Saturday, March 29, 2008

Institutions, Productivity and Growth

A couple of days ago, I mentioned that I will be reviewing Gregory Clark's A Farewell to Alms. And I will. I'm extremely close to finishing and I give you my complete thoughts when done. But something in today's Weekend Edition of The Wall Street Journal clicked and links to part of what I've been reading in Clark's book.

This article illustrates the condition of India's milkmen. It seems that the dairy's used to government-owned and delivering milk was a prestigious public job. But when the industry went private, business dried up. The problem is that these government employees couldn't really be dismissed. Consequently they continue to report to work every day even though they have nothing to do. The trucks have all been sold. So the milkmen keep collecting the check and waiting to retire. (By the way, check out the photo slideshow.)

This relates to Clark's book because he discusses worker productivity as a source of income inequality between nations. I'm not going to say this story illustrates the sole source of a problem. Nevertheless, a nation's productivity and income can't help but be negatively affected if the institutions in place tolerate or even encourage non-production. Or am I missing something? Let me know your thoughts
after reading the article. (And additional information is welcome.)

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