Production versus Productivity – @ASI

Here’s a thought-provoking post from Eamonn Butler at the Adam Smith Institute.

He discusses the difference between measures of production, such as GDP, and growth in actual productivity as enabled by technology.

From the humble washing machine to the new iPhone, technology enables us to do more, but that isn’t reflected in GDP. Similarly, inequality is measured by (relative) wage growth, but ignores that the poor as immeasurably better off than they were before:

The poor in particular have gained from entrepreneurial breakthroughs, the growth of new inventions and technologies, mass manufacturing, and other parts of the capitalist system. The prices of what poorer groups buy have plummeted more than most, while the quality of what they can afford has skyrocketed. Wages may not be rising fast for the poorest groups, but there are more fringe benefits as standard, and money buys a lot more than it did twenty, thirty, forty or any number of other years ago. So people who talk about ‘rising inequality’ are up a gum tree. The income figures greatly overstate inequality, because the poorest groups are so much better off than they have ever been in history.

Definitely worth a read.


Photo by frank cordoba on Unsplash