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The Great Debate©: Is Productivity Improvement Good or Bad

by Tim Jackson, David Gordon and Joseph Russo

Let’s Be Less Productive

by Tim Jackson in The New York Times

HAS the pursuit of labor productivity reached its limit?

Productivity — the amount of output delivered per hour of work in the economy — is often viewed as the engine of progress in modern capitalist economies. Output is everything. Time is money. The quest for increased productivity occupies reams of academic literature and haunts the waking hours of C.E.O.’s and finance ministers. Perhaps unforgivably so:  our ability to generate more output with fewer people has lifted our lives out of drudgery and delivered us a cornucopia of material wealth.

But the relentless drive for productivity may also have some natural limits. Ever-increasing productivity means that if our economies don’t continue to expand, we risk putting people out of work. If more is possible each passing year with each working hour, then either output has to increase or else there is less work to go around. Like it or not, we find ourselves hooked on growth.

What, then, should happen when, for one reason or another, growth just isn’t to be had anymore? Maybe it’s a financial crisis. Or rising prices for resources like oil. Or the need to rein in growth for the damage it’s inflicting on the planet: climate change, deforestation, the loss of biodiversity. Maybe it’s any of the reasons growth can no longer be safely and easily assumed in any of today’s economies. The result is the same. Increasing productivity threatens full employment.

Read further in The New York Times…..

Is Greater Productivity a Danger?

by David Gordon, Ludwig von Mises Institute

It is bad enough that opponents of the free market wrongly blame capitalism for environmental pollution, depressions, and wars. Whatever the failings of their causal theories, at least they are focused on undoubtedly bad things. We have really gone beyond the pale, though, when the market is blamed for something good.

Tim Jackson, a professor of sustainable development at the University of Surrey, does just that in his article. “Let’s Be Less Productive,” which appeared in the New York Times, May 26, 2012.

Jackson suggests that greater productivity may have reached its “natural limits.” By productivity, he means “the amount of output delivered per hour of work in the economy.” He acknowledges that as work has become more efficient, substantial benefits have resulted: “our ability to generate more output with fewer people has lifted our lives out of drudgery and delivered us a cornucopia of material wealth.”

Despite these benefits, danger lies ahead:

Ever-increasing productivity means that if our economies don’t continue to expand, we risk putting people out of work. If more is possible each passing year with each working hour, then either output has to increase or else there is less work to go around. Like it or not, we find ourselves hooked on growth.

If financial crisis, high prices of resources like oil, or damage to the environment make continued growth unattainable, we risk unemployment. “Increasing productivity threatens full employment.”

What then is to be done? Jackson has an ingenious remedy. We should concentrate on jobs in low-productivity areas. “Certain kinds of tasks rely inherently on the allocation of people’s time and attention. The caring professions are a good example: medicine, social work, education. Expanding our economies in these directions has all sorts of advantages.” A cynic might wonder whether it is altogether a coincidence that Jackson is himself employed in one of these professions.

Jackson has in mind other reforms besides greater emphasis on the “caring professions.” (One wonders, by the way, whether by this name Jackson intends to suggest that those engaged in high productivity occupations do not care about human beings. To say the least, that would be a rather bold suggestion.) We should also devote more resources to crafted goods that require substantial time to make and to the “cultural sector” as well.

Jackson’s program raises a question: how can these changes be achieved? He stands ready with an answer. Of course, a transition to a low-productivity economy won’t happen by wishful thinking. “It demands careful attention to incentive structures — lower taxes on labor and higher taxes on resource consumption and pollution, for example.”

Jackson is certainly right that if labor becomes more efficient, workers must find other uses for the time they now have available. But why is this a problem? Human beings have unlimited wants, and there are always new uses for human labor.

As Murray Rothbard notes,

Labor needs to be “saved” because it is the pre-eminently scarce good and because man’s wants for exchangeable goods are far from satisfied.… The more labor is “saved,” the better, for then labor is using more and better capital goods to satisfy more of its wants in a shorter amount of time.…

A technological improvement in an industry will tend to increase employment in that industry if the demand for that product is elastic downward, so that the greater supply of goods induces greater consumer spending. On the other hand, an innovation in an industry with inelastic demand downward will cause consumers to spend less on the more abundant products, contracting employment in that industry. In short, the process of technological innovation shifts work from the inelastic-demand to the elastic-demand industries.[1]

Financial crises may interrupt growth, but given the unlimited character of human wants, they cannot permanently supplant it. Jackson has offered us a cure, but he has failed to show that a disease exists that requires his remedy.

[1] Murray Rothbard, Man, Economy, and State, Scholar’s Edition, pp. 587–88, emphasis omitted.

The Quandary of Finite Resources

by Joseph Russo, Elliott Wave Technology

Author’s disclosure:  I am a student and subscriber of Mises.org, a highly esteemed institute of free market thinkers embracing the Austrian school of economics.

A Challenge for the Austrian School of Economics

In small part as a plausible conduit to build a natural bridge to span the ever-growing chasm between dogmatic ideologies of every stripe, and in large part in endeavor to inspire enduring effectual solutions, I have presented an honest challenge to the Mises community that I wish to share for expanded global discourse.

In commenting on Mr. Gordon’s post under the pseudonym Man of Reason, I have proposed a challenge to the Mises community. It is my hope that the Mises community will rigorously debate the challenge and be able to provide a framework of rational free market solutions that might effectually address the challenge.

In kind, I present to you the same challenge here and now.

A Challenge for all Persons of Intellect and Reason

I am in search of rational argument/debate/solutions relative to the Greater Productivity issue:

Before presenting the specific challenge, I wish to state that I believe the principles of Austrian economics to be far superior to any other set of economic principles currently known.

I suspect the vast majority of students and professors of the Austrian school would agree that capitalism as has been practiced in the west for more than 100-years in no way resembles free market capitalism as defined by Mises, Rothbard, Hayek, and the like.

I suspect also that the vast majority of Austrian thinkers would concur that the apparatus created by the state over the past 200 years has from a western capitalistic viewpoint evolved into a leviathan requiring infinite exponential growth for its very survival.

In my view, this condition would not have come about had the politics, philosophy, and economics of the Austrian school been in force for the last two centuries. Making a bad situation worse, Brazil, Russia, India, and China have embraced western statist capitalists as model partners.

As misfortunate as this is, we are where we are and must now determine how best and least destructively to transition toward a more rational means of freely conducting our individual and collective interests both here in the US as well as abroad.

The Essential Resource Driver of Productivity

Though one may argue the amount of fossil fuels remaining and debate further as to when those non-renewable resources will likely drawdown to critical levels, one cannot argue the finite constraints of these resources relative to the parabolic explosion in population and technological advances that these magnificent resources have brought about.

Furthermore, the state, and by association the Global apparatus to which we now find ourselves wholly immersed, is completely dependent upon finite resources that in time, will not be sufficient to satiate the global populations unending human demands for the freedom to pursue their various and limitless definitions of happiness, liberty, and prosperity.

The Quandary

Given that all manufactured goods and services require a rather high percentage of fossil fuels for their production and delivery, at what point in the growing populations limitless demands relative to the finite resources needed to supply them will either war or the acceleration of economic collapse (or both) present themselves as unavoidable consequences void of practical solutions?

The Easy Solution

Obviously, a new renewable set of technologies to replace finite fossil fuels is the easy answer, but for the sake of argument, let us reasonably assume that such a technological revolution will not surface in time to supply the immediate and ongoing (irrational) demands for infinite growth.

It is very easy for me to understand how laissez-faire empowers, supports, and is able to sustain prosperously, and peacefully, a largely undeveloped world with excess resources.

However imbalanced as it may be, amid conditions of a largely developed world with scarce and diminishing resources, it becomes more difficult for me to understand the praxeological tenets that would regulate time preferences (immediate/medium-term/long-term) relative to potential distortions in effectual perception of productive vs. nonproductive development to fit the resource constraints faced in kind.

The Impasse

I arrive at a significant impasse when trying to identify and extract principles of human action beyond the mere animalistic survival-of-the-fittest that would incentivize individuals and populations throughout overdeveloped and undeveloped regions of the world to agree equitably in laissez-faire manner, the way to solve the existential problem of finite resources relative to the trajectory of the current population.

If you suspect my rationale in arriving at this challenge contains flaws, please bring them to my attention for enlightenment. Whether you agree or disagree with this quandary, please make your case and open the challenge for solutions to rigorous debate.

In fairness to all persons of practical reason with sound and legitimate arguments, I have also been a student of J.W. Smith, who is an independent economist with a PhD in Political Economics and founder of the Institute for Economic Democracy.

As presented in his book, Economic Democracy: The Political Struggle of the Twenty-First Century, although I am in agreement with many of Mr. Smith’s observational accounts of historical episodes that brought the world to its current state, I am not convinced of the efficacy in his blueprint prescriptions to rebalance global economies.

It is a rather long road to serfdom as well as to freedom. We must decide NOW which road to pursue, and make certain throughout the long and arduous process, that we collectively strive (or revolt if we must) to insist upon an effectual political and economic framework from which to steer our fate in the proper direction for current and future generations.

Greece Wins the Race to the Bottom

Amid the current global system of economics, money, and credit, on each of their respective trajectories, no country on earth shall be spared from eventually crossing this rather bitter finish line.

What do Cuba, China, and the US share in common?

Fast approaching the bottom, and likely to come in last, (which is good in such a race) marking the ideological span from socialism to capitalism, we illustrate the flags of Cuba, China, and the US.

Note what each of these “best of the worst” countries has in common. They are ALL Statist Countries, and harbor top-down, command-and-control, exceedingly interventionist political structures that rely exclusively upon coercion and physical force to govern. All are arguably totalitarian governments, including the US.

China and the US are among the last place winners for obvious reasons however; Cuba is likely to keep pace simply because it has been one of the very few countries to successfully fight for and win its right of sovereignty in opting to free itself from the coercive demands of a broadly interconnected global cartel of powerful economic players.

By all accounts, I suspect there is little dispute that Greece will be the first to cross the finish line, and thus become the poster child winner in the worldwide race to the bottom.

I further suspect that if the anti-bailout forces prevail in this weekend election in Greece, it would be reasonable to speculate that such a victory in attempt to free itself at this stage may have arrived a little late in the game, and void of a cogent plan to rebuild. Timing is everything, though we suppose that late and unprepared is better than never.

If the Greece pro-bailout faction prevails, well then they cling to the rest of us downhill racers and just kick the can down the road to add further insult and greater injury at some point in the near future.

This coercive and subtlety imposed race to the bottom must cease, as it will end in inevitable failures such as those occurring in Greece and throughout the balance of the socialist/statist Euro-Zone.

From where the world currently stands, the only rational direction for it to pursue with all expediency and prudence, is to head UP and toward the CENTER at warp factor-9 with Godspeed. Engage already for goodness sake!

In closing, there appears to be a vast multitude common arguments resident between the Austrian school of thought and many of the arguments outlined by J.W. Smith.

If our future is to revert to a bright one, we must at all cost enable free rational thinkers to come together in providing truthful, accurate, objective, and persuasive leadership in moving toward a common ground of equitable and sustainable solutions before it is too late. Time is of the essence.

About the authors

Tim Jackson is a British ecological economist and Professor of Sustainable Development at the University of Surrey. He was the Founder and Director of RESOLVE (Research Group on Lifestyles Values and Environment)[1] and is Director of the recently-awarded Defra/ESRC Sustainable Lifestyles Research Group (SLRG).[2]

David Gordon covers new books in economics, politics, philosophy, and law for The Mises Review, the quarterly review of literature in the social sciences, published since 1995 by the Mises Institute. He is author of The Essential Rothbard, available in the Mises Store.

Joseph Russo is owner, publisher and chief market analyst for Elliott Wave Technology, a subscription based analysis and essential forward forecasting of Global Financial Markets.

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One Response to The Great Debate©: Is Productivity Improvement Good or Bad

  1. David Gordon stated the underlying belief of this entire post: “If more (productivity) is possible each passing year with each working hour, then either output has to increase or else there is less work to go around. “

    Wrong. There is another, far better, solution: Fewer hours worked per person. Today, in America, the average employee works 34.5 hours per week.

    Why?

    I can envision the day when computer directed machines will allow the average employee to work far fewer hours and have many more waking hours devoted to pursuits of personal interest and enjoyment.

    Rodger Malcolm Mitchell