Taking a Long Term Perspective

Three days ago we told you about "pull economics," where "a profound shift is taking place from predictive to non-predictive demand - from push to pull economics."  This reference to the fundamental lean enterprise concept of "pull" is no longer on the manufacturing or enterprise level, but on a global economic level... hence we coined the phrase "lean economy."

Those of us in the lean enteprise world know very well, often painfully, the consequences of short-term vision.  Public companies are particularly beholdened to monthly and quarterly financial perspectives, which often preclude any attention to the long term.  This makes it very difficult to execute a lean transformation at a public company as the near-term activities can be costly with temporary negative financial metrics.  Private companies are somewhat insulated, but can still be driven to short-term financial results due to relationships with banks and other traditional financial enterprises.

The Cafe Hayek blog, one of my favorites and always out to satisfy my libertarian proclivities, weighed in yesterday with another aspect of this lean economy.  Don Boudreaux tries to reconcile Paul Krugman's presumption of "rising worker productivity and stagnant wages" in a recent New York Times column with an article that coincidentally recently appeared in the Boston Globe, reporting "pay outpaces productivity."  Before you jump to the conclusion that Krugman just got it wrong, again - which in my opinion is a pretty each jump based on his past bias-driven inaccuracies - take a look at the Cafe Hayek analysis.

"I've never bought the implication that productivity is really disconnected from workers' compensation.  Capital is too fluid and the American labor market too competitive for such a 'disconnect' to be lasting.  The fact that such as 'disconnect' shows up in economic reports reveals more about the shortcomings of inferring long-term trends from the happenings during arbitrary (and usually short) time periods such as 'month,' 'quarter,' or 'year.'"

Boudreaux the quotes from a letter he sent to the Globe,

"Economies are long-run processes; they should be evaluated as such.  What happens in any arbitrary time period - a month, a quarter, or even a year - typically is too filled with short-run distortions and lags to present a reliable picture of an economy's long-run trajectory."

The "lean economy," or lack thereof, rears its head again.  Just as organizations and companies, or individuals for that matter, suffer when short-term metrics are used to gauge long-term processes, so does the overall economy.  Presumably on an even greater scale due to the magnitude of the processes involved.