Productivity in Economics - Essay Example

In capital productivity, output per units of capital goods employed is measured but, in the case of multiple productivity, both labour and capital goods are used as denominator. The study of productivity analyzes how much output can be produced in a specific time span. Productivity can be increased in various ways. Labour productivity is the term used to know the average product of labour. Productivity in economics is an important term as a country's standard of living depends upon this. So, more is the production more will be the standard of living.

According to Mankiw, a country's standard of living depends upon its ability to produce goods and service. The article we have taken from the Economist raises question, whether slow productivity in America really affects or not. It is an analysis about the impact of mass employment upon productivity. Though , the rate of unemployment in America is dropping, economy is also slowing down. So, this is the matter of concern that, how productivity affects. The hike in employment rate is assembled with slower worker efficiency.

It implies that though people are getting employed, the rate of productivity or efficiency rate is decreasing. So, the reason of sluggishness is to be analysed. Productivity has two components, one long term and another is short term in nature. The long term factors depend upon quality of work force, speed of innovation etc., but short term fluctuations in business create factor for short term effects. In this article , it describes about how these temporary factors are affecting productivity and economy.

Among the various short term reasons, housing bust in America is also reason for this type disturbance. The fall in building activity is supporting for weakness in economy. It is very hard to measure productivity rate in an odd business cycle. Due to rapid innovation and vast investment in IT sector, efficiency rose. As per the 10 principles of Mankiw, computer has a lot of contribution for America's economy, it has raised the standard of living of Americans. It has developed the ability to produce.

The IT evolution has upgraded the productivity of the country. Economist have argued that , it is possible due to the reallocaton of funds between firms. On the whole, the IT evolution is supporting and boosting the whole economy through productivity. But, when we are having a broad analysis on the economy and the ratio of productivity, it is really a matter to consider for. The principles of Mankiw is in contrary. The falling rate of unemployment and weakness of economy put a question mark on the principles of productivity.

The article in 'The Economist' (http://www.economist.com/finance/displaystory.cfmstory_id=9005279 ) not only contradicts the principles of Mankiw, but also raises question on efficiency of the workers serving over there. The factor on sluggishness is to be eradicated, the reason why this type of deficiency is happening is to be debated. The title of the article given a'Making less with more' is a very well opted title as production has become less but employment of people is rising day by day.

In other words by comparing the principles of Mankiw, we can say that according to the data and the article , the principle goes well. Mankiw has described that for a raised standard of living, more production of goods and services are to be done in a particular unit of time. But, as we have analysed in the article, there is no particular unit o