The productivity puzzle: numbers alone won't solve it, (EXCERPT), Monthly Labor Review Online, October 1982

The productivity puzzle:
numbers alone won't solve it

Paul S. Adler

Over the last two decades, there has been a major decline in the rate of growth in U.S. productivity. The lag in the ratio of output to input has also occurred in many other industrial countries, including Japan.

Orthodox economic theory hypothesizes a basically technical link between trends in output and input, namely, the production function. This hypothesis has been put to a severe test, for the precise extent, the origins, and the significance of the productivity slowdown are yet to be analyzed with a clarity that would demonstrate the usefulness of traditional economics in analyzing such problems.

There is, in particular, a surprising contrast between the wealth of studies that attempt to quantify the decline and calculate its causes, and the poverty of material on the role played by such a lag in macroeconomic performance. It should be remembered that, in general, at a company and an industry level, labor productivity and profitability are not well correlated, and that in capitalist economies decisions are based on the latter, not the former. Paul Samuelson's neoclassical paradigm claims its originality in the capacity to link the two factors, in a synthesis of micro- and macro-economics. But so far, this approach has not shed light on the most elementary part of the productivity puzzle: Is the productivity slowdown basically a cause or an effect of current economic problems?

This excerpt is from an article published in the October 1982 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

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