Re:Is Productivity Growth Becoming Irrelevant?
by PeterisP on Sunday July 23, 2017 @08:18PM
(#14835102)
One aspect is the quantity vs quality issue.
If the farming industry finds a way to make e.g. twice as much food (or electronics industry twice as many smartphones) with the same land/people/resources, then we see it as a productivity growth - either you double the consumption (more GDP) or you do it with half the people/resources, and whatever else these people/resources produce will increase GDP.
However, if the farming industry finds a way to make the same food twice as tasty (or the smartphones twice better) with the same amount of labor and resources, then that won't necessarily increase the prices (everyone's product gets the new feature, supply is the same, and demand is mostly the same if other industries advance as well) - so there's no observable growth; the economy produces the same number of widgets, trade happens for the same total amount of dollars, even though people's needs/wants are satisfied better.
If the farming industry finds a way to make e.g. twice as much food (or electronics industry twice as many smartphones) with the same land/people/resources, then we see it as a productivity growth - either you double the consumption (more GDP) or you do it with half the people/resources, and whatever else these people/resources produce will increase GDP.
However, if the farming industry finds a way to make the same food twice as tasty (or the smartphones twice better) with the same amount of labor and resources, then that won't necessarily increase the prices (everyone's product gets the new feature, supply is the same, and demand is mostly the same if other industries advance as well) - so there's no observable growth; the economy produces the same number of widgets, trade happens for the same total amount of dollars, even though people's needs/wants are satisfied better.