On Sep 21, 2007, at 5:39 PM, Eugene Coyle wrote:
During the '90s, when Greenspan kept supplying funds to the
economy, he marveled about how "productivity" was keeping the lid
on inflation.
He spoke of "productivity gains" as a sort of mysterious blessing,
not knowing how long the gains would continue, nor where they came
from.
But was he causing the productivity gains?
As long as people keep buying stuff, won't technology, better work
organization, and other productivity gains keep coming? In other
words, isn't productivity a function of consumption?
Much of the work done on that period showed that the acceleration in
productivity after 1995 in the U.S. was the result of higher
investment in computer and communications technology. Some people who
were skeptical of this explanation, like Robert Gordon and me,
eventually came around. If you want to read the research, look for
Gordon, Daniel Sichel, Triplett & Bosworth, Stiroh & Jorgenson, etc.
Investment levels fell sharply after the dot.com bust, and
productivity growth has fallen along with it, with a delay of a few
years.
As for your earlier query about productivity causing unemployment,
productivity gains were strong in the late 1990s when the U.S. labor
market was the tightest it had been since the 1960s, and real wages
rose across the distribution for about the only period since 1973.
Doug
