But now for every person operating the machine there is an army of planners, regulators, lawyers, administrative staff, consultants and so on.(I welcome pointers to good graphs and numbers on this sort of thing.) So, my bottom line: administrative bloat. Regulations and law are, as Scott mentions, part of the problem.And it spreads largely by forcing companies to hire loads of useless people. Productivity depends as much on the functioning of large organizations, and the overall legal and regulatory system in which they operate, as it does on gadgets. Like our ancestors peer at the buildings, aqueducts, dams, roads, and bridges put up by our ancestors, whether Roman or American, and wonder just how they did it.I think there is another dynamic that’s being ignored — and I would be surprised if an economist ignored it, but I’ll blame Scott’s eclectic ad-hoc education for why he doesn’t discuss the elephant in the room — Superior goods.There are 2.5 people handling insurance claims for every doctor.
Everywhere we see businesses protected from competition, especially highly regulated businesses, we see the cost disease spreading.Contrariwise, I think we know where the extra people are.The ratio of teachers to students hasn’t gone down a lot — but the ratio of administrators to students has shot up.These are all areas either run by the government or with large government involvement. These are above all areas with not much competition.In turn, however, they are not by a long shot “natural monopolies” or failure of some free market.Productivity depends on organizations not just on gadgets.Southwest figured out how to turn an airplane around in 20 minutes, and it still takes United an hour.Below are some of the responses I found most interesting. Well, we (and especially we economists) pay too much attention to snazzy gadgets. The unavoidable answer: The number of people it takes to produce these goods is skyrocketing.Before the hedonic treadmill kicks in, and he decides to waste all the money on higher rent and nicer cars, he changes his diet. You aren’t going to pay 5 times as much for a slightly better video game or movie — and although you might pay double for 3D-Imax, there’s not much room for growth in that 5%.But he won’t start eating chicken 10 times a week — he’ll start eating steak. The Atlantic had a piece on this several years ago, with the following chart: Food, including rising steak consumption, decreased to a negligible part of people’s budgets, as housing started rising.