Productive reasoning

Despite a wealth (heh) of economic statistics, American economists cannot fully and precisely characterize everything we need to know to make policy decisions about the structure of our economy. We have a number for worker productivity, but it's too uncertain to be useful:

[H]ere’s the rub: both of these corporate strategies— domestic productivity improvements and global supply chain management—show up as productivity gains in U.S. economic records. When federal statisticians calculate the nation’s economic output, what they are actually measuring is domestic “value added”—the dollar value of all sales minus the dollar value of all imports. “Productivity” is then calculated by dividing the quantity of value added by the number of American workers. American workers, however, often have little to do with the gains in productivity attributed to them. For instance, if Company A saves $250,000 simply by switching from a Japanese sprocket supplier to a much cheaper Chinese sprocket supplier, that change shows up as an increase in American productivity—just as if the company had saved $250,000 by making its warehouse operation in Chicago more efficient. 

I've previously taken productivity statistics at face value. Now I know they can't be. The essential argument I made at the link remains the same, but the magnitude of economic gains I can ascribe to labor is smaller.

Does this mean that I would now agree that corporate management deserves at least part of what they've creamed off the top of the nominal productivity gains of the past 30 years? Hell, no. The hollowing out that they have done accomplishes short run profit and big bonuses for them, but it's very very bad for the long term U.S. economy.

We need industrial policy that drives jobs back to the U.S. with competitiveness. That's the long run path to continued health, something the financial markets cannot possibly account for with a quarter-to-quarter mentality run amok. Every government policy that encourages hollowing out needs to be revisited.

While we were building Hummers

... Europe was serious about green jobs.

Let's see. We shipped our manufacturing jobs to China for low wages. When we couldn't provide enough high-tech guest workers, we shipped our software jobs to India and anywhere else that would take them. We put religious taboos in the way of biotech, so that's happening in Europe and Asia. Our auto industry could be down to the Big One soon.

What we did was use the borrowed proceeds of China's industriousness to inflate a real estate bubble that we used to finance consumption. We pushed investment paper at each other like so many Big Macs. Now we're truly and thoroughly screwed.

And we still can't build a passive house.

Update: Bob Herbert says it better: "Stop being stupid."

Trying too hard

The New York Times Business section tells us that the refiners are trying so darn hard to keep up with demand for gasoline that they're breaking their plants, which limits supply and drives up prices. Reporter Jad Mouawad manages not to quote one single skeptic about the oil industry's claims. The closest he gets is anonymous:

Some critics of the industry have theorized on Internet blogs that the squeeze on gasoline and other refined products points to a deliberate effort among oil companies to bolster profits by keeping supplies tight. But experts point out that the companies have little incentive right now to hold back on fuel supplies.

The common assumption of business writers everywhere is that the myth of the invisible hand keeps industries from manipulating prices. No one remembers the scandalous conspiratorial theft by deregulated electricity producers in California (obligatory disclaimer: alleged). That was yet another reason that Enron was a terrible rapacious company that demanded, but didn't get, rational regulation.

Like many articles in business sections across the U.S., this one is biased in favor of the industry instead of the truth.