In Indiana Jones and the Last Crusade, Indiana has to pass a series of challenges to get into the Temple of the Sun where the Holy Grail is supposed to be. His dying father has given Indiana some clues:
he who finds the Grail must face 3 challenges. First, is the path of God: Only the penitent man shall pass. Second, is the word of God: Only in the footsteps of God, shall he proceed. Last is the breath of God: Only in a leap from the lion’s head shall he prove his worth.
By a sculpture of a lion’s head, and in front of a deep dark canyon, Indiana must take a “leap of faith.” He closes his eyes and moves on, only to find a hidden path which, painted to look like the depth of the canyon, allows him to safely cross the chasm.
In a report published this month, Robert D. Atkinson, the founder and president of ITIF, presents productivity as the Holy Grail of prosperity, and speaking like Indiana’s father, urges policymakers to take the path of productivity as an absolute priority:
The single most important step governments can take to boost productivity is to make higher productivity the principal goal of economic policy, more important than managing the business cycle, defending liberty, or promoting equality.
Without increased productivity, it will be impossible to raise living standards in a sustainable way. And without a sophisticated understanding and policy, nations’ productivity performance will lag their productivity potential.
Atkinson thinks that today’s pessimistic views that productivity kills jobs, not only suffer from a lack of historical perspective, but from a fundamental flaw in logic. Historically, the relationship between productivity growth and unemployment rates has actually been negative, i.e. higher productivity means lower unemployment. Periods of high productivity have been associated with reduced income inequality, not more. In other words, Brynjolfsson and McAfee’s “great decoupling” is nothing more than a great charade.
The key way productivity grows is through the adoption of new tools. The evidence is quite strong that technology has not been the cause of growing inequality. Far from being doomed by an excess of technology and productivity, the real risk is being held back by too little technology. The scenario of a few “robot” owners making “trillions” while the rest of us are impoverished and on the dole strains credibility.
The average U.S. worker today produces in one hour what the average worker a century ago produced in a day. However, after the Great Recession, U.S. productivity growth went down to 1.2 percent per year, its lowest level since the government began reporting productivity statistics. Why?
Unfortunately nobody really knows. The U.S. national statistical system does a poor job of collecting data useful to understand what organizations are doing to raise productivity and how technology is enabling it or not. Furthermore, few conventional economists bother to “look inside the black box” of actual organizations or industries. Yet it is there that the keys to raising productivity and the right productivity policy will be found.
Any policymaker seeking to maximize the economy’s productivity has to reject the conventional neoclassical and neo-Keynesian economic advice and embrace an alternative economic doctrine grounded in an understanding of the economy as a complex enterprise. Four components are key:
- Incentives to encourage organizations to adopt new tools to drive productivity
- Policies to spur the advance and take-up of systemic, platform technologies that accelerate productivity across industries
- A research and development strategy focused on spurring the development of productivity-enabling technologies such as robotics
- Sectoral productivity policies that reflect the unique differences between industries.
I have never been too fond neither of Indiana nor about productivity, but if I were in the shoes of that policymaker, or that prime minister haunted by the ghost of secular stagnation, I would close my eyes and take that “leap of faith” from the lion’s head. Maybe there is a hidden bridge to the other side of the chasm, after all.