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Let's Know Things

Post-Stagnation

Let's Know Things

Colin Wright

News Commentary, News

4.8593 Ratings

🗓️ 12 January 2021

⏱️ 31 minutes

🧾️ Download transcript

Summary

This week we talk about The Great Stagnation, Robert Solow, and total factor productivity.


We also discuss low-hanging economic fruit, technological innovations, and looms.



This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit letsknowthings.substack.com/subscribe

Transcript

Click on a timestamp to play from that location

0:00.0

The Nobel Prize winning economist Robert Sallow is perhaps most well known for his post-World War II era theories related to economic growth.

0:24.3

More specifically, he posited that existing neoclassical economic models,

0:29.4

although useful in gesturing at how industrialization can stimulate measurable types of growth in a region,

0:36.0

don't capture all the variables relevant to that growth.

0:39.7

What was missing, his work indicated, was a measurement of progress, and in particular, technological

0:46.0

progress. So according to this and adjacent economic models, there are two key ways to increase

0:53.1

the overall productivity of an individual worker.

0:56.7

The first is through industrialization, which roughly correlates with upgrading the infrastructure

1:02.2

available within a workplace, the tools the workers use, and the systems that determine

1:08.0

how they do their jobs primarily. For instance, if you're working at a factory that makes textiles,

1:14.3

and you can produce one set of linens by hand each week,

1:18.4

but by upgrading your tools so that you have access to a large, complex loom,

1:24.5

you're able to produce a dozen set of linens each week.

1:27.0

That upgraded machinery, that new

1:29.5

infrastructure, has resulted in 12 times the productivity and thus 12 times the previous level

1:36.0

of economic benefit from the same effort exerted. Each worker, becoming 12 times as productive,

1:43.4

will likely mean the prices on the linens being produced

1:46.4

can be reduced, and ostensibly at least, the quality of the goods being produced might also go

1:51.9

up. Being able to automate aspects of linen producing means that the companies benefiting from

1:57.5

that labor-related savings and increase in productivity can then invest in higher

2:02.8

quality materials or can produce higher density fabrics. This concept applies to all fields,

2:10.6

including those that offer services instead of goods. So investments in these sorts of technologies,

...

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