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February 08, 2019


Tim Bassett

Would add increasing operational due to technology leverage means firms have to reduce financial leverage to compensate.

A lot of modern plant has almost zero variable costs


Perhaps comparable to the steel mill example; I work in the financial sector and the go-to ways to improve productivity have been software changes (to improve output per person - a surprising amount just from removing bugs) and out-sourcing (to reduce costs). Are these captured in the Out-turn numbers?

Robert Mitchell

Why are economists so concerned about increasing investment? It's like you've all been trained to maximize an abstract number, and that will magically create well-being. You assume more is better; but that crass materialistic attitude sickens the non-neoliberals left among us. I don't want an abstract number like business investment to be the focus of public policy. Businesses externalize too many costs on the nature I try to escape to, to get away from your conspicuous consumption, your vast waste production, your pollution, your shallow, fickle, arbitrary social rules.

Public policy should leave business investment alone, not even track it. Let us self-provision in ways markets won't research because business is too focused on short-term profit.

Woz should never have met Jobs and continued sharing his designs for free. Neoliberalism has polluted the internet with tracking and ads.



In this paper, Acemoglu shows that Japan and Korea, which have ageing and shrinking workforces, are the ones most enthusiastically embracing robotics; while the UK and the US, which have far more buoyant labour markets, are lagging behind.

I’m reminded of James Belich’s somewhat ghoulish theory, that it was the Black Death which effectively kick-started the “Rise Of The West”. Here’s my crude attempt to summarise Belich’s argument:

Previous disasters, such as the Barbarian and Mongol invasions, killed a lot of people, and also did a lot of damage to capital and other non-human factors of production: government, infrastructure, land, livestock, buildings etc. The Black Death was different. It halved the population, but left everything else as it was. So once the plague was over, you had a society with effectively double the amount of capital per human. A society with capital to spare but a massive shortage of workers was far more likely to innovate with labour-saving inventions, such as printing.

I don't know if Belich is right, but the argument sounds plausible.

dilbert dogbert

This might interest: https://equitablegrowth.org/equitable-growth-in-conversation-david-weil/
One might conclude that corps are becoming hollow and only invest in the "Brand".
In the hollow corp maybe the paths for information about improved processes is blocked and does not reach the decision makers.


«a steel mill by Igal Hendel and Yossi Spiegel showed that it doubled production over 12 years ... “Capacity is not well defined,” they conclude.»

Actually capacity is a fairly well defined quantity, for given levels of risk and plant lifetime.

There is always "fat" to cut where "fat" actually means some variant of "quality"; peak "pull all stops" capacity no more valid than sustainable "minimize risk and wear" capacity.

In thatcherite times clever managers always maximize revenue now at the cost of more trouble later, when it is someone else's problem.


«work in the financial sector and the go-to ways to improve productivity have been software changes (to improve output per person - a surprising amount just from removing bugs) and out-sourcing (to reduce costs).»

Out-sourcing does not improve productivity, it improves margins, a very different concept. Productivity is physical output divided by physical input, such as ours of work, not by cost of input.

Switching from workers paid $20/hour making 12 widgets per hour to workers paid $5/hour making 6 widgets per hour both reduces productivity (making widget takes double the work) and increases margins (wage per widget halves).


«corps are becoming hollow and only invest in the "Brand".
In the hollow corp»

Anglo-american culture corps are run by marketing and finance and they consider development, production etc. as costs to eliminate as stupid irrelevancies.
So they always try to get rid of them to become just toll-taking intermediaries, with the goal of getting pure "passive income" (rent) from licensing of brand and IP thanks to government "protection".

Also anglo-american corps have been told by anti-union consultants that worker unions tend to "infect" those industries that have large concentrations of workers in capital intensive plants, so they love the old practices of "putting out" and "piecework".

In the growing economies instead corps are far from hollow and they see their competitive advantage as being well managed tight organizations.


«business investment has been “considerably weaker” than the Bank of England had expected»

I guess that it is unsurprising that the "sell-side" Bank of England tends to be always optimistic for the benefit of the stock and property markets, with rare exceptions as in "Project Fear".

John Company

Isn't the problem that the planning system is artifically maintaining lots of rotten, decaying cities? If you abolished planning controls tomorrow, you'd probably see places like Oxford, Cambridge, York and Bristol swell up.

derrida derider

I'd put most of the emphasis on low wages, simply because this is clearly a self-reinforcing equilibrium (as a long literature on the relations between wage growth and capital investment consistently shows). Who'd invest in a robot when humans are cheap?
In that Solow production function y=f(A,K,L) K is actually itself a function of L (as a Marxist like Chris must agree). But more significantly, so is A.


«you'd probably see places like Oxford, Cambridge»

The centerpieces of both town receive 40-50% of all UK university and research spending, and the booming property prices and rents in both are entirely government created.

«swell up.»

But why would those cities swell up like the magic London-Oxbridge triangle? People don't move to London etc. because of the beaches, the relaxed culture, the sunny weather, the low cost of living.
People move "because jobs", whether they be immigrants from Cumbria or from Slovakia.

The London-Oxbridge triangle gets massive government support, and as a result it is heavily congested -- what would cause millions of jobs to move to Bristol or York other than a large change in government policy?


I absolutely agree that is the primary motivation, and don't dispute anything you have said. However with an international work-force opportunities arise to provide improvements in the product or service. The concept in finance of chasing the sun sees work passed from region to region in order to deliver at the earliest possible time. This I would argue is a productivity improvement through creatiive use of geography.



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