TFP may be a proxy for scientific progress but I’m not sure it really captures that cleanly. I think if on tosses in the lens of external economies of scale (think network type effects or Smithian type division of labor and wealth of nations) then I think the mental image of “scientific progress” most hold in their heads doesn’t quite fit. I think much of that then is more viewed as improved management or coordination or resources.
The question, at least to me, then is do we want to lump the knowledge on how we combine existing resources into “science” or something else. The case can be made either way but I think it needs to be made explicitly.
They agree, and even raise approximately the same point:
To consider a simple example, imagine that an American company is inefficient, and then a management consultant comes along and teaches that company better personnel management practices, thereby boosting productivity. Does this count as an improvement in TFP or not? Or is it simply an increase in labor supply, namely that of the consultant? On one hand, some hitherto-neglected idea is introduced into the production process. That might militate in favor of counting it as TFP. On the other hand, the introduced idea is not a new one, and arguably the business firm in question is simply engaged in “catch up” economic growth, relative to more technologically sophisticated firms.
I am confused by their distinction between “catch up” growth and regular growth; it seems to me it should not matter how long it takes for an idea to diffuse when counting its value. Consider if each idea were like a corporation: it’s not like anyone dismisses the growth that happened after the iPod came out as “catch up” value, and only gains during Jobs’ original tenure count as “real” value.
It does seem clear to me that the timing problem makes it very difficult to disentangle from other ideas at this high level.
TFP may be a proxy for scientific progress but I’m not sure it really captures that cleanly. I think if on tosses in the lens of external economies of scale (think network type effects or Smithian type division of labor and wealth of nations) then I think the mental image of “scientific progress” most hold in their heads doesn’t quite fit. I think much of that then is more viewed as improved management or coordination or resources.
The question, at least to me, then is do we want to lump the knowledge on how we combine existing resources into “science” or something else. The case can be made either way but I think it needs to be made explicitly.
They agree, and even raise approximately the same point:
I am confused by their distinction between “catch up” growth and regular growth; it seems to me it should not matter how long it takes for an idea to diffuse when counting its value. Consider if each idea were like a corporation: it’s not like anyone dismisses the growth that happened after the iPod came out as “catch up” value, and only gains during Jobs’ original tenure count as “real” value.
It does seem clear to me that the timing problem makes it very difficult to disentangle from other ideas at this high level.