Word for Wednesday: productivity

In a vague sense, productivity means the ratio of outputs to inputs. Improvements in productivity arise from improvements in technology or new and better ways of organising production. Productivity can also decline if productive effort is diverted to wasteful ends, which may happen for a variety o reasons.

In m yexperience, most of the time, reported short-term changes in productivity are spurious, in a sense I’ll try to make more precise below. In thinking about this, I came up with the following proposed test/definition for an increase in productivity (it would also apply, with modification, to a reduction)

A change in productivity is sustainable if additional inputs of labour, capital etc could be added and would generate additional output at the new, higher level of productivity

The idea of this definition is to rule out as many as possible of the sources of spurious productivity gains, including

  • factor composition biases, such as the gain in average productivity from closing the weakest plants in an industry/economy
  • relative factor intensity biases, such as gains in labour productivity from an increase in the capital-labour ratio
  • factor use intensity biases, such as labor hoarding during recessions and work intensification arising from microeconomic reform

The most famous case of factor composition bias was the Thatcher productivity miracle, achieved primarily through plant colsures. Factor intensity bias is a chronic problem, which has been addressed through the construction of measures of multifactor productivity. Increased work intensity was the main source of the Australian productivity miracle in the 1990s.

(Since miracles are invariably spurious, I’ve avoided putting scare quotes around the term.)

Word for Wednesday: managerialism (again)

Nobody agreed with my attempt two weeks ago to link neoliberalism, and particularly ‘new public management’ with the ideology of managerialism, and the supporting academic ‘discipline’ of management as embodied most notably in MBA programs (for more on the reason scare quotes are appropriate see this piece by Henry Farrell).

I agree that the two are superficially dissimilar, and that their practitioners do not have much to say to one another. I also concede that my supporting argument, resting on the proposition that the two are united in opposition to professionalism was inadequate. Still, I believe it is an empirical fact that the two are generally found together and this fact can be given a theoretical basis. So I’m going to reformulate my argument.

The central assumption of new public sector management is that, if organisations are given the right (financial) incentives, they can deliver socially desirable outcomes without reliance either on direct political control or on any assumption that the organisation is committed to some concept of public service. In practice, in the sentence above the first occurrence of ‘organisation’ should be replaced by ‘managers of organisations’ while the second refers to the members of the organisation considered collectively.

So new public sector management embodies the hypothesis that managers can ensure that organisations pursue whatever objectives are determined for them by policymakers choice of incentives. From a free-market viewpoint, the most congenial way this hypothesis could be satisfied would be for the incentives to be transmitted from top management through the levels and departments organisation. In effect, this would imply a system of piecework with the prices mirroring the incentives chosen by policymakers. But if everything could be done by piecework, there would be no need for the organisation and particularly no need for the senior managers.

So in practice, new public sector management applies direct incentives only to top management and assumes that there exist a set of generic management skills that can produce the desired outcomes even when the individual interests of the organisation’ staff are not directly tied to those outcomes. So, new public sector management depends on managerialism.

The converse link is weaker, particularly since managerialism is first and foremost a private sector doctrine. However, it’s clear that, even in the private sector, managerialism and neoliberalism reinforce each other. Managers clearly get more of the autonomy they want in a neoliberal policy setting, and neoliberal policies of Îlight-handedâ regulation are justified by the assumption that, provided the rules of the game are set correctly, unfettered managerial discretion will yield the best possible outcome.

Word for Wednesday: managerialism (definition)

As with most terms ending in ‘ism’, and therefore imputing an ideological framework, ‘managerialism’ is more often used pejoratively than favorably. Where it is dominant,, ideology appears as common sense and requires no name. The standard assumption, backed up by the existence of university departments of management and business schools generating thousands of MBAs every year, is that management is a science on a par with physics, or at least with economics. As Thomas Frank observes in his One Market Under God‘the management literature as a whole serves primarily as a PR exercise to legitimate management.

Where managerialism needs a name, the choice is usually one that conceals or obfuscates the role and interests of managers as a class. The most important examples are ‘the New Public Administration’ in the public sector and ‘shareholder value’ in the private sector. ‘Shareholder value’ is of particular interest in the way it represents managers as the mere agents of the shareholder principals.

The central doctrine of managerialism is that the differences between such organisations as, for example, a university and a motor-vehicle company, are less important than the similarities, and that the performance of all organisations can be optimised by the application of generic management skills and theory. It follows that the crucial element of institutional reform is the removal of obstacles to ‘the right to manage’.

The rise of managerialism has gone hand in hand with that of the radical program of market-oriented reforms variously referred to as Thatcherism, economic rationalism and neoliberalism. (Despite very different histories, all these terms are now generally used in a pejorative sense). Managerialism may appear inconsistent with traditional free-market thinking in which the ideal form of organisation is that of competitive markets supplied by small firms, in which the manager is also the owner. However, managerialism is entirely consistent with the dominant strand in the neoliberal approach to public policy, which takes the corporation, rather than the small owner-managed firm, as the model for all forms of economic and social organisation.

In particular, managerialism and neoliberalism are at one in their rejection of notions of professionalism. Both managerialists and neoliberals reject as special pleading the idea that there is any fundamental difference between, say, the operations of a hospital and the manufacturing and marketing of soft drinks. In both cases, it is claimed the optimal policy is to design organisations that respond directly to consumer demand, and to operate such institutions using the generic management techniques applicable to corporations of all kind.
The main features of managerialist policy are incessant organisational restructuring,,sharpening of incentives, and expansion in the number, power and remuneration of senior managers, with a corresponding downgrading of the role of skilled workers, and particularly of professionals.


On the cover of today’s Sun-Herald magazine is a story about the Crown Prince of Nepal who slayed his entire family. My immediate reaction was that the subeditor was asleep on the job, but then I thought that perhaps the language had been regularised and I hadn’t noticed. A search on the Fairfax site showed a dozen other instances of slayed, and Google produced 25 000.

I looked for the formerly standard slew and came up with another problem. There were over 700 000 hits, but most of those on the front page used the word as a synonym for large number. Along with raft used in this way, this is something I don’t remember until recently. My guess is that it comes from idiomatic American usage, and has been popularised by journalists looking for short and snappy synonyms. Rather than do any work to check this, I’ll wait for my readers to set me straight (isn’t blogging great!). Just to complicate things further, there’s an engineering use as a verb roughly equivalent to slide around which has gone through the usual processes of adjectivalisation and nominalisation so that it’s now a generic part of speech.

After this, I checked on slain which is unambiguous and, as a past participle, more prone to regularization than the past tense slew. I got 750 000 hits there, suggesting that slayed is still a minority usage.

Word for Wednesday: Reform

As Raymond Williams points out in his excellent little book Keywords, from which I got the idea for this series, reform originally meant ‘restore the original form’ of something. In particular the Reformation was supposed to sweep away the abuses of the Papacy and restore the church to its original purity. As this example indicates, the worldview associated with this usage was one of decline rather than progress. The best one could hope for was to get back to things as they were in the good old days. This view was dominant in Western thinking from Plato to the 17th century.

From the 18th century onwards, reform underwent something of a reversal, since it now typically implied forming something new. But since the associated worldview was now one of progress, the assumption remained that reform entailed change for the better.

From the 18th century to the 1970s, the term reform was typically used to describe policies favored by the moderate left, in opposition to advocates of revolutionary change on one side and of conservatism and reaction on the other. From the 1970s to the end of the 20th century, though, the direction of policy change was reversed, with the rise of neoliberalism. However, the term reform continued to be used, even when the policies it described consisted of the dismantling of earlier reforms.

As a result, critics of neoliberal policies have frequently resorted to the use of “scare quotes”, as in my recent reference to ‘workplace reform’, or to similar alerts like “so-called”. While the automatic assumption prevails that the term reform applies only to desirable changes, such devices are necessary.

Where it’s feasible though, the best approach is to define reform as “any program of systematic change in policies or institutions” and make it clear that there is no implication of approval or disapproval.

Economic rationalism

My Wednesday post on the term ‘rational’ has brought forward some discussion of the term ‘economic rationalism’, which is now most commonly used in a pejorative . One commentator voiced the widely held assumption that the term was coined by Michael Pusey. In reality, the term was used, mostly positively for about 20 years before Pusey wrote Economic Rationalism. And although the term evolved gradually, the person who did most to popularise it was Gough Whitlam. The history of this phrase tells us a lot about the evolution of the economic policy debate in Australia. Read on for a piece I wrote in 1997, describing this history.
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Rawls and Bentham

Rereading what I said earlier about Rawls and utilitarianism, I think it needs a correction. Rawls really is proposing something different in its approach from classical utilitarianism. In particular, his approach focuses attention on the idea that we might want to pay attention to things like the relative position of different individuals in society rather than simply aggregating utilities across individuals. The most popular way of making this operational has been with social welfare weights that depend on an individual’s rank-order according to some welfare measure. I’m very attracted to this idea, partly because it’s analogous to an idea I developed in the theory of choice under uncertainty called rank-dependent (expected) utility.

Confusion arises with Rawls’ treatment because the maximally risk-averse (or inequality-averse) form of rank-dependence is maximin, just ‘as it is for expected utility. There’s a nice paper on this by Udo Ebert ‘Rawls and Bentham reconciled? in Theory and Decision 24, 215?223.

The other issue is whether you view rank-dependent models of this kind as being alternatives to utilitarianism or generalisations/variants. In the theory of choice under uncertainty, some people (including me) like to talk about generalised expected utility theory while others talk about non-expected utility theory.

More on utilitarianism

There are a couple of things I really like about blogging compared to academic writing. The first is that the relatively terse nature of blogs means that you can take a firm position, without the thicket of qualifications and citations that are needed in academic writing. The other is that the usual boundaries between disciplines and between academics and non-academics are broken down. So I get to see how, for example, sociologists, legal philosophers and businesspeople react to arguments that would normally be confined to economists.

The responses to my short post on utilitarianism illustrated this
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Word for Wednesday: Utilitarianism (definition)

Utilitarianism is important because it is the dominant philosophical viewpoint of modern times, although this is obscured by the way it is discussed.

Utilitarianism is usually presented as an ethical postulate, that good actions are those which promote ‘the greatest happiness of the greatest number’ or some such.

Considered as a guide to individual conduct, utilitarianism is impossibly demanding, since it requires complete selflessness (anybody else’s happiness is just as important as yours) without even the reward of a blessed afterlife.

In fact, utilitarianism only makes sense as a public philosophy, that is as a way of assessing public policy, and it’s pretty clear that this is how Bentham intended it. The only philosopher I know who’s made this point is Bob Goodin of ANU. Going further, utilitarianism only makes sense for a basically democratic society, in which everyone is equal in some formal sense. Obviously in an absolute monarchy, public philosophy is just individual ethics for the monarch, and something analogous is true for aristocracies, theocracies and so on.

In its role as a democratic public philosophy, utilitarianism lacks serious competitors. Ideas proposed as alternatives are usually jerry-built modifications of ideas about individual ethics that don’t scale up to the public sphere

With this background, utilitarianism can be seen as the combination of three principles

  • Consequentialism – actions should be judged according to their (likely) consequences
  • Equality – each individual counts equally
  • Happiness as preference-satisfaction – what matters is each individual’s happiness as they choose to pursue it

Within consequentialism, there’s an important dispute over whether it is best to seek, in every decision, the specific action that would (be likely to) produce the best outcome (act-consequentialism) or whether it’s best to find rules of action that produce the best outcomes on average and adhere to those rules on all occasions (rule-consequentialism). This distinction is critical when we come to consider issues of government policy. I plan to elaborate on it in a later post, and also continue previous discussions on equality and happiness.

Update My claim that utilitarianism lacks serious competitors leaves Lawrence Solum “gasping for breath”. He asks “what about Nozick and Rawls?”. My answer
(i) I don’t think Nozick provides a serious alternative to anything
(ii) Rawls attempts to provide an alternative to utilitarianism, but in the end only produces a variant that is more egalitarian than usual because the underlying preferences are more risk averse than most utilitarians assume [Harsanyi derives standard utilitarianism from an almost identical setup].

Word for Wednesday: Intellectual (definition)

Intellectual is a particularly tricky word. Partly this is because it has no generally accepted definition. To make things even more difficult, almost no-one will admit to being one or even knowing one without some sort of qualifying adjective or caveat. I’m happy to call myself a public intellectual for example, and I know a few people who would admit to being ?literary intellectuals?, but I don’t think I’ve ever met a self-confessed intellectual.

Although there are occasional positive uses like this, the term is far more often used negatively, but again, never in a straightforward way. Negative uses are almost always surrounded by scare quotes, as in ‘intellectuals’, or with some similar qualifier as in so-called intellectual or my personal favorite ?pseudo-intellectual.
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