zlacker

This is something that I've always found odd about how the actual value in the economy is tracked. Specifically, how the stock markets continue to rise despite the decline in productivity. If I was told as a shareholder or private owner of a company, that an hour of labor and inputs are making me mess than I was making 20 years ago I would be upset but that doesn't seem to be reflected in the volumes and prices of the stock markets themselves. Why is this case? Is there something I'm missing?

All in all, I hope someone or some firms figure out how to break through the hurdle to automation in industries where it would matter like healthcare. It would be the first step to correct the economy in my opinion.

>>norea-+(OP)
> Why is this case? Is there something I'm missing?

It's still always going to be better to have the portion of retail worker's production that goes to profits and shareholders, instead of the portion that goes to the worker, if for no other reason than that you can scale that side.

>>norea-+(OP)
> This is something that I've always found odd about how the actual value in the economy is tracked. Specifically, how the stock markets continue to rise despite the decline in productivity.

I'm confused. Are you talking about the economy or the stock market? I don't see why the two should be related. Productivity is (unit of output / unit of input). The value of the stock market is the sum of the discounted cash flows from the market's member firms.

EDIT: marginal investor's estimation of

>>norea-+(OP)
> Why is this case? Is there something I'm missing?

Labor is a market. It's segmented geographically and by industry, but you can think of it as a single market.

You might be 500% percent as productive as a person with your same abilities was 20 years ago, but so is everyone else. So you're contributing five times as much to your employer's bottom line, but since he's in a demand-constrained market (post-scarcity, pretty much everyone is), he doesn't need 500% percent productivity.

So he hires fewer workers. So the demand for workers goes down. So your skills are worth less.

This trend is going to continue until you have (hyperbole) a single person hitting a single button periodically as the sole employed person in the market. What happens to everyone else? No one knows.

>>norea-+(OP)
Specifically, how the stock markets continue to rise despite the decline in productivity.

The stock market rises in nominal dollars, which is meaningless, since that is just a result of monetary inflation. Corporate profits, and personal income invested in the stock market will rise with total nominal national income. In economics terms, nominal national income growth is proportional to the growth in the money supply (M*V=Y). So the growth in the stock market is just a result of the growth of the money supply. It has zippo to do with any real thing like productivity. That is why it is always silly when newscasters report the stock market changes every day, and view it as good when it rises, and bad when it falls. They are essentially cheering on monetary dilution. (But inflation always feels good in the short term, so they aren't entirely wrong to cheer it on, it feels good when the stock market rises, even if the same underlying mechanic is also pushing up your milk price).

>>devinh+Bd
Thanks for clearing that up. It's one area where I can't seem to get a solid grasp on it (I know micro-economics and some macro-economics, but those don't seem to be helpful in understanding financing imo). So basically the stocks will rise regardless of productivity. But then where does productivity come into play? Maintaining the real cost of production below/at a certain threshold regardless of the nominal cost?

>>debacl+Ub
> (hyperbole) a single person hitting a single button periodically as the sole employed person in the market. What happens to everyone else? No one knows.

Well, the owners would be the ones calling the shots to the intelligence systems.

I would gather that the country would look similar as Marshall Brain's Manna. Although, I'd take out the nicer parts about the "Australia Project".

>>devinh+Bd
We've had very low inflation in the last 20 years or so. While certain numbers, especially short-term ones, are reported in nominal dollars instead of real ones (it's actually kind of hard to report on real dollars except in considerably retrospect), neither Yglesias nor anyone else in the broadest definition of economic literature is confused about the nominal/real distinction.

That said, productivity is not declining. The first derivative of productivity is declining -- that is, productivity is going up, but it's not going up as fast as it used to. Also, the population is going up. And that explains the (real, not nominal) stock market growth.

>>norea-+(OP)
To make this clear: Productivity is not declining. The growth of productivity is slower than it was in the past, but it's still growing. The first graph here is annualized growth rates, and you'll note they're all positive: http://www.bls.gov/lpc/prodybar.htm