Welcome to Dr Lincoln's blog

Welcome for visiting my blog. Hope you enjoy the visit and always welcome back again. Have a nice day!


Meaning and meaningful in measuring producivity

Comments on Tim Mazzarol "

Poor management performance and the implications for Australia’s economic outlook", 15/07/2012, https://theconversation.edu.au/poor-management-performance-and-the-implications-for-australias-economic-outlook-8254

While Dr Gruen and Dr Dolman's paper fingers out at what they view as poor management, particularly amongst our nation’s manufacturing firms based on some interesting research recently completed by the World Management Survey, chart 1 and chart 2 alone are not necessarily helpful in supporting their viewpoint.
Chart 1 is a time series while chart 2 is a cross-sectional. Although chart 2 indicates what is argued in this article, that is, the difference in management between Australian manufacturing firms and world best such as the US, Japan and Germany, is does not say how that difference changed over the same time period shown in chart 1.
Besides, chart 1 show the multifactor productivity had declined since 2003 not just from 2008-09. Was that coincident with the mining boom from 2003?
Further, I doubt the meaning of multiproductivity shown by chart one would really mean much to firm and industry management, because such measurement, while having its merits, may have some weaknesses in terms of significant relative price changes. We all know that the mining boom was associated with significant rises in mineral prices. From profit maximisation point of view, if the out price rises, then even the multifactor productivity stays constant or goes backward the firm may still be more profitable.
That is the difference between academic style studies and real world operators.
So the question is how to be most meaningful in measuring productivity in the real world. That would require a bit of creativity, not simply adopt what is available. Creativity may be controversial when it first appears, so it needs courage too.
If I were to redo a study on productivity similar to show the case shown chart 1, I would take the changes in relative prices into account and come up with a new concept or new measurement for it.

PS: The same logic applies to the situation when an industry or the economy is experiencing recessions when capital is sticky in the short term and cannot be adjusted as freely and quickly as desirably. So from microeconomic point of view, firms maximising profits would take the most effort to do it and that does not necessarily mean an improvement in multifactor productivity.

No comments:

Post a Comment