Does anyone know of any efforts to measure total consumers’ surplus in the U.S. economy? What do you think it would be relative to GDP?
a) a fraction of GDP
b) about equal to GDP
c) a multiple of GDP
Justify your answer.
Category Archives: Growth Causes and Consequences
Paragraphs to Ponder
Two pointers from Reihan Salam.
America doesn’t have a jobless recovery; it has a hireless recovery. Don’t confuse them. After all, you first have to get hired to have a job. Organizations may be desperate to grow, but they overwhelmingly lack the desire to hire. Fewer people are working longer, harder and (presumably) smarter hours. So many firms have proven so productive even after several rounds of layoffs, that serious economists wonder if, in fact, large slices of the workforce actually offer ZMP — Zero Marginal Productivity — to their enterprise. In other words, the Great Recession reveals many employees not just to be worth less but economically worthless. Ouch.
For most organizations, people are a means and medium to an end. They’re not hiring employees, they’re hiring value creation.
One point I am starting to harp on is that many workers are not concurrently productive. That is, the work they do helps the firm be more productive in the future. That means that when firms think about hiring they have a lot of discretion (we can meet the demand for widgets today without adding new people) and they face a lot of uncertainty (will these social media marketers really deliver us new customers?).
Schrage again:
What’s structurally changed is not the job but why people get hired. In other words, is hiring someone really essential to getting the job done? Just as important, as we look at employment costs, risks and uncertainties over the next five years, is hiring someone the most cost-effective way to get the job done?
[in the year 2030] Firms also are not interested in paying for training, so most people now go through a 10-year unpaid internship while simultaneously attending school online and engaging other pursuits on a more or less random schedule.
Steve Oliner on Productivity
Interesting interview. One excerpts:
the underlying pace of innovation has remained rapid but businesses have been slow to take on any kind of risky ventures, and financing for – until recently for, you know, early stage venture capital, for example, or for small businesses, has been pretty tight. So I think we are seeing a slowdown period in terms of the adoption of the innovation into the business world.
Another:
The PPI shows that the price declines for [semiconductors], which were extremely rapid throughout almost the entire history that they’ve been produced, have basically come to a halt — that in the last couple of years there have been no price declines to speak of at all, which is very strange and is in conflict with the fact that innovation in that part of the economy is still proceeding at a rapid rate. And it raises questions about whether the procedures that are being used to measure those prices are appropriate. And I personally think that they’re not, that prices are actually falling more rapidly than the official statistics would show.
Eating Out More
Timothy Taylor finds a USDA report, which says that
Between 1977-78 and 2005-08, U.S. consumption of food prepared away from home increased from 18 to 32 percent of total calories.
Since 1970, the proportion of food spending that is spent on eating out has increased from about 25 percent to about 43 percent.
Taylor and the USDA focus on the consequences for obesity. I would add that this trend will increase measured GDP. When you spend time preparing a meal at home, it does not count as GDP. When you eat out, the time spent preparing the meal does count as GDP.
I believe that this represents a legitimate increase in GDP. My comparative advantage is not in food preparation. The same is true for most people. Spending less time in the kitchen represents economic progress.
Although I eat out much less than most people, I rarely spend more than 20 minutes preparing a meal. That means that I eat a lot of prepared foods. I do think that most meals that you eat at home have a higher ratio of nutrients to calories than most meals that you eat outside the home. Perhaps that will change at some point.
Two Interesting Abstracts of NBER Papers
1. Philip J. Cook and many co-authors write,
This paper reports on a randomized controlled trial of a two-pronged intervention that provides disadvantaged youth with non-academic supports that try to teach youth social-cognitive skills based on the principles of cognitive behavioral therapy (CBT), and intensive individualized academic remediation. The study sample consists of 106 male 9th and 10th graders in a public high school on the south side of Chicago, of whom 95% are black and 99% are free or reduced price lunch eligible. Participation increased math test scores by 0.65 of a control group standard deviation (SD) and 0.48 SD in the national distribution, increased math grades by 0.67 SD, and seems to have increased expected graduation rates by 14 percentage points (46%). While some questions remain about the intervention, given these effects and a cost per participant of around $4,400 (with a range of $3,000 to $6,000), this intervention seems to yield larger gains in adolescent outcomes per dollar spent than many other intervention strategies.
2. Daron Acemoglu and many co-authors write,
An increasingly influential “technological-discontinuity” paradigm suggests that IT-induced technological changes are rapidly raising productivity while making workers redundant. This paper explores the evidence for this view among the IT-using U.S. manufacturing industries. There is some limited support for more rapid productivity growth in IT-intensive industries depending on the exact measures, though not since the late 1990s. Most challenging to this paradigm, and our expectations, is that output contracts in IT-intensive industries relative to the rest of manufacturing. Productivity increases, when detectable, result from the even faster declines in employment.
Links to ungated versions would be appreciated.
UPDATE: Cook here, Acemoglu here.
Larry Summers on Sectoral Productivity Disparities
people with higher wages now work more hours than people with lower wages. The time series tracks the cross section. Over time, as we have all gotten richer, the number of hours worked for many people has risen
and also
the simple fact is that the relative price of toys and a college education has changed by a factor of ten in a generation
Pointer from Timothy Taylor.
How do you connect these dots? One way is to scream “We need more government!” Because look at the inequality! Look at the low productivity in education and health care, and we know government ends up running the low-productivity sectors!
I had another way to connect the dots. You could say that the cost of living has gone way down for people who do not measure their self-worth by the prestige of the college to which their kids go and the breadth of their health insurance coverage. Many people can now afford what they think is a decent lifestyle without earning so much in the labor market. However, the anointed look at such people and say, “But you must attend an elite college. But you must have health insurance that covers all manner of medical services, not just major medical.”
A Robot-Friendly Environment?
I am still reading The Second Machine Age. The section on the improvements in robotics made me think about creating a city that is robot friendly. Imagine a city with “self-driving car lanes” comparable to bike lanes today. My guess is that self-driving cars could be more efficient without humans.
But why not go further? Instead of making robots adapt to the human environment, why not put RFID’s on every object and surface, to make it easier for robots to operate. The place to try this out might be at an expensive resort or a cruise ship. You could be in your room and say to your phone or wristband, “I am ready for lunch.” You listen to a menu, you make your choices, and robots assemble and deliver your meal. If you are at a golf resort and are ready to play, you could summon a self-driving golf cart to take you around the course. Maybe each hole could adapt to your level of skill, with the location of the pin and various sand traps moving while you come toward the tee.
The Second Machine Age
That is the latest from Brynjolfsson and McAfee. I have just started it. Here is one quote.
Now comes the second machine age. Computers and other digital advances are doing for mental power–the ability to use our brains to understand and shape our environments–what the steam engine and its descendants did for muscle power.
Future Job Growth
Personal-care aide will be the fastest growing job from 2012 to 2022, among categories with more than 25,000 positions, the Labor Department said in a new report. The field will grow by nearly 50% to 1.8 million jobs.
I could envision a scenario in which personal services of all sorts become more important. For example, here is an idea from IBM.
by next year, Watson will be your personal shopping assistant. Store associates will also have similar intelligent tech providing them instant product information, customer loyalty data, sales histories, user reviews, blogs and magazines, so that when you do need to talk with another human, they know exactly how to help.
IBM thinks in terms of technology it can sell to large enterprises. I tend to think in terms of disintermediation, in which large enterprises are no longer needed.
So IBM thinks about adding personalization to an existing classroom. I think about getting away from classrooms and going back to tutors. Imagine a world with tutors instead of schools.
Schools keep you kids around all day, and thereby waste most of the day. For parents, that is as much a feature as a bug, because they need schools to supervise their kids. But if you were to re-organize schooling into a day-care component and a tutoring component, you might find benefits in getting rid of the enterprise that we call a school.
So we might find that in the future there are fewer school administrators and fewer classroom teachers, but there are a lot more day-care supervisors and tutors.
Culture and Institutions
Alberto Alesina and Paula Guiliano write,
We have shown how certain institutions need to “fit” with the dominant culture, such as regulatory policies regarding, for instance, the welfare state, financial regulations, or the functioning of the labor market. On the other hand, certain institutions can determine trust and social capital, as is the case for the presence of free city states in Italy in medieval times.
Therefore, statements like “only institutions matter” or “only culture matters” are unnecessarily single-minded and clearly incorrect
Over the years, I have found a number of articles stressing institutions, while other articles stressed culture. I agree with the authors here that it is more complicated.