Cost, productivity and impact on society

Cost, productivity and impact on society are all related. Cost is a very important parameter of economic performance. Cost is a derivative of productivity. If cost is low ... it is a proxy indicator that productivity may be high ... but not always.

Productivity is the single most important reason that modern society has potential ... modern society can do things today that were impossible only a few years ago.

In numerical terms, I suppose this means that productivity went from one over infinity (infinitesimal) to something measurable.

• What was consumed
• How much was consumed
• The unit costs for items consumed

Low productivity low wage areas may have lower costs than high productivity high wage areas. Corporate profits ... which are determined in large part by costs ... are maximized by focus on production in the lowest cost areas. Social value, on the other hand, may or may not be optimized by corporate profit maximization.

Agriculture is one of the few industries where the United States has retained a position of global competitiveness. The productivity of American agriculture is impressive, though there may be important questions about its environmental sustainability. That aside, American agriculture produces enough food for all of America, and enough for massive exports and does it using only 3% of the population. In contrast most of the countries that are poor have a large proportion of their population working in agriculture and not very much is produced ... not even enough to feed the country's population. This is a crisis of productivity ... which should not go ignored.

COSTS AND PRODUCTIVITY

Costs

Corporate profit performance has been optimized by a deep understanding of the behavior of costs. Cost accounting and the analysis of cost behavior has a very long history in corporate management ... but its equivalent is practically non-existent in the public sector and in the international relief and development arena. Understanding costs is essential ... and simply this will materially improve profit performance in the international relief and development industry.

The TVM Value Accountancy system provides a framework for understanding the behavior of cost. It can show what costs are in a specific set of circumstances, and compare this with what might have been expected and what has been achieved in other places, or at other times.

Productivity

Productivity is a function of cost ...

For many years low unemployment was seen as a way to improve economic performance and reduce poverty ... but it rarely achieved much of either. The jobs that were created were unproductive jobs that did nothing to create incremental value, rather the work diverted people from more useful activities to absolutely useless activity.

Cost is a determinant of productivity ... or is it productivity that determines cost. This is more than semantics and goes to the heart of the management of society and the effective use of science and technology for the benefit of society rather than only being used for proprietary wealth gain. A strategy that optimizes the former may well be different from one that maximizes the latter.

Cutting Grass When I was in Ethiopia (in the 1980s) I observed women being employed by the government to cut grass in the public areas of Addis Ababa using hand scissors. Very many women were paid tiny wages to do this work and did it laboriously and with great inefficiency. One person and a lawn mower could have done the work of 1,000 of the women. The value of the work would have been the same.

In one case one person was the labor cost. In the other case, 1000 people was the labor cost. In a case like this there is the potential to improve the grass cutting productivity by 1000 times ... but the productivity gain does not become a priority.

Perhaps it is because the leadership is using employment as a measure of success ... and by doing this ensuring that the economy remains unproductive.