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C00002 00002	         	OPPORTUNITIES TO INCREASE PRODUCTIVITY
C00016 00003				   ADMINISTRATION
C00024 00004	PERSONAL SERVICES
C00025 00005	DOMESTIC
C00026 00006	number of days ford workers must work to buy ford
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         	OPPORTUNITIES TO INCREASE PRODUCTIVITY


	In order to afford new inventions like those in this book, in
order to have more leisure, and in order to bring the standard of
living of the whole country up to the level of the present upper
middle class or beyond, productivity has to be increased.
	
	America is the richest country in the world today, but from
the standpoint of 100 years in the future, it is a poor and
underdeveloped country.  In this underdeveloped country, some people work
very long hours for low wages, have little vacation time, and cannot
afford many desirable things, like the inventions described in this book.
People ought to be able to do the work required to support themselves and
their families in a small fraction of their lives and use the rest to do
as they like.  They ought to be able to travel more or study more.  They
ought to be able to do all kinds of things that wealth allows, like
rebuilding obsolete housing.  

	Increasing productivity is the way to generate this wealth.  It
must be immediately faced that an increase in productivity is genuine
only if it allows the same task to be done with less human labor.  This
will dismay someone who believes that there is a fixed amount of work
to be done and that an increase in production per worker must result in
an increase in unemployment rather than an increase in leisure.
Fortunately, this fear can be laid to rest by the observation that the
large increases in productivity that have occurred so far have not led
to permanent unemployment.  Therefore, we shall assume that increase in
productivity is an unalloyed good, but after discussing the opportunities
for achieving it, we shall devote some attention to the temporary
dislocations specific improvements may cause, including unemployment, and
how to mitigate their undesirable effects. 

	Some areas of human activity experience regular increases in
productivity and others do not.  Which do and which don't is not
determined by a law of nature but depends on the state of technology,
on social organization, and on whether there is a desire to increase
productivity. 

			MANUFACTURING

	Manufacturing is the classical area for productivity
improvement.  Its productivity has both a technological and a social
component. The differences among manufacturing productivities in
different countries stem from both causes.  Thus there are many cases
in which a country like Britain or the Soviet Union uses an identical
technology to the U.S. (for example when the plant is purchased from the
U.S.) but obtains a much lower productivity from the technology.  A
first approximation to quantifying this phenomenon might be to say that
the productivity is the product of a technological productivity times a
social efficiency and that the social efficiency is characteristic of
the country and sometimes of the industry within the country.  We
might guess that the social efficiency of the U.S. and Japan is .8,
Britain is .4, and the Soviet Union is .3.  In this section, we shall
be mainly concerned with the technological component of productivity. 

	In general, the productivity of manufacturing in the U.S.
follows the possibilities admitted by technology rather well, but
there are some remarks worth making:

	a.  The technology of manufacturing productivity (as distinct
from peripheral topics like quality control and operations analysis)
is not developed as an academic discipline. There are no
experimental production lines and almost no professors of production
technology.  Most likely, there is a substantial missed opportunity
here.  (The situation has improved considerably since the above was
first written.  Several universities have recently started programs
of systematic research and teaching in productivity).

	b.  The area of fastest productivity improvement is in the
manufacture of electronics.  This is a consequence of
a technological situation, the possibility of integrated circuits and
the possibility of printed wiring, that unfortunately cannot be
transferred to the manufacture of mechanical devices.

	c. Much of the increase in manufacturing productivity has
been achieved by economies of scale in making very large numbers of
identical objects.  This has costs in the quality of jobs
and in rigidity of product design.  Computers provide a potential
means of getting the economy of mass production with individuality of
design.  Numerical control and computer control of machine tools is a
first step in this direction and the automatic assembly robot is
another.  Because of special opportunities, the manufacturer of
electronic devices can do this more easily than the manufacturer of
mechanical devices. 

			    RETAIL TRADE

	The robot stores I describe in section [xxx] would increase the
productivity of the retail industry and would also save the time of
consumers.
			   ADMINISTRATION
	
	Here are three ways of improving administrative productivity:
	
       	   1. Not doing it. 

	   2. Making computers talk to each other
	
	   3. Wiping out the brokers and other parasites. 

	Everyone complains about government inefficiency, but it is
important to realize that the social forces making for administrative
inefficiency exist everywhere.  They are prominent in the private
sector and where effective competition doesn't exist can impose even
higher costs.  For example, at Stanford University where I teach,
the ratio of administrative expenses to direct academic expenses
has steadily increased and by the early 1970s Stanford was spending
1.6 dollars on administration for every dollar spent on direct
academic salaries.  A dramatic example is afforded by the cost of
mailing a letter.  As we know the cost of a stamp since the end of
World War II has gone from 3 cents to 22 cents.  In the early 1970's
Stanford increased the cost to its departments for affixing postage
from 10 percent to 15 percent of the cost of postage.  Thus the
the University has become inefficient 50 percent faster than the U.S.
Postal Service.

	The social forces increasing inefficiency are really beyond
the scope of this book.  I'll mention some of the phenomena without
estimating their relative importance.  Parkinson points to the
tendency of an executive to download some of his functions onto
assistants as he grows older.  Opportunities to do this are greater than
in other parts of an organization, because executives are closer to the
source of authority.  As an organization gets older, each crisis or
scandal causes an attempt to remove decisions from the individual
executive and embody them in regulations.  Each new regulation requires
manpower for its enforcement and manpower to evade its letter when this
proves harmful to the goals of the organization or inconvenient to
influential individuals.

	In so far as new regulations can be embodied in existing
computer programs with which people interact, there is some possibility
of mitigating some of the costs of their enforcement.

	Many administrative and clerical workers act primarily as
intermediaries between people who want to do something and a system
with regulations.

Here are some examples:

	The purchasing department in an organization processes purchase
requests and issues purchase orders to suppliers.  In doing so it makes
sure that the policies of the organization regarding purchases are
carried out.  Its work is almost always considered slow and error-prone
by its users.  However, the organization has a purchasing department
because the people who need what is to be purchased to do their jobs
don't know the purchasing policies and their changes.

	Much bureaucratic work is concerned with people getting
benefits to which they are entitled.  The bureaucrats know the rules
and are responsible for preparing and issuing documents that will
cause the exact benefits to be conferred.

	Stockbrokers know how to execute their clients' orders to buy
and sell stock.  A computer could handle these details.

	Many of the functions of real estate agents could be computerized.
Today very few people feel able to buy or sell a house without hiring
realtors.  With improved real estate technology, most transactions could
be done unaided.  The computer realtor would have data on all houses sold
locally and would be able to project market value on a house very
accurately.  It would also have information on all the financing deals
available at local banks.  It would list and produce all required
paperwork and send it to the appropriate offices.

	Besides those who facilitate transactions between an individual
and a system, there are those who facilitate transactions between
systems.

	A major way of improving administrative productivity is to
eliminate these intermediaries using computers.  If the purchase
rules are embodied in an interactive computer program, the person who needs
the purchase can generate the purchase order himself.  The person
entitled to social benefits can interact directly with the system
through his home terminal.  The investor can do his own trading.
Programs belonging to one business can deal directly with programs
belonging to other businesses.
	
	There can be a human on hand for special cases that the program
doesn't cover or for complaints, but whole buildings full of clerical
workers doing boring jobs can be eliminated.
PERSONAL SERVICES

	1. Law and medicine - better access to information. 

	2. automated design and diagnosis. 

	3. Teaching

DOMESTIC

	1. Delivery

	2. Cleaning and putting away. 

	3. Child care. 

	4. Food preparation. 

	5. Maintenance and repair. 
number of days ford workers must work to buy ford

    PRODUCTIVITY, UNEMPLOYMENT AND OBSOLETE INDUSTRIES

	
	Each increase in productivity since early in the nineteenth
century has given rise to worries of permanently increased unemployment.
However, there seems to be an economic feedback mechanism in society that
adjusts employment to a level slightly less than the size of the labor
force. This mechanism works better than it used to, perhaps because of
increased understanding of how Government actions affect employment, but
it still doesn't work well enough.  Nevertheless, fluctuations in
unemployment as a whole are uncorrelated with increases in productivity,
although technology often does force people in particular occupations to
find other jobs.  Moreover, there is probably a negative correlation
between productivity and unemployment across countries; i.e. it's the
countries with low productivity that have high unemployment.

	Consider that a hundred years ago more than half the population
was engaged in agriculture, and now the percentage is about five.  There
has been an increase in productivity permitting most of the population
to switch to other activities.

	In my opinion, a number of social changes might ease the
problem.  In the first place, tinkering with the money supply and the
interest rate does not allow enough control over employment without
other adverse effects such as inflation.  Here are some other
mechanisms that might be used.

	We can imagine extending to standard industrial products the
mechanisms used for stabilizing farm income, e.g. Government payments
or loans or purchase for later resale.  However, in agriculture these
methods have had such an unsatisfactory history that no-one has seriously
proposed extending them to industry.  The problem is that such programs
are too strongly influenced by politics to be administered for the
benefit of the country as a whole rather than for the benefit of those
most immediately affected.  What should be temporary measures to ease
difficult transitions become permanent subsidies and monopolies.  I
see no near term prospect of an improvement in the objectivity of the
political process that would make such programs a good idea.

	Measures that allow immediate transitions to greater productivity
at a price paid to those displaced have better prospects than temporary
measures that politics can make semi-permanent.
Every job should have a definite price depending on the industry,
length of service, and time till retirement. When a worker takes a job,
he will know that his employer is free to eliminate the job at the given
price.  An industry that does not expect to change will set a high price for
the job and workers interested in security will concentrate there.
In special cases transitions will be eased by payments to people, who
strictly speaking, have no right to them, e.g. union officials.
The best results have been obtained in the U.S. when the transition
payments were the result of negotiation between employers and unions
rather than Government action.
	
	
A SURVEY OF FEATHERBEDDING, ESPECIALLY WHITE COLLAR


	When we consider how to increase productivity, we immediately
face  the fact that  large numbers of  people make  their living from
unproductive activity.  These  situations continue for the  following
reasons:  (1)  The  unproductive  activity  is  often  mixed  with  a
productive  one, and the two  are not easy  to disentangle. (2) Union
contracts. (3) Tradition. (4) Laws requiring  the useless activities.
We  shall  call  such activities  rackets  in  order  to establish  a
pejorative atmosphere.

	The most widely discussed  such rackets are those  maintained
by blue collar  workers with the  help of union strength.   Classical
and  much fought over  examples include locomotive  firemen on diesel
trains, standby  musicians and  stagehands,   linotype operators  who
reset already set up ads and who have become comletely redundant with
automation,   airline  flight  engineers,   and the  beneficiaries of
makework rules  in  the  building trades.    However, each  of  these
rackets  has been  fought over  by the  employers,   and  progress is
gradually made  in reducing  them.   At  least it  seems to  me  that
progress is being  made, but I don't know what percent of  manual work
can be regarded as  unnecessary or how this has changed with time.  A
real survey would be worthwhile.  To be fair, it should  be mentioned
that not  all claims  of featherbedding are  true, because  a speedup
beyond  a "normal" working pace  can be represented  as a campaign to
eliminate  featherbedding.    However,    just  because  there  is  a
concentrated interest opposed to employee featherbedding - namely the
employers - this is not where we should expect the worst abuses.

	The worst featherbedding rackets  are in the professions  and
by business itself.  There the adverse interest is diffuse - i.e. the
general  public -  and rarely has  the knowledge  to know that  it is
being taken.  The most  publicized example is the undertaking  racket
where advantage is  taken of a rare occasion of  great personal strain to sell
unnecessary  services.  Sometimes  the law  is used to  help sell the
services as  in the California  law that  prevented (and maybe  still
prevents) a person  from having posession of the  ashes of a cremated
relative - they had  to remain in the  posession of an undertaker  or
cemetery who  would  charge for  it; the  rationalization was  public
health.   However, undertaking is  not a high  prestige profession in
the modern world, and its  rackets are have been repeatedly  attacked
by publicity,   and the politics of consumerism  has probably already
reduced  the  problem  and may  eventually  reduce  it  to negligible
proportions.

	Some of the worst rackets  are in the law profession.   Since
the legislators are mostly lawyers, there is little any other segment
of society can  do to  reduce or  even fully  understand the  abuses.
Probably there  should  be a  non-lawyer watchdog  commission on  the
practice  of law with  the power at  least to  make widely publicized
recommendations.  Some examples of legal rackets include restraint of
trade by the prohibition of advertising and bar association schedules
of  minimum fees.   (When a  professional says the  word "ethics", he
usually  means  an  illegal  combination  in   restraint  of  trade).
The fact that the U.S. has twenty times as many lawyers per capita as
Japan is an important adverse factor in our economy.

	Advertising is also prohibited to reduce competition in medicine
and in the sale of prescription drugs.  Minimum fees exist in stockbroking
and real estate brokerage, and a stockbroker told me that their ethics
required him to take the full five days allowed for the paying the money
due on a sale.  The stock market is an interesting example where new
technology should eventually allow the existing monopolies to be broken.
Namely, soon all stock trading will be accomplished through a single
computer system, whether the stock is over-the-counter or is listed in one
of the major exchanges.  At this point, the distinction between the two
becomes almost meaningless.  The idea is that any broker will be able to
make the trade directly, and membership in the exchange will no longer be
necessary or else will be available to all brokers a nominal cost.  The
next step is for a customer to sue to make access to the system available
to customers directly without paying a commission to a broker, but only
the computer costs incurred. Hopefully, this will eliminate a substantial
part of the stockbroking industry.