NoApparentMotive

Paul Krugman's new blog at the New York Times has a favorable post on my piece with Dean Baker on the recent sharp slowdown in US productivity growth.

Mark Thoma's Economist's View also has a post with a lively discussion.

Dean Baker and I have a piece in today's online "Comment is free" section in The Guardian. The piece calls attention to the worrisome decline in labor productivity growth in the United States since mid-2004. (Productivity growth boomed 1995 through the first half of 2004.) Our basic argument is that the US economic model not only fails to produce equitable economic and social outcomes, but is now not even delivering strong productivity growth --the single most important determinant of long-term economic well-being (at least as economists typically measure it).

An important strain of the comments posted on the "comment is free..." site so far questions the social usefulness of growth. This is a legitamite point. In the rich countries, we already have plenty --it is just unequally distributed. In poor countries, however, economic growth still has a lot to contribute to improving economic and social conditions of billions of poor people.

The argument against economic growth, however, doesn't apply in the same way to productivity growth, which is the focus of my piece with Dean. Productivity growth means that we can produce more now in an hour of work than we could in an hour of work in the past. Higher labor productivity therefore implies that, in principle, we can work less and still obtain the same material standard of living. In fact, much of Europe has chosen this route, taking the benefits of higher productivity growth in the form of more vacation days and a shorter working life. The shorter work hours have a tremendous positive effect on the environment, as my colleagues David Rosnick and Mark Weisbrot have argued in a comparison of the US and European economies. In one calculation, Rosnick and Weisbrot estimate that if the US workers worked on average only as many hours per year as European workers do, the United States could have come within just a few percentage points of the cuts in carbon dioxide consumption that would have been necessary to meet our obligations under the Kyoto protocol.