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Supplementary Statement MARKLEY ROBERTS This report of the Panel to Review Productivity Statistics contributes to better understanding of productivity statistics by recognizing the influence of cultural, social, and political factors. I wish the report had gone further in that direction. I believe that the cultural, social, and political characteristics of the American people are far more significant in determining the nation's productivity over the long run than strictly economic factors. The creative, innovative spirit of a free, educated people in a free, open society, with democratic social, political, and cultural values, with rising expectations for a better life in many dimensions, is the key to long-run growth in productivity. Advances in knowledge, the diffusion of knowledge, improvements in nutrition and health, changing patterns of family life, elimination of discrimination in its various forms, rising expectations, widening opportu- nities for citizen participation in economic, political, social, and cultural life, and opportunities for workers to participate through their unions in influencing the quality of life on the job and life off the job-all these factors and many others have impacts on productivity that are difficult to measure, perhaps in some cases impossible to measure, but that are, nevertheless, highly significant. Productivity improvement is not an end in itself. It is a means to an end. In fact, it is a means to achieve a variety of social as well as economic goals. Economic goals and economic efficiency are by no means the only goals of American society, and it would be wrong to allow such goals, 206

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Supplementary Statement 207 important though they may be, to be the exclusive or overriding goals of our society. Some major goals of our society are . maximum freedom and dignity for all persons; . employment for every person who desires it, for as long as he or she desires it; adequate income; improved equity of income distribution; good health and safety throughout every individual's life; adequate housing; adequate, nutritional food; . a clean and decent environment; equality of opportunity; enjoyment and pleasure in life; and a more democratic structure of society, industry, and community. This listing suggests that our society is concerned and I believe rightly concerned about the quality of life and the distribution of income and the distribution of social benefits. To translate these social goals into some kind of operationally meaningful system requires some kind of "goals accounting system" or some kind of "social accounting system." Such a system would be broader in conception and approach than our existing system of national economic accounts. It would be a system to which our national economic accounting system would contribute, but it would not be dominated by the economic accounts. I do not underestimate the difficulties involved in choosing and using a set of social indicators and a system of social accounting or public accounting. Nor do I underestimate the difficulties in relating our economic accounting system to a still-to-be-developed social accounting system. Nevertheless, any accounting system, including existing productiv- ity measures, involves arbitrary Gordian-knot-cutting decisions and acceptance by a broad public depends on confidence in the originators and producers of the system and the index or indicators that come out of the system. I recognize the utility of existing government productivity efforts. I recognize the need to ensure the validity and objectivity and historic continuity and refinement of existing productivity series. I recognize the achievement of the present national economic accounting system in spite of its limitations. I recognize that traditional economics has tools of analysis and uses that should not be thrown away.

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208 REPORT OF THE PANEL I am concerned about the "measurement trap" that affects the existing national economic accounting system and thus affects our system of productivity measurement. What cannot be measured easily or at all is considered unimportant or it is ignored because it is too difficult to deal with. To put it another way, I am concerned that the concept of "output" as now defined and measured in our national economic accounting system distorts our concept and understanding of"total social output" (which includes but is not limited to marketed output) and therefore distorts our concept of"productivity." If "measured output" and "measured productivity" go down-or fail to go up as fast as we hope-because we clean up our air and water, because we reduce cancer dangers to workers, because we improve the "quality of life" on and oh the job, because we increase protections for consumers, then our system of measurement is tragically limited-or just plain wrong. The consequences of such measurement may be seen when economic analysis of the costs of protecting the environment and protecting workers on the job is used to support shortsighted, pro-business, anti-people deregulation campaigns. An example of a preliminary effort to explore income distribution effects (and therefore social effects) of protecting the environment appears in Henry Peskin's (1978) article on "Environmental Policy and the Distribu- tion of Benefits and Costs." I am also concerned about measurement of "input." Specifically, I do not oppose research on "weighted labor input measures," but I reject any implication that age, race, sex, education, occupation, earnings, or any other arbitrary weighting factor reflects "quality of labor." I believe that unweighted labor input must remain the basic, primary labor input measure, logically and conceptually prior to any arbitrary weighting system. Also, output per unweighted worker-hour is a basic social indicator as well as a basic economic indicator. The measurement of capital "input" is another very difficult problem. There is no satisfactory way of adjusting and measuring capital "input." The paper on welfare dimensions of productivity measurement, pre- pared for this panel by Milton Moss (in this volume), raises the kind of issues I am particularly concerned about, including discussion specifically about "quality of life measurement" and "social indicators" and "social accounting" and the "outcome" of social activity, including economic activity. I hope the Moss paper stimulates new and broader thinking among productivity researchers. Also, I hope productivity research is provoked

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Supplementary Statement 209 by Harvey Leiberstein's (1976) ideas about "X-efficiency" and "allocative efficiency" and "selective rationality" in Beyond Economic Man. In this connection I also commend to the attention of productivity researchers an article by Charles Brown and James Credos (1978), "Trade Unions in the Production Process." This massive statistically controlled econometric study of the effect of trade unionism on worker productivity in U.S. manufacturing finds union workers significantly more productive- by about 22 percent than non-union workers. This suggests that a more positive approach to unions and unionism and unionization of workers on the part of business management and in public policy would be sound not only for moral and social reasons but also on the basis of economic efficiency. There is a growing body of material on social indicators and social accounting. And even among economists there is a growing realization that "externalities" or "spillover effects" call for some new and better system of social accounting. A simple framework or typology for such a social accounting system is set forth in the December 28, 1978, draft report of the Public Interest Advisory Subcommittee of the Advisory Committee on Industrial Innova- tion, U.S. Department of Commerce, Office of Science and Technology. The Moss paper (in this volume) makes a valid distinction between the national economic accounting system's measurement of"final 'real' output of the economy" and the social accounting effort to develop welfare "outcome measures for society as a whole." I agree with the Panel on the desirability of maintaining the distinction between the existing national economic accounts system and a still-to-be- developed system of social welfare accounting or goals accounting or "quality-of-life" accounting. The distinction is valid, and it shows the limitations of our national economic accounts. The Panel report, of course, appropriately notes that understanding and interpretation of productivity measures could be broadened and enhanced with more attention to quality-of-life issues, with studies of social indicators, and with work on goals accounting. To the extent that the composition of the nation's output shifts from market-oriented, private sector production, primarily of goods, to non- market-oriented private and public services, there is a danger that productivity measurement excluding the service sector will be more and more concerned with a smaller and smaller proportion of total output- and will therefore be less and less relevant to public policy. It is interesting and significant that in manufacturing for which output measures are more reliable and where unionization is higher than in the

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210 REPORT OF THE PANEL rest of the economy-there is less evidence of a productivity slowdown. This suggests the possibility that a significant portion of the currently perceived productivity slowdown stems from the inadequacy of output measurement in the service sector. To conclude this supplementary statement to the Panel report, I note again that existing economic analysis cannot cope with difficult or impossible-to-measure social outputs and social benefits such as environ- mental protections and occupational safety and health protections and consumer protections and other social programs that do not have a "measured output" as defined in our existing system of national economic accounts. I urge economists and social scientists generally and productivity researchers in particular to consider the points I have raised as they seek to push out the frontiers of knowledge to lay the foundations for better public policy. I hope they come up with better metaphors and with better, broader, more solidly based productivity measures. /