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A PRODUCTIVITY PRIMER. As Dean Baker notes, productivity growth is slowing, which may well presage a fairly significant recession. Productivity has been a tricky indicator in recent years, as it used to track quite closely to wage growth, but that link has severed over time, and economists don't really know why or what to do. In the midst of all this, occasional TAP contributor Maggie Mahar sent along a great, slightly older article taking a skeptical view of productivity as an indicator of economic health:
One perspective on productivity involves a trip to the farm to look at chickens laying eggs. Basically, productivity in the coop increases when chickens lay more eggs per day. Early on farmers noted that hens could produce more eggs when confined to a cage instead of running around searching for food, being chased by cocks, or having to evade predators. Putting them in a small cage, feeding them to the maximum and clipping their bills so they couldn't peck neighbors resulted in further gains in productivity. To understand productivity as it relates to the economy substitute the word "chicken" with "worker."It gets more skeptical from there. This is a slightly counterintuitive view of productivity, but it better tracks with recent experiences, wherein productivity has not rapidly translated into increases for workers. Donald Perry's point that "Asian chickens produce more eggs on less food" has certainly been borne out, and the 1970's era belief that more productive chickens get more feed hasn't described the reality. That said, productivity increases remain a bad thing to lose, and given the lack of other robust economic trends, the productivity downturn is worrying.--Ezra Klein
