Productivity in Process - this week in the Economist - Economics Focus

The Economist this week discusses research by my old college friend Tim Leunig (LSE) and myself on process innovations - that's two Econ Focus highlights in three weeks... Here is the abstract of the paper (available on SSRN):

Fifty years ago economic historians found surprisingly small gains from 19th century US railroads, while more recently economists have found relatively large gains from electricity, computers and cell phones. In each case the implicit or explicit assumption is that researchers were measuring the value of a new good to society. In this paper we use the same techniques to find the value to society of making existing goods cheaper. Henry Ford did not invent the car, and the inventors of mechanised cotton spinning in the industrial revolution invented no new product. But both made existing products dramatically cheaper, bringing them into the reach of many more consumers. That in turn has potentially large welfare effects. We find that the consumer surplus of Henry Ford’s production line was around 2% by 1923, 15 years after Ford began to implement the moving assembly line, while the mechanisation of cotton spinning was worth around 6% by 1820, 34 years after its initial invention. Both are large: of the same order of magnitude as consumer expenditure on these items, and as large or larger than the value of the internet to consumers. On the social savings measure traditionally used by economic historians, these process innovations  were worth 15% and 18% respectively, making them more important than railroads. Our results remind us that process innovations can be at least as important for welfare and productivity as the invention of new products. 

Now I know it isn't just me...

For years, I used to joke with my co-author Mauricio Drelichman that the best way to make progress on our papers would be to sit in the office, take another office chair, push it hard against one's kneecaps, and then force oneself to be immobile for the next 4-10 hours. That's what being on an airplane is like, and these days I get a phenomenal amount of work done in flight. Give me a good run to Vancouver, where Mauricio works and lives, and we can put a major revision of one of our papers to bed. What exactly is it? I think it's partly the absence of disruptions - no phone calls, emails, nobody "just dropping by", no regular seminar or lunch appointment. Three times 1.5 h is much less productive than 4.5 h uninterrupted. I think it's also the sheer discomfort. The only way to mentally disconnect from one's miserable surroundings (let's be honest, where is the delight suggested by glamorous airline ads in being stuck in metal tube re-breathing the same air?) is to focus on something else - in this case, work.

Fresh from the New York Times comes the news that there may be another reason why this works, for some - the feeling that one is about to run out of battery power focuses the mind on "just get it done". Sir Raymond Carr, the master of my old college in Oxford, always gave the same advice to incoming Ph.D. students - just write. And doing that seems much easier for Simon Sinek when the battery indicator is slowly crawling towards zero -- see "Fly Me Anywhere, I Just Need To Work". Maybe, enterprises and academic departments should contain "productivity rooms" where we deliberately replicate the misery of airline travel, at what would surely be a low cost. In case of a sudden loss of concentration, masks will automatically... no, let's not take it that far.

Incidentally, Sinek is working on a book that emphasizes the importance of explaining intent to providers, employees, etc. I haven't seen the manuscript, but I hope he points out the analogy with what the German army called Auftragstaktik -- which involved explaining the point of a mission to humble sergeants and privates, so that they could make decisions on the fly about how to best adapt the means to the purpose of the whole exercise. It made for great combat efficiency, and I always thought it odd that an undemocratic country with a pretty authoritarian culture should evolve such a tactic, while the armies of Western democracies in WWI and II mostly believed in often bizarre micro-management, mostly with disastrous effect. The best book on this and other aspects of military HR I have ever read is Martin van Creveld's Fighting Power (a comparison of the US and German armies in WW II).