Brexit is removed, they will be forced to carry out the innovations they have been thinking of and this will lead to a sudden increase in productivity ? You can already hear the Brexiteers saying, “I told you so.” Timhttps://www.blogger.com/profile/11667765169892969762noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-87778634157470002752017-10-06T10:05:37.428+00:002017-10-06T10:05:37.428+00:00That's really interesting. It's tempting t...That's really interesting. It's tempting to look at a 'hairbrush' chart like the top one and read it as a series of wildly optimistic forecasts, on one hand, and disappointingly mundane reality on the other. What gets lost, as you say, is the normality of continuing growth - the horizontal line just looks like 'business as usual'. I wonder if it'd be possible to plot charts like that in such a way that on-trend growth was the flat line. Or perhaps we just need to lean to the left while reading them.Philhttps://www.blogger.com/profile/07009879034507926661noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-74896201372273173572017-10-06T09:58:28.267+00:002017-10-06T09:58:28.267+00:00Your conclusions are pretty thin gruel but this is...Your conclusions are pretty thin gruel but this is the type of question of which it is very difficult to arrive at an answer.<br /><br />Your answer stresses, in effect, the cyclical whereas Bob Gordon would stress the secular in his analysis. Any time series will contain both as a matter of fact but which is the dominant in a particular series is anyone's guess.Robert Joneshttps://www.blogger.com/profile/03593742130088640939noreply@blogger.com