Somewhere a roscoe barked…
It was a slow day in my P.I. business. No mysterious blondes had walked under the transom in days. Well, years, actually. I was about to reach for the office bottle, when two men walked in and eased themselves into the hard, second-hand wooden chairs in front of my desk. They looked like eggheads.
The balding one introduced himself as Mark Wright. He wore glasses but had a brawler’s face. I would have to watch him carefully. “Jake,” his partner mumbled. “Fabina.” He spoke it as if he was carrying a secret. Neither seemed impressed by my shabby office. Turns out they were feds from Chicago, needing my help. It surprised me that they wanted a cheap econ shamus like me, especially after that misunderstanding last year on the South Side. The ancient fan over our heads spun slowly as they told their story: American productivity has stalled. In fact, it’s happened in most developed countries. Nobody knows why.
“Productivity is important,” one said, declining a pull from the cheap bottle of scotch. “Growth in the amount of goods and services produced for a given amount of labor and capital is the ultimate determinant of growth in living standards in an economy over time.”
I shrugged: “Maybe it was the recession.” I charged a C-note a day plus expenses and hated to stick it to Uncle Sam.
They persisted: The stall predated the Great Recession. But I pushed hard: Labor productivity as a measure is as reliable as a leggy redhead who tells you she loves you after two martinis and is gone in the morning.
Sure, they said. But what about multi-factor productivity, measured by Fernald. Now they had my attention. Fernald had been my partner on the force before we were kicked off for refusing to be Friedman’s bagmen. He became an economist. Imagine that. The feds slid over a folder and I studied the charts. They were right.
It made me sad. “We were doing great in the 1990s. Maybe we just ran out of productivity leaps from information and capital technology investment. I can check there. And it’s tough to measure productivity in services.”
I was speaking their language now and they sat forward on their chairs. But they had factored in those angles and still weren’t satisfied. Productivity growth was still missing and none of those answers completely fit. “Does the productivity slowdown presage a period of low growth in living standards?” The silence that followed, you could have driven a malfunctioning Dreamliner through it.
So I took the case. You can read their report, by the Federal Reserve Bank of Chicago here. I wondered if part of the answer is the increased financialization of the economy in the 2000s. I slipped on my wrinkled suitcoat and went to talk to a couple of tough guys who would know, Bob and Jamie. I slipped a derivative in my shoulder holster just to be safe. You never knew with those guys.
Today’s Econ Haiku:
Clearwire goes away?
What startup will replace it?
The answer’s not clear