If output displacement hides productivity, so does input displacement.

Sir, Dr Peter Johnson, responding to Diane Coyle’s “Conventional measures pose the wrong productivity question” August 16, argues that “Shift in output definition [is] at the heart of the productivity puzzle” and concludes “We are not counting apples for apples”,August 20.

As one example of “output displacement” output Johnson writes that “A great deal of retail banking activity has been displaced to private individuals [as a result of internet technology] and is not included in the calculations of output or productivity.”

There is also the other side of that same mirror namely that which you could call input displacement. 

In a letter to you referring to that same article by Diane Coyle I mentioned a post by Dan Dixon, in Bank of England’s “bankunderground” blog, titled “Is the economy suffering from the crisis of attention?” 

It said, “With the rise of smartphones in particular, the amount of stimuli competing for our attention throughout the day has exploded... we are more distracted than ever as a result of the battle for our attention. One study, for example, finds that we are distracted nearly 50% of the time.”

Sir, if those interruptions were recorded for what they really are, reduced working hours and increased consumption of distractions, we would probably see a dramatic increase in productivity, in real salaries, in voluntary unemployment and in GDP.

In other words our current economic compasses might not be working properly, risking taking us in the wrong direction.

@PerKurowski

If it now takes researchers much more time to come up with ideas, how much of that is caused by their consumption of distractions?

Sir, Diane Coyle writes that current productivity data does not consider what’s achieved through outsourcing since GDP excludes all the intermediate links in the chain and the additional value is netted out. If included “economic output would look somewhat better than the current statistics suggest. “Conventional measures pose the wrong productivity question” August 16.

But when Coyle refers to “a recent paper a group of economists from Stanford University and the Massachusetts Institute of Technology…calculate that it now takes more than 20 times the number of researchers to generate the same economic growth as it did in the 1930s.” I would have to ask: Does that calculation take due consideration of the ever-growing time researchers spend, not working, but consuming distraction on the cell phones or laptops?

Some months ago, in Bank of England’s “bankunderground” blog, we read a post by Dan Nixon titled “Is the economy suffering from the crisis of attention?” It said, “With the rise of smartphones in particular, the amount of stimuli competing for our attention throughout the day has exploded... we are more distracted than ever as a result of the battle for our attention. One study, for example, finds that we are distracted nearly 50% of the time.”

If those distractioninterruptions were recorded for what they really are, we would probably see a dramatic increase in productivity, in real salaries, in voluntary unemployment and in GDP.

In other words our current economic compasses might not be working properly, risking taking us in the wrong direction.

@PerKurowski

Our best hope for a decent and affordable adult social care must be minimizing the intermediaries’ takes, whether these are private or public

Sir, Diane Coyle when discussing the possibilities and need for organizing for instance adult social care, and thereto taking advantage of new methods to connect demand and supply and as exemplified by Uber, expresses concern for “the treatment and status of workers in platform public services (although it is not as if these are high-status jobs at present)” “Algorithms can deliver public services, too” December 19.

What’s missing though in that good analysis, is not having contemplating additional tech advances. For example Uber wants to buy self driven cars, in order to get the complications of human drives out of their way, but without realizing that consumers might at one point take direct contact with those cars, in order to get Uber out of the way.

The same will happen for workers in public services, though of course the increased demand for adult social care should help to keep up the demand for many of them. But, even in this case who knows? If you think of yourself as an older person soiled with your own feces, what’s currently is delicate referred to as an “accident”, who would you feel most comfortable with cleaning you, a not too human 1st class robot or a human? 

Sir, the way our generation, and governments have gone on a debt binge, to anticipate current consumption, there will come a time for a reckoning. If we do not find ways to minimize the intermediaries’ take, we will not afford the basic services we need and want.

Of course intermediaries are workers too… and that is why even for them we need to create decent and worthy unemployments.

@PerKurowski

The biggest “problem” with a Universal Basic Income is that it leaves many redistribution profiteers without jobs ☺

Sir, Diane Coyle from the University of Manchester, with respect to a Universal Basic Income writes: “it is hard to see that a Universal Basic Income would do better at addressing the economic and social costs of large-scale redundancy than the previous policy of making payments to those who lost their jobs. “Universal basic services are more important than income” April 5.

But suppose this prayer was read next Sunday in all our churches: “For all our young people who are never going to get a job, we pray they feel worthy citizens. Lord, hear our prayer”. 

Would then Professor Coyle still believe that a payment under the dole system is a better option than a Universal Basic Income?

There’s a choice to be made. Either a system with flexible accessible humiliating dole payments handed out by besserwissing redistribution profiteers, or a UBI complemented by strict, very limited, supplementary payments to those of working age with special problems. I have no doubts which one I would choose.

We do need decent and worthy unemployments.

PS. As always I signify that the needs of children and of those who have retired are to be met separately.

@PerKurowski

Low capital requirements for banks lead, automatically, naturally, to high bonuses for bankers

Sir, Diane Coyle writes: “If the chief executive of a company seriously tells me, as a shareholder, that he will not put in as much effort as he otherwise would unless I link his pay to a handful of metrics, I have every reason to be doubtful about hiring him to do the job” “Burger flippers deserve bonuses, bankers do not” May 26.

That is absolutely right; as long as the shareholder was putting in enough efforts himself… otherwise he might better shut up in silent complicity.

If you make the argument that the bankers are helping to convince the regulators that the shareholders of a bank need to put in very little equity, and therefore the shareholders are made more irrelevant, then it is much easier to understand why bankers have been able to get away with what they are doing.

Bank equity, allowed to be highly leveraged, especially on what is perceived as safe, has produced great returns, which have kept bank shareholders happy and in a complacent mood.

Ask the banks to triple their capital, or at least put up 10 percent of equity against absolutely all assets, and then you might begin see some bonus restricting relations developing between bank managers and the shareholders of banks.

@PerKurowski ©

The economists’ UK manifesto, seems to be over 90 percent long on government bureaucrats.

Sir I refer to Tim Harford’s “The economists’ manifesto” April 18.

Nick Stern: “green infrastructure bank…congestion charges…carbon tax”.

Jonathan Haskel: “government funding of science” with government borrowing taking advantage of the ultra-low interest rates.

Gemma Tetlow: “abolish national insurance entirely and replace it with higher rates of income tax”

John van Reenen: “an infrastructure bank to help finance projects by borrowing from capital markets and investing alongside private sector banks”

Kate Barker: “replace council tax with a land value tax”…taxing expensive homes more heavily and “charge capital gain’s tax on people’s principal residence”

Simon Wren-Lewis: “the Bank of England should print the money and hand it to the government on condition it be used for fiscal expansion.”

Diane Coyle: To limit executive pay packages.

Though Nick Stern mentions his proposal is “long on UK strengths such as entrepreneurship” I would hold the Economist’s manifesto package seems to be over 90 percent long on government bureaucrats.

My own recommendation, also as an economist, would be to create some lebensraum for UK entrepreneurs and SMEs, by firing current bank regulators.

Why?

Because banks are allowed to hold less equity against assets perceived as safe than against assets perceived as risky.

So banks can leverage more their equity, and the support they receive from society, with assets perceived as safe than with assets perceived as risky.

So banks can earn higher risk adjusted returns on equity with assets perceived as safe than with assets perceived as risky.

So banks will lend too much at too low rates to what is perceived as safe, like infallible sovereigns and members of the AAArisktocracy, and too little at too high relative rates to what is perceived as risky, like SMEs and entrepreneurs.

And so the indisputable fact about current bank regulation is that it distorts all common sense out of the allocation of bank credit to the real economy.

PS. I hear again about ultra-low interests... careful these rates are being subsidized.

@PerKurowski

Since it can always pay back through inflation, I bank regulator, decree sovereign debt to have a zero risk-weight.

Sir, Diane Coyle begins “A history of inflation – and a future of deflation” April 7 with describing high inflation as “socially and economically corrosive, redistributing purchasing power away from small savers and those on low wages that do not keep up, and also degrading trust in long-term bargains”. In other words a truly public bad.

But then, because of “the effect deflation would have on real debt burdens” and how this would be “inhibiting a return to growth”, she ends arguing that “A quick and political painless way to reduce debt burdens, private and public, is a bout of high inflation.” Clearly a case of the damned if you do and damned if you don’t.

But, if what is really needed is a 30 percent inflation to cut all debts back to something livable, why not an Emergency Act that decrees a 30 percent haircut applicable to all debts in the society, including that of banks to its depositors. Would that not be a more transparent, less distortive and, hopefully, a politically more painful solution, so that we can get a little bit more accountability into the system?

I mention this because clearly the concept of inflation not being a haircut, although intellectually very repulsive, must be a prerequisite for allowing bank regulators to argue something so loony as a zero percent risk-weight for sovereign debt.

@PerKurowski