Posted by: Maureen Flynn-Burhoe | June 12, 2011


Productivity in economics is the ratio of what is produced to what is required to produce. Productivity is the measure on production efficiency. Productivity model is a measurement method which is used in practice for measuring productivity. Productivity model must be able to solve the formula Output / Input when there are many different outputs and inputs.

“Measurement of hours worked by industry, as labour is the single most important factor of production. Currently, there are many problems associated with the accurate measurement of hours worked, in particular when disaggregated by industry. Specific challenges in this context include successfully combining information from the two main statistical sources, enterprise and household surveys, and measuring labour input and compensation of selfemployed persons. A cross-classification of hours worked by productivity-relevant characteristics of the workforce (education, experience, skills, etc.) would also be highly desirable (OECD).”

“Labour remains the single most important input to many production processes. From a perspective of production analysis, and ignoring quality differences for the moment, labour input is most appropriately measured as the total number of hours worked. Simple headcounts of employed persons will hide changes in average hours worked, caused by the evolution of part-time work or the effect of variations in overtime, absence from work or
shifts in normal hours. However, a number of statistical issues arise regarding the measurement of hours actually worked. One of them is the best use of available statistical sources, in particular establishment and household surveys. Consequently, the quality of hours-worked estimates, and their degree of international comparability, are not always clear (education, experience, skills, etc.) would also be highly desirable. . . Because a worker’s contribution to the production process consists of his/her “raw” labour (or physical presence) and services from his/her human capital, one hour worked by one person does not necessarily constitute the same amount of labour input as one hour worked by another person. There may be differences in skills, education, health and professional experience that lead to large differences in the contribution of different types of
labour. A differentiation of labour input by type of skills is particularly desirable if one wants to capture the effects of a changing quality of labour on the growth of output and productivity. Explicit differentiation is, however, data- and research-intensive. As a minimum, time series of hours worked, broken down by one differentiating characteristic have to be available, alongside corresponding statistics for average compensation, broken
down by the same characteristic. Measurement problems are compounded when explicit differentiation of labour input by industry is sought. Aggregation of undifferentiated labour input across detailed industries can provide some form of implicit differentiation.. . . Training expenses. Distinguishing labour from capital income is but one of a number of other measurement issues associated with the measurement of labour compensation. One such issue
concerns training expenses that constitute a form of investment in human capital. The acquisition of knowledge, skills and qualifications increases the productive potential of the individual concerned and is a source of future economic benefit to them and to their employer. Different from physical assets, however, investment in training does not lead to the acquisition of assets by an employer that can be easily identified, quantified and valued for balance-sheet purposes. Thus, the SNA 93 states that they continue to be classified as intermediate consumption, even though it is recognised that they may bring future benefits (OECD).”

1997-07-02 East Asia crisis began in Thailand.

1995 John Vickers. 1995. Concepts of Competition. in the economics of imperfect information, imperfect competition, and dynamic ….. 22 The following discussion is based on Meyer and Vickers (1994). ….. explicitly about the dynamic process of competition. One can ask how the … In the last 10 years the most important advances in the theoretical analysis of …

1989 The Greenwald-Stiglitz theory of adjustment provided an explanation based on capital market imperfections arising …

1986 Bruce C. Greenwald & Joseph E. Stiglitz: “Externalities in Economies with Imperfect Information and Incomplete Markets,” Quarterly Journal of Economics 90, May 1986, 229-264. 1985 Greenwald, B and J. E. Stiglitz. “Externalities in Economies with Self-Selection Constraints. Princeton. Under which set of circumstances is an economy Pareto efficient? What are pecuniary externalities? moral hazard,

“There is not a complete set of markets; information is imperfect; the commodities sold in any market are not homogeneous in all relevant aspects; it is costly to ascertain differences among the items; individuals do not get paid on a piece rate basis; and there is an element of insurance (implicit or explicit) in almost all contractual arrangements, in labor, capital, and product markets. In virtually all markets there are important instances of signaling and screening. Individuals must search for the commodities that they wish to purchase, firms must search for the workers who they wish to hire, and workers must search for the firm for which they wish to work. We frequently arrive at a store only to find that it is out of inventory;” or to find a queue waiting to be served. The cumulative effects of such small instances can be very large. Stiglitz argued that Pareto improvements could be effected through government policies such as commodity taxes. Their methodology identified the presence of inefficiencies and enabled them to identify the appropriate direction of policy intervention and observable measures of their successful application. distortions: information imperfection, market failure, knowledge of the cross elasticities of demand unavailable, ex net effect of accident rates related to taxation of alcohol; distortions include imperfect information, incomplete markets, the costs of obtaining information and running markets are real. In large economies even though the action of an individual has a very small effect on price, the change in price affects a large number of individuals and the total welfare effect is the product of the magnitude of the change in the price times the number of individuals who are affected. This does not go to zero as the size of the economy gets larger.”

1973 “Another point of debate in the 1970s and 1980s was whether output should be measured net or gross of depreciation. Depreciation measures the loss of the market value of a capital good between consecutive periods. One notes that this gross/net distinction of output relates to depreciation and not
to the treatment of intermediate inputs. Denison (1974) advocated a concept of output net of economic depreciation on the grounds that it traces improvements in welfare more closely than output measures that are gross of depreciation. A group of researchers, including Dale Jorgenson and Zvi Griliches, on the other hand, argued that output must be measured gross of depreciation if it is to conform to the logic of production theory. Hulten (1973) provided a theoretical underpinning for the Jorgenson/Griliches approach. Today, a large majority of productivity research uses output measures
gross of depreciation (OECD).

1942 The economic theory of productivity measurement goes back to the work of Jan Tinbergen (1942) and independently, to Robert Solow (1957). They formulated productivity measures in a production function context and linked them to the analysis of economic growth (OECD).

1920s “Perhaps the clearest link between economist’s changing views of competition and their support of antitrust in the post 1920s era is found in the structure-conduct performance paradigm of industrial organization theory (DiLorenzo and High 1988: 431).”

1911-1913 “Edgeworth’s analysis of the law of returns is one of his most important contributions to economic theory. In fact he examines increasing returns in relation to marginal and average costs, separately considered (Edgeworth 1911a, 1911b). Moreover, his 1913 article
has probably the first diagram of the U-shaped average and marginal cost curve, and the demonstration that the marginal costs curve intersects a U-shaped average costs curve at its minimum (1913: 214, fig. 3).” Edgeworth, F.Y. (1911a). Contribution to the theory of railway rates. The Economic Journal. 21 (83): 346-370; Edgeworth, F.Y. (1911b). Contribution to the theory of railway rates.-II. The Economic Journal,. 21 (84): 551-571; Edgeworth, F.Y. (1912). Contribution to the theory of railway rates.-III. The Economic Journal. 22 (86): 198-218; Edgeworth, F.Y. (1913). Contribution to the theory of railway rates. IV. The Economic Journal. 23 (90): 206-226.

1976 The Chicago school of economics rejected government regulation of natural monopoly, public enterprise, and any antitrust policy beyond preventing the restriction of output, combating cartels, horizontal mergers and predatory practices (Posner 1976, Bork 1978) (more).

1899 Norwegian-American economist and sociologist Thorstein Veblen (1857-1929) published his influential book entitled The Theory of the Leisure Class: An Economic Study of Institutions which is considered to be the first iteration of the term “neoclassical economics.” In neoclassical economics, the economic value is based on the relationship between costs of production and “subjective elements,” later called “supply” and “demand.” This came to be known as the Marginal Revolution in economics, and the overarching theory that developed from these ideas came to be called neoclassical economics. (Weintraub, E. Roy. 2002. History of Political Economy). Veblen observed that menial and labor-intensive jobs (that actually, pragmatically contributed more to society according to Veblen) were assigned to the lowest classes who were subjugated. Members of the emerging ruling classes (Veblen’s leisure class) emulated the behavior in more traditional higher-status groups (priests and nobility and their retinue, for example) . The higher status of the leisure class was reflected in 1899 by the fact that white-collar workers had higher salaries than manual laborers. He noted that businessmen do not produce goods and services, but simply shift them around whilst taking a profit. He thus argued that the modern businessman is no different from a barbarian, in that he uses prowess and competitive skills to make money from others, and then lives off the spoils of conquests rather than producing things himself.

1896 Italian economist Vilfredo Pareto introduced the concept of Pareto optimality or efficiency in his studies of economic efficiency and income distribution. According to his definition, a society is Pareto optimal when no member of that society can improve their condition without lowering the condition of another member. The concept of Pareto optimality can be applied to GP in order to build succinct tools to overcome these intrinsic deficiencies. In a GP environment, Pareto optimality/efficiency is defined as

1894-03. Ely, Richard T. 1894-03. “Natural monopolies and the Workingman: a programme of social reform.” North American Review, vol. 188. no. 448. pp. 294-304. Ely believed that economics was an inductive historical subject, not deductive and mathematical.

“There are various undertakings which are monopolies by virtue of their own inherent properties. Recent discussions have made these businesses well known. They are railways, telegraphs, telephones, canals, irrigation works, harbors, gasworks, street-car lines, and the like. Experience and deductive arguments alike show that in businesses of this kind there can be no competition, and that all appearances which resemble competition are simply temporary and illusory. It will be observed that these undertakings are nearly all of them comparitively new. They are an industrial field which has recently been opened. They are a non-competitive class of industries super-imposed upon the world of competitive industries vix agriculture, manufacture and commerce. They have nearly all come into existence in the present century, and their growth has been so marvellous that they now represent a large proportion of all the wealth in the civilized world. It has even been claimed that railways alone in the United States comprise one-fifth of the entire wealth of the country. This is doubtless an exaggerated estimate, but it is probably an under-estimate to claim that all these businesses represent one-fourth part of the entire wealth of our industrial civilization. Moreover, their nature is such that every other kind of business is either directly or indirectly dependent upon them. Their significance becomes at once manifest. The manner in which they are managed must affect very materially the entire population, and in particular the wage-earner.”

1880 R. T. Ely began writing popular articles on a burning issue of the day—the relationship between labor and capital.

1873 Mark Twain and Charles Dudley Warner published their novel entitled The Gilded Age: A Tale of Today. They satirized graft, greed, materialism, and corruption in public life in post-Civil War America.

1870 “The marginal revolution saw the introduction of the idea of marginal utility into economics in the early 1870s by Jevons, Walras and Menger. This change in economic theory was a slower process than the word ‘revolution’ suggests, and, to understand the changes associated with it, it is necessary to explore the scientific, social and political context in which they occurred (more).” Neoclassical economics attempted to erect a positive, mathematical and scientifically grounded field above normative politics.

1850 English-speaking economists generally shared a Classical Theory regarding value and distribution based on the work of Adam Smith, David Ricardo, Thomas Robert Malthus, John Stuart Mill, and Karl Marx. “The value of a bushel of corn, for example, was thought to depend on the costs involved in producing that bushel. The output or product of an economy was thought to be divided or distributed among the different social groups in accord with the costs borne by those groups in producing the output (more).”

1850 Samuel Taylor Coleridge in “Essays on His Own Times” argued that, “The annals of the French Revolution prove that the knowledge of the few cannot counteract the ignorance of the many . . . the light of philosophy, when it is confined to a small minority, points out the possessors as the victims rather than the illuminators of the multitude.”

1836 Porter’s Progress of the Nation

1813-15 Cannan, Edwin. 1982. “The Origin of the Law of Diminishing Returns.” Economic Journal. Vol. 2.

1801 Recreations in Agriculture. Natural History, Arts, and Miscellaneous Literature. 1801, vol. iv., pp. 374376 vi. 405407

1795 British Parliament has enacted 738 enclosure bills since 1775. As the price of corn increased, the number of enclosure acts increased.

1798 Malthus, Thomas. 1798. “An Essay on the Principle of Population as it Affects the Future Improvement of Society with Remarks on the Speculations of Mr. Godwin, M. Condorcet, and Other Writers.” London. Printed for J. Johnson, in St. Paul’s Church-Yard. He challenged the possibility of the organic perfectibility of man referring to Steele’s fictional Isaac Bickerstaff (1798:53). “The improvement of the barren parts would be a work of time and labour; and it must be evident to those who have the slightest acquaintance with agricultural subjects, that in proportion as cultivation extended, the additions that could yearly be made to the former average produce must be gradually and regularly diminishing (Malthus 1798).”

1793 Godwin, William (1756-1836). “Avarice and Profusion.” Chapter in Enquiry concerning Political Justice, and its Influence on General Virtue and Happiness. This essay started the general question of the future improvement of society.

1793-01-08. Every man is to be prosecuted who shall appeal to the people by the publication of any unconstitutional paper or pamphlet; and it is added that men are to be punished for any unguarded words that may be dropped in the warmth of conversation and debate. The first conviction of this kind, which the author was far from imagining to be so near, was of a journeyman tallow-chandler, January 8, 1793, who, being shown the regalia at the Tower, was proved to have vented a coarse expression against royalty to the person that exhibited them (Godwin 1793).

1776 Adam Smith. “An Inquiry into the Wealth of Nations.

“The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations. According therefore as this produce, or what is purchased with it, bears a greater or smaller proportion to the number of those who are to consume it, the nation will be better or worse supplied with all the necessaries and conveniences for which it has occasion. But this proportion must in every nation be regulated by two different circumstances; first, by the skill, dexterity, and judgment with which its labour is generally applied; and,
secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed. Whatever be the soil, climate, or extent of territory of any particular nation, the abundance or scantiness of its annual supply must, in that particular situation, depend upon those two circumstances (Smith 1775).”

“Dr Adam Smith has very justly observed that nations as well as individuals grow rich by parsimony and poor by profusion, and that, therefore, every frugal man was a friend and every spendthrift an enemy to his country. The reason he gives is that what is saved from revenue is always added to stock, and is therefore taken from the maintenance of labour that is generally unproductive and employed in the maintenance of labour that realizes itself in valuable commodities. No observation can be more evidently just (Malthus 1798).”

1781 William Godwin (1756-1836) seriously questioned the role of the monarchy in enlightened times planting the seeds for his book entitled Enquiry concerning Political Justice, and its Influence on General Virtue and Happiness.

1775 British Parliament began to enact enclosure bills.

1709-04-12 Richard Steel published his first journal entitled The Tatler “to expose the false arts of life, to pull of the disguises of cunning, vanity, and affectation, and to recommend a general simplicity in our dress, our discourse, and our behavior” Steele wrote under a pseudonym of Isaac Bickerstaff (name borrowed from Jonathan Swift who used it as a pseudonym) and gave Isaac Bickerstaff an entire, fully-developed personality. For example he gave him a fictitious genealogy traced back to a short, dark-skinned knight of King Arthur’s round table who began an inter-generational project of physical improvement of offspring by judicious choice of partners which at one point included a milk maid Maud who “spoiled” their blood but “mended” their constitutions. Steele described his motive in writing The Tatler as “to expose the false arts of life, to pull of the disguises of cunning, vanity, and affectation, and to recommend a general simplicity in our dress, our discourse, and our behavior”.


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