Category Archives: Economics

Productivity or just staying busy?

When I was younger, I was a gopher. I drove from our office to other offices and picked up and dropped off things. I always tried to be outstanding so I drove fast. The faster I drove, the more productive I was and that meant I was more valuable, at least in my own mind.

Currently, we are in the midst of what economists commonly call a productivity miracle.  Our productivity, how much we each produce, has increased substantially over the last decade or so. I am far to lazy to research the numbers, but I am confident that they will back me up on this.  I know I still drive fast, apparently other do too!

My query lies not with the numbers, they are most likely within the margin of error, but rather with productivity itself.  Is a given action productive just because it causes capital to change hands?  In other words, is everything we are doing to earn money actually productive in the broad sense of the word?  Are our actions moving us forward as a collective?

Certainly if farmers use people to harvest crops and sell them in the market, that’s a productive use of our time and energy.  We need the food and they are filling that need.  If a device, like a tractor, comes along and they begin using fewer people to harvest the crops, that is an increase in productivity. Those people can then go and do something else, yet we still get the same amount of food to eat. We are all better off. We are being more productive. Conversely, when the reduced the speed limit to 55 my productivity as a gopher declined.

But what about other professions.  Take tax preparers for example. Can what they do be called productive? Well, we pay them so they cause capital to change hands. So that meets the definition of productive. If computers allow them to do more tax returns in less time that counts as increase in productivity.  Technically, all that is true.

My quandary lies in this question, “how does having all these people preparing taxes make us better off?” In other words, is that a productive use of their time? Wouldn’t we be better off to simplify the tax code so we wouldn’t need a specialist to do our taxes for us? The millions of hours spend on taxes could be used elsewhere, yes?

Then all these bright people could go do something really productive, something that would accomplish a need that is not invented like tax preparation.  This kind of make work industry takes bright people out of careers that can propel us forward as a society, thus reducing our potential overall. 

I’ll give you another make work job that we can get rid of, Real Estate Agents! Put the info on the internet, have the homeowner show the house and negotiate, go to a title company to write it up and Viola! a 6% savings on every house and lots more talented people out doing things that actually need to be done.

In fact, I can think of what one of those real estate agents could be doing right now – Fetching my lunch! That would be productive as I need to eat and I am busy doing this, so go get my lunch, Mr. Gopher.

Oh, and Drive Fast. (We want to keep up our productivity 😉

Rational expectations joke

There is a rational expectations joke that economists like to repeat. It goes like this. Two economists are walking down the street. They come across a $20 bill lying in front of them on the sidewalk. They pause and glare at it. One economist says to other,“Aren’t you going to pick it up?” The other replies,“I would, only the bill can’t really be there. Someone else would already have picked it up.” And they keep on walking. The joke amuses economists because it describes a true-to-life event – finding money on the ground – that they are predisposed to believe is very unlikely.

Should the government bail out Ford and GM?

Should the government bail out Ford and GM? We did bail out chrystler and it worked, they paid back the loans ahead of schedule. (of course now they are foreign owned). But that notwithstanding, bailouts are bad. I would be surprised if the politicos bailed them out from this, given that the red states won.

This is really a union issue for the most part as fuel and airplanes cost about the same for everyone. This wouldn’t be a problem at all as they would just raise prices to cover it, except that Southwest and others are undercutting them buy not having all these perks for their employees and running a more efficient shop. We have all heard the pundits talking about lower paying jobs, this is an example. Bust the union, pay Southwest wages and lower prices to consumers. We pay less, they get less and competition becomes even. In fact, the only thing keeping Southwest wages as high as they are is the competition is still union and paying higher wages. If they all go nonunion, wages will drop even further to gain competitive advantage.

Budget deficit

I do want to make sure we’re clear that the budget deficit has no effect on interest rates currently. It could if there were no buyers of our debt and if it continues upward it could get so high that we couldn’t do much about it but raise rates. So it is a concern.

I think that it’s difficult to keep them separate as the politicians want to take too much credit for their input into the economy and that goes double in a Presidential Election year.

Strong dollar, weak dollar

 Just because the Financial Times is a wonderful publication worthy of as much praise as I can give it, doesn’t mean you don’t have to think about what it is saying. I just clicked on the top story. Its about the falling dollar and in it it says, “On Friday, John Snow, the US Treasury secretary, maintained that the US supported a strong dollar, and added the familiar rider that, the determination of exchange rates is best left to the market.” Does that mean the US has a strong dollar policy? Well if you weren’t thinking, or didn’t understand what they were saying, you could argue that the US does have a strong dollar policy, after all that is what the Treasury secretary said. To the casual observer that would be enough. But to the more knowledgeable, the second part is the key. The administration can say the have a policy all they want but their actions are the only thing that counts. And as they clearly report the actions are non-existent. They say strong dollar, they act weak dollar. So which policy is it? The verbal or the physical.