Most serious economists believe that “productivity” — measured by output per hour for the nonfarm business sector — is the best single measure of what leads to differences in economic performance over time. In fact, Paul Krugman believed this when he was a serious economist (and he may still believe it, for all I know).
Arnold Kling reports that the average productivity growth from 2000-2005 is 50 percent higher than it was from 1995-2000, and about twice as high as during the previous ten years. Indeed, the average productivity growth rate in the last five years is the highest over the past half century. This means, in Kling’s words, that “the economy today is in great shape.”
Kling emphasizes, correctly, that the productivity numbers tell us nothing about economic policy under President Bush. Productivity growth, he reminds us, “is the economy’s gift to policymakers, not the other way around.” Productivity has a huge amount to do with the tools employees have to perform their work. Thus, technological breakthroughs can increase productivity, as can a better educated workforce. To the extent that government policy promotes technological breakthroughs or education, it does so only over time. While one can make intelligent arguments about which policies (and whose) might be affecting productivity, Kling warns that “we do not know how much of today’s productivity growth reflects Clinton-era policies or Reagan-era policies or even the deregulation that began under President Carter.”