Must-Read: Is it really credible that the rapid growth in potential output over 1995-2004 was 90+% an “anomaly… upward shift in the level of productivity rather than… thanks to the Internet, the reorganization of distribution sectors, and the like…” and 10-% a supply-side consequence of a high-pressure economy? Surely the coincidence of sustained high demand relative to current potential in this one single decade of the past four and rapid potential output growth create a strong and unrebutted presumption that the split is 50%-50% or 70%-30% and not 95%-5%?
: Does the United States Have a Productivity Slowdown or a Measurement Problem?: “After 2004, measured growth in labor productivity and total-factor productivity (TFP) slowed…
…We find little evidence that the slowdown arises from growing mismeasurement of the gains from innovation in IT-related goods and services…. Underlying macroeconomic trends–not mismeasurement of IT-related innovations — are responsible for the slowdown in U.S. labor productivity and total factor productivity (TFP) since the early 2000s…. Because the slowdown predated the Great Recession, and growth was similar in the 1970s and 1980s to what it’s been since 2004, it was the fast-growth of 1995-2004 period that was the anomaly — a one-time upward shift in the level of productivity rather than a permanent increase in its growth rate – thanks to the Internet, the reorganization of distribution sectors, and the like. ‘Looking forward, we could get another wave of the IT revolution. Indeed, it is difficult to say with certainty what gains may yet come from cloud computing, the internet of things and the radical increase in mobility represented by smartphones,’ they write. Still, those hypothetical benefits have not appeared yet.
I also confess to being annoyed by:
Second, many of the tremendous consumer benefits from smartphones, Google searches, and Facebook are, conceptually, non-market: Consumers are more productive in using their nonmarket time to produce services they value. These benefits do not mean that market-sector production functions are shifting out more rapidly than measured, even if consumer welfare is rising…
Isn’t “measuring consumer welfare” the point? We (a) arrange atoms (b) in forms we find pleasing and convenient, and then use them in combination with (c) information and (d) communication to accomplish our purposes. That our measures of economic growth are overwhelmingly “market” measures that capture the value of (a), much of the value of (b), and little of the value of (c) and (d) is an indictment of those measures, and not an excuse for laziness by shrugging them off as “non-market” and claiming that measuring the shifting-out of market-sector production functions is our proper business.