Computer Saturation and the Productivity Slowdown

https://libertystreeteconomics.newyorkfed.org/2022/10/computer-saturation-and-the-productivity-slowdown/

by Bostonian • 4 years ago

104 93 4 years ago

libertystreeteconomics.newyorkfed.org

qsort2• 4 years ago

Fine article from a reputable source, but there's a tendency I despise in modern journalism: making it unclear they're talking about a declining growth rate (positive first derivative, negative second derivative: increasing with the convexity down), not a decline (negative first derivative).

But hey, mainstream news sources fail at elementary school math, at least here they're making the effort to fail at high school math.

llanowarelves• 4 years ago

I didn't read the article yet but the headline is pretty tactful here on that point: "Slowdown".

throwaway821909• 4 years ago

eh, I figured it out, but I think even that only works if the writer and reader have shared assumption that the thing in question inevitably grows and so insert "(rate of increase of)"...

"VR slowdown", I'd think less people are buying in, but no-one's throwing their headsets away. "Border crossing slowdown", the number of people crossing the border is actually less than before.

nostromo• 4 years ago

The first sentence of the article makes it very clear they’re speaking of a slowdown in the rate of growth.

qsort2• 4 years ago

Yeah, the article isn't a problem, I'm pretty sure the author is being 100% honest, but the editorialization is.

The title of the the first paragraph is "Declining Productivity and Moore’s Law".

alpaca128• 4 years ago

I disagree, productivity by itself doesn't imply growth. For me "slowdown in productivity" unambiguously means a decline. You also don't write "slowdown of the vehicle speed" when you mean a decrease in acceleration.

mihaaly2• 4 years ago

It still talks about productivity slowdown afterwards, in overall repeatedly, while in fact the productivity increases 1.27% in the worst period analyzed.

xdavidliu• 4 years ago

No, the article contradicts itself:

Declining Productivity and Moore’s Law In the U.S., average labor productivity growth in the 1995-2004 period was 2.85 percent per year. This productivity growth significantly declined in the following decade

Title of section says "declining productivity"; body says "productivity GROWTH declined". Those are two very different things.

bullen• 4 years ago

Like acceleration of population growth peaked in 1968.

Very relevant if you want to predict the future.

tdehnel3• 4 years ago

Nonsense. The only long term prediction you can make with confidence is that the future will not be like the past.

chatterhead• 4 years ago

This isn't a news article it's primary source information as it's from the New York Federal Reserve discussing data-based correlations in economic factors and outcomes.

"Once electronics were small enough to be used in almost all industries, their effect on productivity vanished."

gtirloni• 4 years ago

Which leads the reader to think that removing electronics would keep us at the same level. Poor choice of words.

meltyness• 4 years ago

They could teach a lesson to all the clinical researchers and studies that completely eschew derivatives for exclusively qualitative analyses.

reaperducer2• 4 years ago

there's a tendency I despise in modern journalism

This is not journalism, and not written by a journalist. It's from the Federal Reserve.

It's no more journalism than a court decision published on a web site.

klabb3• 4 years ago

Well spotted! Perhaps macro economists are so used to thinking in terms of growth rate that they forgot to specify it.

techas• 4 years ago

The proposed model explains slowdown in terms of production technologies and materials, in particular microelectronics. But, is it fair a model that does not take into account the effect of internet during the last 20 years? Not only the hardware have changed the production landscape, but also the networks.

The conclusions of the work might be correct, but in my opinion the model seems incomplete to draw conclusions from it.

geysersam• 4 years ago

From what I understood in the end the conclusion was that only a relatively small part of the productivity difference can be explained by electronics minification.

And while we can find reasons the productivity increased faster in the 90s, it's not difficult to find reasons why the productivity should increase now as well.

Software, network and sensor technology advances rapidly. Biotechnology and medicine too (MRI, better cancer treatments, RNA vaccines, etc).

In the same period of time (80s/90s) there were enormous changes of the manufacturing economy in the US. Reforms to the financial system. Outsourcing to Asia etc.

So many factors not taken into account. Such science only serves to create compelling stories of the past, it doesn't have predictive value.

leohonexus• 4 years ago

What about the adoption of cloud, SaaS, and improvements in information systems in industry (e.g. Flexport for freight)?

The article doesn’t touch on software at all and instead attributes productivity growth purely as a function of Moore’s Law, which seems counterintuitive as both HW improvements and SWE improve the SW running on top.

sgt1014• 4 years ago

But it does provide some interesting ideas about measuring new contributions and identifies them in the combination of electronics and domains of industry.

jackcosgrove• 4 years ago

The article attributes ~12% of productivity growth to electronics miniaturization. It isn't meant to be a comprehensive analysis of the factors of productivity growth. The author is testing a hypothesis about electronics miniaturization and finds it correlated with some of the productivity acceleration during the 80s and 90s. He is using a new dataset and his analysis is shaped by that.

rileyphone• 4 years ago

Embarrassing that software can be completely elided like this. What gains it has brought have been offset by the stifling of creativity, ossification of process. Maybe there are a few more variables here?

lifeisstillgood• 4 years ago

So the model is roughly

- access to computing devices increased from 1980-2005 which increased productivity

- microchips could be added to products, increasing the utility of the product / variability hence productivity.

I mean, maybe. Seems reasonable. I suspect that the chase after productivity now has to stop in the physical and be looked for in code and in organisational arrangements - ie we don't need so many managers, but we do need more coders - and how do we get coders to co-ordinate ? mostly through openness, democracy and ... testing :-)

mikewarot• 4 years ago

We've not tapped the full productivity of computers yet. I'll still be a while before we get capability based security built into everything, then there'll be another boom as creativity is once again released, without the artificial drag of a horrendous security model of ambient authority making everything unsafe.

rrwo3• 4 years ago

I'm wondering if the decline after the mid-2000s isn't due to computers so much as the internet.

Once somebody has an internet-connected computer at their desk, they have more distractions (from internal applications like email to external ones like Facebook or reading news online). They also have more kinds of problems that can interrupt their work (server failure, network problems, viruses).

mvdwoord• 4 years ago

They can also use the internet to quickly look up things, ask questions to a giant group of experts, not likely to be available in-company. As well as the countless other productivity boosting resources made available through it.

bratbag• 4 years ago

They can, but the question is if the two on balance produce a net negative across the population as a whole.

simmerup• 4 years ago

I’m more tempted to think the computers made them more productive and took away the complexity, allowing employers could pay them less.

Productivity is just a measure in how much people are paid after all

rrwo3• 4 years ago

I've seen computers improve lives

At a former place of work the secretaries became experts at using Excel and even Access or Crystal Reports. I remember one had a beefy SQL book on her desk to make queries directly from the company's Oracle databases.

Eventually they got newer titles of "executive assistant" with better pay.

The IT department I worked at also lobbied for a policy, so that when computers were upgraded that they should get the newest and more powerful ones, since they were doing the bulk of computing.

atoav• 4 years ago

I think it already makes sense just by looking at computers. A computer ca. 2000 was a machine for productivity mostely. Sure you could play games, look at pictures, videos or similar things, but the whole design of everything in that computer was still very office like (cue pictures of people playing solitaire on windows xp).

Look at e.g. Windows 10/11 today. Open the Start menu at a default installation and you will get a much more time wasting User Interface, candy crush: I am looking at you.

Windows is no longer the operating system meant for professionals (even if you get the professional version), it is trying to sell you a sweet promise of a lazy joyful time at every corner.

Windows has tried to become more like IOS or Android, which are arguably systems designed for consumption more than production.

The internet has played it's role in all of this for sure, as it is no longer our bosses wallets they are after, but our attention and time.

fruit2020• 4 years ago

That’s why I moved from windows to mac. There’s no distraction for me there, aside from what I chose myself. Even linux OSes seem more distracting for some reason. Mayne Mac has a more cohesive feel

civilized• 4 years ago

Yes. Windows looks disgusting.

It's been getting worse for a long time. Windows 2000 was the best version and it's been downhill from there. I was lucky to be persuaded to switch to Mac in the mid-2000s and miss most of the awfulness.

At this point, it's the worst of both worlds: baroque, distracting and confusing, but without genuine interest or charm. It's like staring at one of those failed neural net generated pictures where your visual cortex is vaguely stimulated but you have no idea what you're looking at.

My kids will never touch Windows. It would feel like the electronic equivalent of letting them live on McDonald's and food coloring.

sgt1014• 4 years ago

As per other comments - this isn't a decline in productivity, but a decline in growth of productivity as the tech is adopted.

But I would argue that the internet has made people far more productive in many ways. Especially software people!

rrwo3• 4 years ago

I worked in a office in late 1990s/early 2000s when it transitioned from Novell NetWare on DOS and Windows 3 to Windows 95 and 98 on the internet.

People using the internet on their work machines added so many problems:

- People spending a lot of time on shopping or porn. (This was before Facebook, and I don't think MySpace was around or popular yet.)

- People downloading and installing software they shouldn't. Which ranged from pirated software to adware to malware, or even something benign that conflicted with the tools they needed for their job. (This was mostly fixed when we migrated people to Windows 2000.)

- Viruses.

- People set up file sharing nodes for music and porn.

All of these problems came about once we added access to the internet.

Admittedly, it should have been rolled out differently, perhaps using something like Windows NT with firewalled networks.

But giving people access to the internet just allowed a lot of people who were naive to shoot themselves in the foot and waste a lot of resources fixing their computers.

stormbrew• 4 years ago

Productivity here doesn't mean "how much you get done" but "how much money is made off you". There may be some ways in which the two ideas correlate, but it's a complicated relationship and it's not even always in the same direction.

mihaaly2• 4 years ago

Slower growth, why is that a problem? That is still a growth.

Are we really expecting not only everlasting growth but exponential growth until the end of times?! Come on! Even the 1.27% growth of the groth seems unsustainable, we should be happy about it it not seeking the faults in not achieving somthing unattainable.

defrost• 4 years ago

I'm looking forward to a metric that measures and rewards increasing ability to live better lives within our means ...

jlawson• 4 years ago

Most measured economic growth is like this - getting more from less.. For example, a process that allows producing 2x more electricity per unit of fuel would increase the productivity of the generator station, and be counted as economic growth.

Economic growth also measures increased consumption of natural resources, so it's a mixed measurement admittedly.

millimeterman3• 4 years ago

Do you think humans have run out of things to invent and improve? Are standards of living good enough that we can be content to stop here? Why exactly should we expect (let alone hope) that growth will stop?

rTX5CMRXIfFG• 4 years ago

If you want to improve standards of living for more people with respect to the socioeconomic realities of each person, you’re going to end up with an outgoing cash flow towards some welfate policy or humanitarian cause that funds people’s basic needs and healthcare, which won’t count as “growth” in the capitalist sense, which is the sense being used here.

towaway154632• 4 years ago

Why should there be a limit on human productivity? After all it means we are getting more efficient at the things we are doing, doing more with less, is that not a laudable goal? Any time we have approached a limit we have found a way to cheat it, that’s cause for celebration.

unity1001• 4 years ago

Slower growth, why is that a problem? That is still a growth.

Capitalism increasingly consolidates the economy in the hands of the majority capital owners that control most of the economy. For that reason, in order to have a society that at least has a semblance of being a functioning one, there must be growth to provide some wealth/income to the majority.

When a capitalist economy is no longer able to grow exponentially, it starts eating itself from inside.

PartiallyTyped• 4 years ago

Slower growth, why is that a problem? That is still a growth.

Occam's razor suggests capitalists must make more money because their mega yachts and private jets are not enough.

bjornsing2• 4 years ago

I think some alternative hypotheses should be considered:

1. Workplace culture has changed drastically over the last 20 years, at least in Sweden. Comparing the work ethic of my parents generation to that of millennials is… like comparing night and day.

2. We’ve been living in a radical monetary policy experiment for the last 20 years, with zero (or even negative) interest rates and quantitative easing. It should also be noted that the previous change in productivity growth rate (in the 80-ties) coincided with a dramatic change in monetary policy.

sgt1014• 4 years ago

This would be the radical monetary policy experiment called "avoiding a depression by preventing the financial system from collapsing"?

flakeoil• 4 years ago

Maybe more like: "We have a bull market and almost no unemployment; let's lower the interest rate to below zero".

xiphias2• 4 years ago

The monetary quantitative easing is keeping up with technological productivity improvements: central banks inflate currencies as much as they can get away with without getting a revolution from the working people.

bjornsing2• 4 years ago

Yes, I have a feeling this is how it works “big picture”, but I don’t have any trustworthy sources for that claim. Do you know of any? I’m thinking academic economists who have written on the subject or something like that.

Qem• 4 years ago

Comparing the work ethic of my parents generation to that of millennials is… like comparing night and day.

It's easier to keep a strong work ethic when the returns of work are consistent. Harder to keep when people work their asses off until their forties and still can't afford owning a house and sustaining a family in the income of one member of the couple. Just one or two generations ago most people routinely were able to achieve that in their 20s.

xyzzyz• 4 years ago

I worked at some very high paying tech companies, most of my coworkers could and did easily afford housing and family, and yet the work ethic was simply not there.

jimbokun2• 4 years ago

Comparing the work ethic of my parents generation to that of millennials is… like comparing night and day.

Is there any quantitative data available to back up this claim?

nicholastsmith• 4 years ago

An amusing thread on the subject:

A Brief History of Nobody Wants to Work Anymore https://twitter.com/paulisci/status/1549527748950892544?s=20...

zhte415• 4 years ago

Interest is, after all, the return on capital. While an individual borrower may be over the moon to have to pay less interest, on aggregate it means lower return, and return on all capital across the economy is growth.

kkfx• 4 years ago

IMVHO it's not a matter of "we can integrate more creating a scaling effect" or "we have done too much, too intricacy" it's a matter of "basic technology" designed for business purposes instead of whole society serving purpose.

Try a modern car: it's a crapload of crapware crap. It's not because we have tried to integrate too much, automotive sector do not know IT, ... it's because modern cars are NOT designed for the human, formal owner, but as a service, a way to (ab)use the human owner to milk extra money. Similar thing happen with the cloud+mobile integration.

The SOLE way IT works is an open ecosystem where ANYONE can see, change at any level, contribute and discuss, because IT it's not a layer of automation over something else (typically a mechanical/electrical thing) but a logic layer between humans and their own machines. Productivity fall because user freedom an power falls. Users now are just a mechanical arm of a crapware system to do the part the crapware system can't do alone. The systems is designed to milk money on them, not to serve them.

If big of IT want real productivity MUST look back at their history: the more they abuse users the more short-term profits they elicit, than a fall. Or they came back to a FREE software, open hardware where they compete in features not in lock-in and crappy UIs/tools or they will be pushed aside as a generic commodity sooner or later eroded by some other sector who made more money them them (energy sector seems a candidate so far).

xnx• 4 years ago

Properly applied AL/ML systems will keep productivity alive. Think stable diffusion for everything.

funstuff007• 4 years ago

I thought they were talking about the lost working time whenever my machine locks up because a job I'm running uses up all my cores/memory, or I have too many browser tabs open.

jrm4• 4 years ago

I wish it were more obvious the extent to which this is all astrology.

graycat5• 4 years ago

The article has

"A car from the 2020s with thousands of microchips ..."

"Thousands"? Uh, I confess: That's where I stopped reading!

ghaff• 4 years ago

This trade pub says around 1,000 is the number:

https://electronics-sourcing.com/2022/05/04/how-many-chips-a...

This article says 1200. https://www.freep.com/story/money/cars/mark-phelan/2022/02/1...

So no. "Thousands" doesn't seem out of the ballpark.

graycat5• 4 years ago

WOW. Good grief. The article

https://electronics-sourcing.com/2022/05/04/how-many-chips-a...

has:

"By 2020, electronics now comprise 40% of the car’s cost,"

WOW. Looks like a golden opportunity of a really fast, easy way to save nearly 40% of the cost of a car!

danabrams3• 4 years ago

How feasible is this alternative theory: the growth of computing systems, while increasing productivity, has also allowed a substantial growth in bureaucracy.

Archelaos• 4 years ago

Two thoughts:

a) How can we measure "bureaucracy"?

b) On average, an increase in bureaucracy implies an increase in productivy.

MrWiffles• 4 years ago

I’d think b is exactly the opposite. More b is less productivity from my experience, 100% of the time.

danabrams3• 4 years ago

For a) you can at least measure the ratio of managerial to non-managerial staff (which has become more substantially more heavily weighted towards management since 1983).

danabrams3• 4 years ago

For B) Parkinson’s law predicts that useless bureaucracy, if left unchecked, will eat any gains in productivity.

RosanaAnaDana• 4 years ago

Eventually we'll see a similar pattern with AI.

Some industry where it makes sense will incorporate it and see the gains.

Slowly and maybe after a couple oom improvemens, every other industry will come along.

dheera• 4 years ago

Productivity Slowdown

Blame FB, HN, Reddit, Instagram, Twitter? I feel like this is pretty glaringly obvious.

tuatoru• 4 years ago

The article's model is wrong-headed in two ways.

First, it is based on manufacturing, which has been a minority of economic activity throughout the period it discusses. To explain anything, it needs to explain services.

Second, the model is too elaborate and depends on a hard-to-measure variable (saturation).

Let's use a really simple model in which work (service work) is made up of two tasks, decision-making and communication.

Recall that 1995-2004 is the exact period when cell phones and email diffused throughout the economy. These improved the rate at which communication tasks could be completed, so productivity grew in this task. But as with everything there are diminishing returns to further improvement.

The other task, decision-making, is much more varied, being different for truck drivers, real estate agents, nurses, and yoga instructors (to select a few examples). Increasing productivity in the decision-making task across the whole economy is much harder, which is why productivity growth has slowed down.

19h• 4 years ago

Off topic: It’s really hard to read on a mobile device. I’d really wish blog posts would look more like the iOS reader mode: https://i.imgur.com/K9nDmpN.png

Computer Saturation and the Productivity Slowdown

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