In my last post I mentioned productivity as a concept of human action. Let's discuss the roots of the word.
Productivity is defined by the Oxford English Dictionary as:
- Economics. The effectiveness of productive effort, especially in industry, as measured in terms of the rate of output (of goods, products, etc.) per unit of input (of labour, materials, equipment, etc.). Also in extended use.
But let us venture backwards a little. What is it that makes up productivity? That is simply action. As Murray Rothbard describes it:
All human beings act by virtue of their existence and their nature as human beings. We could not conceive of human beings who do not act purposefully, who have no ends in view that they desire and attempt to attain. Things that did not act, that did not behave purposefully, would no longer be classified as human.
With this definition in mind, to act is simply to be human. But it goes deeper than that. To act is to be a being with purpose. A dog may act in its own self-interest, just as a man may act in his own self interest. Objects that do not act are inanimate objects without consciousness. Therefore action is the essence of being conscious. So how do we extrapolate from this term to a more macro level?
Productivity requires action toward a certain goal. Ideally a person's productivity works towards a wholesome goal of supporting a discriminate or indiscriminate livelihood, more often to their own benefit. A person may act and become productive in order to benefit another person as well, but the key to this definition is that they act toward a productive end. There must be a goal in mind, even if that goal is not in the forefront of the mind.
As an example, let's say that you wake up in the morning. What is your first act of the day? Do you stay in bed and soak up the warmth held in your blankets? Or perhaps you get up and brush your teeth? Both of these things are acts of productivity in their own way. The first is an act to appease your body's need for warmth and the second is an act to prevent cavities and bad breath. Your actions are productive to long-term and short-term goals. Either way your actions are productive. If instead you decide to wake up and do some heroin, your act is immediately productive. It produces euphoria and good feelings initially.
Different acts produce a different set of productive environments. Brushing your teeth sets a long-term environment of productivity. You will have fewer cavities and your breath will be fresher than the person that decides to stay in bed or the person who decides to do some heroin. This will set you up for more productive acts in the future while the other two examples will set you up for fewer productive acts in the future. Therefore acts are only part of productivity. The other part of productivity must then be guided by something like reason and discernment.
Reason is a topic that can take up an entire book, so we will only define it for the purposes of this essay here.
Reason is defined in the Oxford English Dictionary as:
- A cause, explanation, or justification for an action or event.
Reason is the ability, therefore, to justify or explain an act. On a deeper, human level, reason is the conscious explanation of an act. That is, reason is the human ability to think consciously about how current action will positively or negatively affect future productivity or action.
With that in mind we can safely say that what makes up the act of being productive is action and reason. Productivity is not the same as that which is produced. Human productivity is action and reason that results in some sort of product as a result of action/labor.
I will touch more on the Labor Theory of Value later, but for now let's just define labor
Labor is the action exerted by a person toward a specific goal. The result of labor is production. Therefore is it upon labor that an economy is built. A person could labor at a workshop with the end goal of producing tables. The tables would then be the product of his labor. These are simple concepts, but they must be stated here in order to help define the term for future argument.
Adam Smith said in Wealth of Nations:
The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it, and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save himself, and it can impose upon other people… Labour was the first price — the original purchase-money that was paid for all things.
While it can be argued that labor is the first price of all costs, this concept has been extrapolated by economists like Karl Marx and David Ricardo to mean that the value is derived from labor, which is a dangerous association to make cosidering how complex human interaction truly is. Since the economy and trade are simply the evolution of how humans interact in a regulated basis and in a peaceful way, the claim that labor is the basis for cost, and therefore price, is a huge claim full of assumptions, most of which are difficult or currently impossible to resolve.
Labor is not simply a cost basis for a product. It is, rather, a form of product. Let's say that you go to a business owner who is in need of help. You can offer your labor at a cost. You are, therefore, selling the business owner a product known as labor in return for perhaps money or some other tradeable good. However, the product you sell is a single cog in the machine of industry. If you sell your carpentry labor to a table manufacturer, your labor is a single cost-point in an array of cost-points. When you combine the array of points, you get the true cost.
There could be a number of costs involved in manufacturing a hard good such as tables:
The above are just a few of the major cost-points in the actual cost-array. The larger the business, the more complex the cost-array becomes. So to focus on labor as a primary source of cost is a grave error in the judgement of the Smithians, Ricardians, and Marxists.
Labor is, however, not a set cost-point. The cost of labor varies based on the productivity of the individual, which further complicates the equation. One person may produce more tabletops than another per hour. Therefore that person's labor provides a lower cost-point to the table manufacturer. The business owner will look at the average productivity of the workers and try to see where improvements can be made. If one worker generates half the productivity of another, it is expected that that worker will be paid half or even less than half. The less productive worker will not have as strong a bargaining position as his more productive peers because the business owner must justify the increased cost to the company.
Productivity is, therefore, a prime indicator of a person's ability to participate and contribute to the growth of a local secular economy. Natural capitalism would shift and dictate who works in which sector of the economy based on their secular productivity. If a worker is less productive in one sector of the economy, they will monetarily be encouraged to find a sector of the economy in which they will be more productive. Thus the economy on a local and broad scale can be extremely elastic when given a chance, based on the measure of productivity of the workforce. When laws such as minimum wage and various other regulations come into play, the economy — both local and global — becomes very inelastic and unstable, as we are seeing today. A rigid economy encourages booms and busts on a large scale, which causes massive corrections in workforce and productivity distribution. Instead of micro-correction over the course of small amounts of time, the correction builds up with false incentives and then when the false distribution of productivity is no longer sustainable, we get a bust in the economy on a massive scale.