Abstract
This chapter examines the possibility that the productivity slowdown of the 1970s was a direct manifestation of the limits to speed-ups. It contends that two centuries of machine-based human betterment came to an end in the late 1960s/early 1970s. It also examines the related policy implications, notably regarding knowledge-based R&D.
All goods things must come to an end
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Notes
- 1.
The capital–labor ratio throughout the 1950s remained relatively constant (see Gourio and Klier (2015)).
- 2.
A good illustrative example is provided by supersonic air travel, more specifically, the joint British/French Concorde that flew at Mach II. Energy costs were astronomical, which in addition to the problems associated with the associated sonic boom did the venture in. Today, commercial jet aircraft travel at speeds which in many cases are lower than those in the 1970s, owing principally to the associated energy costs.
- 3.
It was suggested that perhaps the OPEC oil embargo precipitated the decline in energy use. We remain skeptical as, if nothing else, higher energy prices will, assuming that machine speed can be increased, result in further profit-increasing speed ups. This follows from the fact that in general, energy costs represent 4–6% of a firm’s operating costs, thus making speed-ups extremely profitable as shown in Chap. 4.
- 4.
These ratios were obtained using the same data.
- 5.
This is known as Arrenius’ Law, according to which the rate of a chemical reaction depends on, among other things, the absolute temperature.
- 6.
This is surprising given the important role of machine speed in productivity growth.
- 7.
What eventually did them in was their size—more specifically, their width.
- 8.
No mention is made of speed-ups which in this case consist of increasing the rate/speed at which petroleum is refined.
- 9.
The nature of control technologies changed in the 1980s and 1990s. Instead of focusing on minimizing downtime and increasing average machine speed, they focused on automating supervision, rendering labor expendable. In others words, they ushered in the era of the intelligent plant/factory—that is, a factory without workers.
- 10.
A good illustration is provided again by the Concorde which doubled the speed of air travel to Mach II, but at an exorbitant cost ($5,000 vs $800), which eventually did the project in.
- 11.
Here, productivity is defined traditionally as output per unit labor/capital.
- 12.
Our results also rationalize Olson (1988)’s findings to the effect that post-WWII productivity growth was greater in Europe than in North America. Specifically, operating speeds in North America were greater than those in Europe, making for a situation in which greater gains could be achieved in Europe.
- 13.
Conventionally measured labor productivity can be modeled as follows: \(\frac{{y_{i} (t)}}{{l_{i} (t)}} = \frac{{e_{i} (t)^{{\left[ {0.5 + \gamma_{i} (t)} \right]}} k_{i} (t)}}{{l_{i} (t)}}\). Speed-ups will increase labor productivity by increasing the numerator on the left hand side of this equation. It bears reminding that according to our approach, labor is not physically productive, but rather is an organizational input, which explains its absence from the production function.
- 14.
In Beaudreau (2011), the dynamo and the computer were compared on the basis of the underlying mechanics. It was argued that unlike David (1990) who predicted and continues to predict sizeable productivity gains from ICT, it was argued that because information is not physically productive, the promised or prophetized gains in productivity and growth will fail to materialize. Three decades after David’s original article, high growth rates have yet to materialize.
- 15.
Likewise, the economy was not more productive.
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Beaudreau, B.C. (2020). The End of the Age of Speed and the Productivity Slowdown. In: The Economics of Speed: Machine Speed as the Key Factor in Productivity. Lecture Notes in Production Engineering. Springer, Cham. https://doi.org/10.1007/978-3-030-26713-1_5
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