2017

Stories related to "Economics". http://www.chicagobooth.edu/magazine/fall-2017/rss

conversations

Why Is Productivity Stuck in Neutral?

When we talk about the global economy, we tend to turn to automotive metaphors. A recession brings things to a “screeching halt.” Boom times are said to be “in overdrive,” to have “found a higher gear.” And since the recession, one of the major components of the economy has been stuck in neutral. According to the Conference Board, productivity has barely budged since 2007, was flat in 2014 and 2015, and fell last year. We asked professor Chad Syverson, alumnus Matt Tracey, and Executive MBA student Crystal Lam to tell us why it’s stuck and what might kick it into gear. Chad Syverson, J. Baum Harris Professor of Economics, is the author of “Challenges to Mismeasurement Explanations for the US Productivity Slowdown,” published in the spring 2017 issue of the Journal of Economic Perspectives: Is productivity stuck in neutral? The short answer is yes. It’s been slow for the last decade—truly slow, not mismeasuredly slow or illusorily slow. The mismeasurement hypothesis says that although productivity has been slow since the mid-2000s, that isn’t real. The hypothesis argues that what’s actually going on is that our ability to measure economic growth has gotten worse. New things that people like and use a lot—Google, Facebook, Snapchat—are all free. We calculate GDP by adding up what people spend money on. Those things don’t show up because they’re free, so it looks like output per worker hour isn’t going up much. In my recent paper I asked, if that’s true, what else would it be true of? The patterns I found were consistent with an actual productivity slowdown rather than with mismeasurement.