"It’s a paradox that’s been puzzling economists for a while"

Bloomberg Business:  How can U.S. productivity growth be slowing down at the same time that innovation in everything from smartphones to 3D printing seems to be speeding up?

A trio of economists from the Federal Reserve and the International Monetary Fund think they have the answer and it’s not particularly pretty. They argue in a new paper that the down-shift in productivity is for real. It’s not a mirage of mis-measurement by government statisticians unable to keep up with rapidly changing technology.

To show how important that conclusion is, the paper’s authors cite one telling statistic. U.S. gross domestic product would have been about $3 trillion higher in real, inflation-adjusted terms in 2015 if productivity hadn’t slowed over the last decade.

It’s not that the researchers give the federal bean counters a pass and say they’re now accurately toting up every bit of the economy. It’s just that the measurement problems have been around a while and aren’t new.

So they can’t explain why efficiency gains have slackened in the past 10 years from the previous decade, when statisticians also had trouble gauging the economic benefits of information technology. (read more)

"How friendship became a tool of the powerful"

"Researchers from the decision science research group at the University of California, Berkeley have looked closely at pay-it-forward pricing and discovered something with profound implications for how markets and businesses work. It transpires that people will generally pay more under the pay-it-forward model than under a conventional pricing system. As the study’s lead author, Minah Jung, puts it: “People don’t want to look cheap. They want to be fair, but they also want to fit in with the social norms.” Contrary to what economists have long assumed, altruism can often exert a far stronger influence over our decision-making than calculation."

"Such findings are typical of the field of behavioural economics, which emerged in the late 1970s. Like regular economists, behavioural economists assume that individuals are usually motivated to maximise their own benefit – but not always. In certain circumstances, they are social and moral animals, even when this appears to undermine their economic interests. They follow the herd and act according to certain rules of thumb. They have some principles that they will not sacrifice for money at all."