The Map and the Territory by Alan Greenspan — EIGHT | PRODUCTIVITY: THE ULTIMATE MEASURE OF ECONOMIC SUCCESS

1. 1. By late 1997, wage rates accelerated but price inflation remained contained despite stable corporate profit margins, implying output per hour rose at least in tandem with wage costs.
2. 2. Greenspan's belief that productivity was accelerating in the mid-1990s was not supported by official BLS statistics, which showed only 0.75% annual growth from 1993 to 1995.
3. 3. The long-term ceiling for U.S. productivity growth appears to be around 3% per year, a limit that has held for over a century except for the immediate postwar years.
4. 4. Multifactor productivity (MFP) measures output changes not explained by labor and capital inputs, primarily reflecting innovation, technical efficiency, and organizational improvements.
5. 5. The share of U.S. GDP devoted to capital investment peaked at 25% in the late 1970s and fell to 18% by 2009, largely due to a decline in domestic savings as social benefits crowded out savings.
6. 6. China's impressive productivity growth (9.5% annually from 1990 to 2011) relies heavily on borrowed technology, and its capacity for homegrown innovation remains unproven.
7. 7. Major innovations often take decades to fully impact productivity, as illustrated by the 40-year lag between Edison's electrification of lower Manhattan and widespread factory electrification.
8. 8. The weight of U.S. GDP output has leveled off since the 1970s, with increases in real GDP almost entirely driven by conceptual components—advances in knowledge and ideas—rather than physical bulk.
9. 9. Information technology reduces short-term uncertainty, allowing businesses to cut inventory safety stocks and redundant labor, thereby raising output per hour by eliminating non-value-adding activities.
10. 10. Productivity was essentially stagnant for nearly two millennia before the 18th-century Age of Enlightenment, when a framework of property rights, contract law, and savings emerged.