Nostradoofus

$775 billion — the current proposed fiscal stimulus, aka deliberate deficit spending – is fearsome not for its scale, but for the risk it will be aimed at an unproductive goal.

Jobs are not the goal.  Increasing consumer spending is not the goal.  They are merely happy byproducts of something more important.

The goal — the objective of economic policy — is to permanently increase median GDP per work hour.

Every word of that definition matters.

Why per work hour?  Because no one is better off if GDP increases 10% by working 10% more hours, or by having a 10% larger population.  The measure of economic improvement must be GDP per work hour.

Why median?  Because if Wall Street earns an extra $100 billion, and everyone else stays the same, then GDP per capita went up, but in fact almost no one is better off.  Unlike the average, the median ignores statistical outliers — the best way to increase the median is to improve the productivity of the greatest number of people.

Why permanently?  Because otherwise, after the stimulus money is gone, you’re back where you started.  And anyway, simply handing out checks and keeping people busy is too unambitious. 

One cost effective way to permanently increase median GDP per work hour would be to spend stimulus money optimizing America for productivity and productivity growth.  Some easy examples:

1. Move all government filings to Web forms, eliminating PDF and paper.  Concurrently, teach every adult to type and use a Web browser.
2. Widely teach the benefits of productivity growth, so people know what solutions to look for.
3. Widely teach probability and statistics, and their application to efficient production.
4. Teach 10 million adult Americans to speak German, Japanese and Chinese.
5. Translate all foreign production management publications into English, and republish them here.
6. Eliminate the Big 3 automakers’ existing distribution model, and replace with a build-to-order model like that used for Mini Cooper.  Showroom contains just 1 or 2 of each basic model.  Fixed price.  You order the colors and options via Web form.  Car arrives a couple of weeks later.  This offers greater choice, while eliminating inventory, waste and the deadweight loss of the sales-push model.  Also provides instant product feedback from sales to manufacturer, allowing products to improve more quickly.
7. Force the US military to use commercial platforms for its cars and trucks.  In particular, the Humvee would be replaced by an armored GM/Ford 4×4.  This would help GM/Ford, the Army, and the taxpayer at the same time.  For the Army, mass produced vehicles are not only cheaper, but also more reliable, cheaper to maintain, and better designed because each design sees more total use.  For GM/Ford, increased sales would push factory utilization back up toward breakeven, reducing average cost per vehicle.  For the taxpayer, the cost per Army vehicle would go down.  For the consumer, the price of 4×4’s goes down, because GM/Ford passes on some of its lower cost per vehicle.  Everyone wins.  It’s insane for the Army to use purpose-built designs.  They only do it out of momentum — it’s been that way since World War II.
8. Change the tax structure to encourage production at the expense of consumption.
9. Change the regulation of the media to encourage production-oriented content, and discourage consumption-oriented content.  (To see the pervasiveness of the problem, visit a magazine rack and notice that nearly every publication is essentially consumption-oriented.)
10. Hire 5 times more patent examiners, double their salaries, and cut the small-entity patent filing fee.  Simultaneously, raise the bar on actually obtaining a software patent, particularly in software.
11. Provide tax breaks for how-to publications that focus on exports and production management.

Instead of wasting money on yet more unused light rail lines — which are a nice idea, but wholly incompatible with existing city layouts –we could put $775b to real use.  Productivity-oriented education in particular has astonishingly high ROI compared with alternatives.

This entry was posted on Sunday, December 21st, 2008 at 7:17 pm and is filed under Policy. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.