As a country develops the labour productivity tends to increase. This would imply that a country endowed with better capital would be able churn out more goods per hour(or any unit of time) than a country with lesser capital investment. We can clearly the veracity of this hypothesis in our everyday life. The output produced by an average Bangladeshi worker per hour is much lower than the output produced by a German labour. This has nothing to do with the fact the Bangladesi are lazy or Germans are industrious. It only reflects the fact that an average German is better educated and equipped with technology to increase his hourly output.
Labour productivity is not an obscure measure. It can easily be estimated by dividing the GDP of a country by the total labour-hours available. For e.g in US 2008 GDP was 14,350 billion dollars(Source: Federal Reserve). And available total labour hours is 797 million hours. (Source: US BLS )So the average productivity comes around 18 dollars an hour per US worker. So statistically every US worker in 2009 churned out goods worth 18 dollars a work hour.( in current dollars without factoring inflation).
But as productivity rises the demand for lesiure also increases. After all work and no play makes Jack a dull boy right? So the developed country are witnessing the phenomena of high labour cost (it costs a lot more to employ Americans remember) and lesser work hours as well!!
Increasing there are calls for making Friday a part of extended weekend. In my college here in America, people increasing bid me Weekend wishes starting from Thursday afternoons !! In such a scenario we would effectively define a work-week as having only a four continuous working days of eight hours each (considering the fact that in the nineteenth century Industrial age workers toiled for more then twelve hours a day, all week long, this is indeed a remarkable turnaround !!). Increasingly leisure hours would only serve to undermine the competitiveness of an economy.
P.S: India has a long way to go in reaching labour productivity anywhere near OECD countries. In this age of increasing mechanization we still tend to cling on hard manual labour. Our NREGS(National Rural Employment Guarantee Scheme, similar to the depresssion era WPA in US) is one prime example of this atavistic mentality. Instead of training rural folks to equip them with marketable labour skills, we employ them in manual labur. The worst part the output of their is hardly ever produces tangible assets. Perhaps our public policy doctrine tend to prefer the status quo.
Wednesday, September 23, 2009
Saturday, September 12, 2009
Price of everything and Value of Nothing
This was a very good book by Akerman and Heinzerling that I came across recently. It really opened my eyes to subtle nuances of price and value. Most of us judge the price of a good as an indicator of its value. But usually it is not the case.
I believe price, is the label that gets attached to a good to facilitate its sale or market transaction. Price of a good is only speculative. A shop keeper may sell a Persian rug for $5000. But come festive seasons the price may drop down to $4000 to pep up the sale. In this case does the value of the rug(say its aesthetics) diminishes in any manner? certainly it doesn't.
The value of a good is constant. At least it is constant for every individual .Values of goods tend to take considerable time to change. I may value a rug at lower value, and prefer a Walmart Mainstay's instead. After my value for a rug is determined by the function or utility it servers, say covering the bare floor or aesthetics.
Speaking of rugs it reminds of an interesting incident that happened recently. I wanted to purchase a new rug worth about $25 for our home. But my roomies took a vehement opposition to such outrageous luxury purchase. One mutual friend of our home even suggested that I was not sympathetic with my roomies and aspiring for a luxury world while my roomies are tethering in poverty and penury. Perhaps if we divide among all of us, it would only cost $5 each. But then the rug had no value for any of them. Naturally any price would be outrageous to them (as long as it doesn't come free of cost. In such case they wouldn't mind a rug in the living room).
Alas we live in a world wherein we check the price of everything,while dismiss the value of somethings to nothing.
I believe price, is the label that gets attached to a good to facilitate its sale or market transaction. Price of a good is only speculative. A shop keeper may sell a Persian rug for $5000. But come festive seasons the price may drop down to $4000 to pep up the sale. In this case does the value of the rug(say its aesthetics) diminishes in any manner? certainly it doesn't.
The value of a good is constant. At least it is constant for every individual .Values of goods tend to take considerable time to change. I may value a rug at lower value, and prefer a Walmart Mainstay's instead. After my value for a rug is determined by the function or utility it servers, say covering the bare floor or aesthetics.
Speaking of rugs it reminds of an interesting incident that happened recently. I wanted to purchase a new rug worth about $25 for our home. But my roomies took a vehement opposition to such outrageous luxury purchase. One mutual friend of our home even suggested that I was not sympathetic with my roomies and aspiring for a luxury world while my roomies are tethering in poverty and penury. Perhaps if we divide among all of us, it would only cost $5 each. But then the rug had no value for any of them. Naturally any price would be outrageous to them (as long as it doesn't come free of cost. In such case they wouldn't mind a rug in the living room).
Alas we live in a world wherein we check the price of everything,while dismiss the value of somethings to nothing.
Sunday, September 6, 2009
Follow the herd..dont stand out
The other day while I was commuting the University bus, the driver threw a question at the passangers. Do you folks wanna switch on the AC? Well a seemingly simple question. Answer would be a firm YES or a NO.
But for nearly seconds (that seemed like an eternity) the question was answered with stoic silence. Then a few rumblings. Finally an owerwelming NO. I never realised human instincts are too complicated to understand.
Most of us have this "tag-along-the-majority" syndrome programmed in our genes. we wait for the crowd and then decide on our course of approach. We simply be refused to be on the part of the minority. we tend to sacrifice our individual views to majoritarian voices.
I definitely wanted the AC switched ON. Had I sticked to my guns and shouted aloud, surely the outcome would have been a different one indeed. Of course other passengers wouldn't mind as well, as they pre-programmed to follow the crowd.
Perhaps this explains why we need leaders in our social and political institutions. Most of us are simple unwilling to follow our heart says. Individuality is the first victim of this mentality. We are all leaders in our own merit. Unless we imbibe this spirit, I am afraid we would only end following the herd.
But for nearly seconds (that seemed like an eternity) the question was answered with stoic silence. Then a few rumblings. Finally an owerwelming NO. I never realised human instincts are too complicated to understand.
Most of us have this "tag-along-the-majority" syndrome programmed in our genes. we wait for the crowd and then decide on our course of approach. We simply be refused to be on the part of the minority. we tend to sacrifice our individual views to majoritarian voices.
I definitely wanted the AC switched ON. Had I sticked to my guns and shouted aloud, surely the outcome would have been a different one indeed. Of course other passengers wouldn't mind as well, as they pre-programmed to follow the crowd.
Perhaps this explains why we need leaders in our social and political institutions. Most of us are simple unwilling to follow our heart says. Individuality is the first victim of this mentality. We are all leaders in our own merit. Unless we imbibe this spirit, I am afraid we would only end following the herd.
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