I'm not sure how they're measuring productivity. From my own experience as a software developer, I've seen how software makes individuals more productive. But the end result of this productivity is not 2x as much output overall but 0.5x as many people to achieve the same level of productivity. We're decreasing costs but maybe the market doesn't need 2x or 5x more productivity. There just isn't that kind of demand anywhere -- especially with fewer people working.
"Productivity" means "amount of input required to get a given output." I think you might be thinking of "productivity" as a synonym for "output".
Usually in economics the input is labor hours, but for example "energy intensity" is the productivity of how much energy a process uses. In the macroeconomic case it's GDP divided by total energy used, but some industries are more energy intensive than others -- they have lower productivity from their energy use.
Thus 2X the output and same output with 1/2 the people are identical: both describe doubling productivity.
> "Productivity" means "amount of input required to get a given output." I think you might be thinking of "productivity" as a synonym for "output".
Okay but surely we're only talking about average productivity with some assumptions on the approximate employment rate and hours worked per week. No one is going to be impressed by a "5% increase in productivity" next year if unemployment rises to 99%, the 1% of remaining workers only work 10 hours per week, but the average hour yields 5% higher output than the previous year.
> Okay but surely we're only talking about average productivity with some assumptions on the approximate employment rate and hours worked per week.
No. Productivity is simply output divided by some input factor. Employment rate, hours worked per week, wage: none are involved in that calculation (unless you're measuring productivity of the wage, i.e. COGS).
> No one is going to be impressed by a "5% increase in productivity" next year if unemployment rises to 99%, the 1% of remaining workers only work 10 hours per week, but the average hour yields 5% higher output than the previous year.
On the contrary, investors and managers will be very impressed by that.
> On the contrary, investors and managers will be very impressed by that.
No, they won't. You're free to propose any definitions of "productivity" you like, but this particular proposal doesn't remotely match what anyone will ever be talking about in discussions about productivity in the economy.
Indeed I propose the standard definition of productivity used in economics departments, business schools, and thousands of textbooks, news articles and the like, including those written by people, like Brynjolfsson, quoted in the article.
Seems a lot easier to refer to papers, statistics and the like when you use the same terminology everyone else does.
But how is this productivity measured across an entire country? How does unemployment factor in? If I'm making the workers twice as effective but we then lay off 50% of the workforce -- how does that factor in?
> But how is this productivity measured across an entire country?
On a total GDP basis it would be GDP divided by labor hours, no more no less. A national economy is complex, and especially one like the US or Europe, in which a lot of financial services are involved. So typically it is done on a sector basis (labor force productivity in steelmaking or construction, or mining, or office work).
Sometimes it's quite tricky: when the "output" of a given person goes up a lot it could lead to a different product (e.g. when the spreadsheet meant one person could do financial analysis that had previously required multiple people and a lot of time, it didn't mean less time doing analysis but instead significantly more sophisticated analysis in the same time, with the objective (at least) of finding better deals or avoiding worse ones).
> How does unemployment factor in?
It doesn't. It's simply output divided by input. Don't mix the two.
The same output with half the people means a doubling in productivity for that activity. What happens to the other half of people? Orthodox economics says they find some other job, perhaps a more productive one or more likely less so. Pragmatics says some never work again, some find a (often but not always) better job.
That's harsh, but the "lump of labor" fallacy is indeed a fallacy.
