A Productivity Crisis?

Sep 13 2011 @ 8:31am

Derek Thompson points to the unevenness of productivity gains:

The reason why toasters are cheap and health insurance is not is that the productivity gains that made toasters — not to mention computers, media, durable goods, food, and clothes — more affordable are not spilling over into health care. The next chart from McKinsey tells the story: More than half of total productivity growth comes from computers and information technology. Practically zero comes from health care and education. In fact, one reason why heath and education are adding the most jobs today is that employers can’t meet new demand with technology or offshoring. They have to keep hiring people.

Walter Russell Mead agrees. Kevin Drum complicates Thompson's argument:

I'm not sure it's helpful to desrcibe education and healthcare as industries that have low productivity growth. This suggests that they're laggards who simply refuse to respond to consumer demand for more efficiency. But the truth, I think, is that we as consumers have demanded that universities retain much the same teaching model as they've always had, and we've been willing to back up that demand with ever more dollars. We don't want our kids going to electronic classes and, apparently, we don't want our state governments to subsidize public universities the way they used to either. On the healthcare front, there's been tons of new technology, but we, as consumers, don't want that technology used to provide the same old service at a lower price. We want it used to provide additional services. We've spoken loud and clear on that score.