CEPROM/ECAEF Conference Postponed to 30 MARCH 2021

Due to the current development of the Covid 19 pandemic regretfully we are forced to postpone our V. CEPROM/ECAEF Conference (scheduled Dec. 16, 2020) to March 30, 2021. Please mark your calendar. We apologize for the inconvenience and will keep you posted.

Principality of Monaco:

V. International

(In honor of Jacques Rueff, 1896-1978)


“Is the Public Interest
really in the public’s interest?”

– with Lessons from the Past Pandemic –

The conference is developed and organized by ECAEF (European Center of Austrian Economics Foundation, Liechtenstein). It is hosted by CEPROM (Center of Economic Research for Monaco). By invitation only. Stay tuned for updates regarding the Conference Program.

Designed and Arranged by ECAEF – European Center of Austrian Economics Foundation (LI)

Locally hosted and organized by CEPROM- Center of Economic Research for Monaco (MC)

By invitation only

Academic Director: Kurt R. Leube (ECAEF; krleube@gmail.com)
Administrative Director: Emmanuel Falco (CEPROM; cecile@mlp.mc)
Media Contacts: nsaussier@palais.mc
Conference Date: 30 March 2020
Location: Musee Oceanographique de Monaco, Principality of Monaco
Conference Languages: English/French; simultaneous translation

Conference Program

09:00-9:30 Registration
09:30-9:45 Welcome: H.S.H. Prince Albert II and H.S.H. Prince Michael of Liechtenstein

Session I: The Public Interest: On its Substance as a Governmental Concept
09:45-10:00 Chair: Peter A. Fischer (CH)
10:00-10:30 Limits and Necessities of Regulation: Public Interest Lessons from the Past Pandemic – Henry I. Miller (USA)
10:30-10:45 Discussion
10:45-11:15 Coffee break for all participants
11:15-11:45 A false Dichotomy? The Public Interest and Inequality – Axel Kaiser (CL)
11:45-12:00 Discussion

12:00-13:45 Break

Session II: The Public Interest: On its Meaning as an Economic Policy Function
13:45-14:00 Chair: Carlos A. Gebauer (D)
14:00-14:30 Bliss Point Economics: On the Root of Public Interest Evil – Terry L. Anderson (USA)
14:30-14:45 Discussion
14:45-15:15 In the Name of the Public Interest? Government Debts and Reckless Monetary Policies – Lars P. Feld (D)
15:15-15:30 Discussion
15:30-16:00 Coffee break for all participants

Session III: The Public Interest: As a Guide to and a Fact-Check on Public Policy Measures
16:00-16:15 Chair: Peter A. Fischer (CH)
16:15-16:45 Conjectures, Refutations or Fakes? Only an Unbiased Science is in the Public’s Interest – Josef H. Reichholf (D)
16:45-17:00 Discussion
17:00-17:30 On the Zeitgeist and the Public Interest – Johan Norberg (S)
17:30-17:45 Discussion
17:45-18:00 Closing Remarks: Kurt R. Leube (A/USA)
18:00 End of Conference

Please note: Some paper titles might be edited or changed.

Iconoclasm and moral hypocrisy

GIS Statement by Prince Michael of Liechtenstein

Modern-day iconoclasts are removing objects and symbols of Western civilization as part of moralistic campaigns. By doing so, they are falsifying history and attacking the very foundation of democracy.

So-called “cancel culture,” born from social media’s practice of banning nonconformists, is supported by lots of organizations and spreading in Western societies (source: GIS)

Iconoclast is a Greek word for a person destroying a picture. Its use goes back to Byzantine Emperor Leo III (717-741), who banned religious images. Today’s iconoclasts are fanatics destroying objects of historical heritage for political or religious reasons.

In March 2001, Taliban leader Mullah Mohammed Omar ordered the blowing up of two monumental 6th-century statues of Buddha in Afghanistan’s Bamiyan Valley. This barbaric act of religious zealotry shocked the world and was rightly condemned. Today, however, many would refrain from criticizing such gestures for fear of offending the religious sensitivities of Islamists. The Bamiyan Buddhas’ destruction is unforgivable. The statues, sculpted in 507 and 544, predated Islam. At the time, Buddhism was the prevailing religion in the area.

‘Cancel culture’

In 1966, Mao Zedong launched a brutal and radical mass-scale operation in China to reshape the country’s perception of history. During a decade known as the Cultural Revolution, the Chinese Communist Party murdered hundreds of thousands of people and destroyed countless historical monuments and works of art. Iconoclasm, an expression of fanaticism, also exists today. Europeans and Americans tend to associate the phenomenon with the uncivilized past and faraway radical movements such as the Taliban or Maoists.

Such a ‘history’ can be considered a form of intellectual iconoclasm
Many in the West forget that past events and cultural heritage must be understood within their historical framework, not judged by the norms, standards and beliefs of today. Unfortunately, our approach to the past has become increasingly judgmental: it mixes a hypocritical “benefit of hindsight” attitude with moral arrogance in assessing the events and personalities of bygone eras. Such a “history” becomes a political tool. It can be considered a form of intellectual iconoclasm.
A significant number of Western historians no longer analyze the past in its historical context. They would rather judge it using moral standards set by themselves. The intellectual base for this practice eerily resembles that applied by the Taliban in the bombing of the Buddha statues. For example, Europe’s historical secularism has been overinflated, prompting excessive criticism of the continent’s Christian heritage. The opposition to including a reference to God in the European constitution was iconoclastic in its radicalism. The more Europe denies its Christian past, the more radical groups will entrench themselves. Xenophobia can quickly become the norm and laicism could degenerate into fundamentalism and intolerance.

Eradicating heritage, regardless of whether one agrees or disagrees with it, tends to polarize societies. The so-called “cancel culture,” born from social media’s practice of banning nonconformists, is supported by lots of organizations and spreading in Western societies. The past is doctored or censored according to today’s view of what is proper and what is not.

Continue reading ->
Iconoclasm and moral hypocrisy

Disastrous economic and social ideas are making a comeback

GIS* Statement by Prince Michael of Liechtenstein

It is hardly a coincidence that a new monument of Karl Marx, the creator of socialist philosophy, was erected with great pomp in the city of his birth in 2018. Marxist thinking has been undergoing a renaissance for all sorts of wrong reasons, including in academic and political circles. Beware, as socialism has produced only poverty, oppression and genocide.

Trier, May 5, 2018: the ceremony of unveiling the statue of Karl Marx made by sculptor Wu Weishan and gifted to the philosopher’s city of birth by the People’s Republic of China (source: dpa)

Socialism has repeatedly, consistently and without exception, proven a failure. The Soviet Union of Joseph Stalin and Leonid Brezhnev, Venezuela of Hugo Chavez and Nicolas Maduro, or Pol Pot’s bloody experiment in Cambodia are striking examples of the disaster this system inevitably brings on countries that embrace it. Another socialist experiment is now taking place in China. On the one hand, it is about trying to improve the material well-being of Chinese people, on the other – introducing total control by the ruling party.

What is socialism? Basically, it is a doctrine that uses the lofty notions of equality and solidarity to impose an oppressive system that is anathema to these. Equality, being alien to human nature, is incompatible with freedom. The pursuit of equality invariably leads to fascism-like solutions. A free society, as opposed to a socialist one, lets people pursue opportunities of their choice as long as it does not harm others. This is also the basis of free-market competition. These are the ingredients of systems characterized by cohesion, prosperity and fruitful progress.

Systemic brutality and intimidation

Socialist systems come in a variety. The most extreme forms existed during Stalin’s purges in the Soviet Union, in Albania under Enver Hoxha and Pol Pot’s social engineering in Cambodia, and in China during the decade-long Cultural Revolution of Mao Zedong. In the Soviet system, property rights were eliminated. In today’s China, some entrepreneurship and private property are allowed. However, the state has the power to confiscate it at will and individual freedom is subjected to the arbitrary designs of the ruling bureaucracy.

A striking characteristic of all these states is the rulers’ brutal intolerance of freedom of opinion and the system’s critics.

Given socialism’s track record, it is surprising that Marxist-Leninist ideas are seeing a comeback lately – although, this time around, they have been repackaged. Increasing numbers of NGOs, politicians, media outlets and universities come out in support of the socialist and totalitarian renaissance as green movements in which environmental and climate issues are misused to camouflage neo-Marxist policy “solutions.” Tellingly, these groups and organizations display sharp intolerance to any disagreement with their doctrine.
This doctrinaire attitude is on the rise on both sides of the Atlantic. Some universities in Europe no longer seem concentrated on propagating knowledge, open debate and understanding; the focus on campuses has shifted to what are considered the correct opinions. Many NGOs attack those not toeing their lines, assailing the plurality of opinion and ignoring fact-based arguments. What we are witnessing looks like poorly camouflaged attempts to impose authoritarian norms. Intolerance in society is increasing by the day.

Populist politicians of all ilk – and political parties especially – like to ride the wave of denouncing economic and social inequality. They willfully ignore the well-established fact that general prosperity cannot be reached while enforcing strict equality on society. They also omit the experience-born truth that poverty is effectively eliminated in a healthy, market-driven economy, not through the redistribution of wealth. Such schemes are not sustainable: as Margaret Thatcher famously observed, “The trouble with socialism is that you eventually run out of other people’s money.”

Why do they do it?

A number of economists – motivated either by ignorance of their discipline’s basics, stubborn righteousness or ideological fanaticism – present social inequality as the root cause of today’s economic and social problems. In the United States, even seasoned political veterans active in the electoral campaign subscribe to this damaging doctrine.

The revival of old totalitarian temptation also takes place in the open. While one sees many old monuments removed from public places or vandalized, a new statue of Karl Marx has been added to the many already standing in the world. Even the then-president of the European Commission, Jean-Claude Juncker, attended the 2018 celebrations of the philosopher’s 200th anniversary and the unveiling of the hulking 4.4-meter bronze figure in Trier, his birthplace.

No one seemed to care that Marx was the father of an ideology that murdered untold millions in the 20th century. If that estimate seems high, please add the victims of Stalin’s sweeping purges – including the state-induced hunger (Holodomor) in Ukraine – the mass executions in China during Mao’s Long March and Cultural Revolution, and the genocide in Cambodia, to name just the most tragic crimes committed in the name of socialism.

Read the original article here ->
Disastrous economic and social ideas are making a comeback

*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defense, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyze the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyze and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.

Hardy Bouillon: “Gerechtes Glück”

Hardy Bouillon Gerechtes GlückNeu erschienen in unserer ECAEF-Buchreihe: Hardy Bouillon* “Gerechtes Glück”

Das Buch “Gerechtes Glück” ist zum einen eine Taxonomie der Theorien sozialer Gerechtigkeit – so der Untertitel – und zum anderen eine Rehabilitierung der Philanthropie.


Worum geht es?

“Gerechtes Glück” ist eine Untersuchung zu einer virulenten Theorie im Schnittfeld von Glücksökonomie und Gerechtigkeitsphilosophie, die der Autor wie folgt auf den Punkt bringt. „Materielle Ressourcen, die eine Person hat, aber nicht zur weiteren Steigerung des eigenen Glücks nutzen kann, sollten nicht nur aus Gründen sozialer Gerechtigkeit, sondern dürfen auch aus Gründen der formalen Gerechtigkeit umverteilt werden, weil sie das Glück des Nehmers mehren, ohne das Glück des Gebers zu schmälern.“

Aus Sicht von Bouillon ist die These vom gerechten Glück falsch. Um dies zu zeigen, entwickelt er eine Taxonomie der Theorien sozialer Gerechtigkeit und zeigt die Unzulänglichkeiten auf, die hinter der These vom gerechten Glück stecken. Aber er lässt es nicht bei einer Kritik bewenden, sondern zeigt auch, auf welche Weise die These vom gerechten Glück zu retten ist, nämlich durch die Rehabilitierung der Philanthropie. Sie, die Philanthropie, ist für Bouillon die einzige bekannte Form, die das Glück des Nehmers mehren kann, ohne das des Gebers zu schmälern.

Zum Inhalt des Buches

Der Autor fasst sein Buch wie folgt zusammen: Um die These vom gerechten Glück angemessen diskutieren zu können, wurde die Abhandlung in drei Kapitel unterteilt. Das erste beleuchtet das Verhältnis von Glück und Gerechtigkeit, soweit es den Zielen der Studie zuträglich zu sein schien. Zu diesem Zweck wurde eine Definition von Glück entwickelt, welche die Möglichkeit materiell bedingten Glücks einräumt, ohne den flüchtigen Charakter des Glücks zu leugnen. Anschließend wurden zwei Grundannahmen diskutiert, die wesentliche Bestandteile der These vom gerechten Glück sind. Gemeint ist die Vorstellung vom abnehmenden Grenznutzen des Einkommens oder Geldes und die Idee, gerechtes materielles Glück stehe unter dem Vorbehalt, dass dasselbe auch verdient sein müsse.

Unverdientes Glück, so die Idee weiter, berge eine Ungerechtigkeit, die es durch Umverteilung zu korrigieren gelte. Die kritische Diskussion der beiden Thesen ergab, dass keine von ihnen haltbar ist, aber jede erklären hilft, warum die spontane Verteilung materiellen Glücks Gegenstand der Theorien sozialer Gerechtigkeit ist.

Sie, die Theorien sozialer Gerechtigkeit, stehen im Fokus des zweiten Kapitels, das mit der Entwicklung einer Taxonomie beginnt. Mittels der generierten taxonomischen Kriterien wurden die einschlägigen Theorien sozialer Gerechtigkeit sortiert und vor allem hinsichtlich der Frage diskutiert, ob sie dazu geeignet seien, die These vom gerechten Glück zu stützen. Geeignet in diesem Sinne wäre eine Theorie sozialer Gerechtigkeit dann, wenn sie einen Typus der Gerechtigkeit entwickelte, der mit der formalen Gerechtigkeit kompatibel wäre. Es zeigte sich im Verlauf der kritischen Erörterung, dass keine der einschlägigen Theorien sozialer Gerechtigkeit diesem Anforderungsprofil genügt bzw. mit der Idee formaler Gerechtigkeit in Einklang zu bringen ist. Dieses Ergebnis gilt für alle Varianten sozialer Gerechtigkeit; für solche, die als Komplementär, Korrektiv oder Kompensation vermeintlich unzureichender formaler Gerechtigkeit auftreten. Und es gilt auch dann, wenn eine der Varianten nur vermeintlich soziale, in Wirklichkeit aber formale Ungerechtigkeit moniert.

Das Scheitern der Theorien sozialer Gerechtigkeit im o.g. Sinne hat viele Ursachen. Im Rahmen des rawlsschen Ansatzes hätte der Nachweis gelingen müssen, dass nur die Redistribution der spontanen Verteilung materiellen Glücks, nicht aber die Beibehaltung rational begründbar ist. Im Erfolgsfall hätte dies die Vereinbarkeit formaler und spontaner Gerechtigkeit bedeuten können. Doch weder Rawls noch seinen Adepten ist dieser Nachweis gelungen. Die aktuellen Theorien sozialer Gerechtigkeit verzichten entweder vollends auf derlei Kompatibilitätsbemühungen oder rekurrieren auf Zusatzannahmen, die – wie wir sahen – der Kritik ebenfalls nicht standhalten. Sie gründen ihre Haltung insbesondere auf dem, was sich als Wasserscheide zwischen Befürwortern und Kritikern der sozialen Gerechtigkeit erweist. Gemeint ist die These von der Rechtfertigungsbedürftigkeit aller Diskriminierungen. Umverteilungskritiker können ihr entgegenhalten, dass nicht Diskriminierungen per se rechtfertigungsbedürftig seien, sondern die Allgemeinverbindlichkeit von Diskriminierungen.

Die Kritik an der staatlichen Umverteilung führte uns zu Kapitel 3. Wenn gerechtes Glück nicht im Zuge staatlicher Umverteilung erzielt werden kann, wie dann? Gibt es eine Umverteilung, die dem Nehmer Glück bringen kann, ohne dem Geber Glück zu nehmen? Unsere Analyse führte zu dem Schluss, dass es sie gibt, und zwar in Gestalt der Philanthropie. Indem der Philanthrop gibt, kann er sowohl fremdes Glück erwirken als auch eigenes erfahren. Die Bedingungen, unter denen dieses Ziel verfolgt werden kann, haben wir erörtert und dabei Proportionalitätsprobleme aufgezeigt, die entstehen, wenn man ein angemessenes Philanthropieverständnis generieren will.
Danach haben wir die wichtigsten Einwände diskutiert, die gegen die Philanthropie vorgebracht werden, darunter den Unterversorgungseinwand und den Diskriminierungseinwand. Beide erweisen sich als nicht haltbar. Eingehendere Betrachtungen haben wir vor allem dem ersten Einwand geschenkt sowie dessen irriger Annahme, die Hauptursache der Unterversorgung sei ein klassisches Gefangenendilemma. Es zeigte sich, dass der Unterversorgungseinwand lediglich für Krisensituationen eine gewisse Berechtigung hat. Ansonsten sprechen neben der einschlägigen Literatur zum Spenderverhalten und Spendenaufkommen auch die von uns vorgelegten historischen, ökonomietheoretischen und motivationalen Argumente gegen den Unterversorgungseinwand und für bessere steuerliche und rechtliche Bedingungen von Geld-, Sach- und Zeitspenden. In diesem Sinne brechen sie eine Lanze für die Philanthropie.

*Hardy Bouillon studierte Philosophie und Kunstgeschichte in Albuquerque, Oxford und Trier, wo er heute als Außerplanmäßiger Professor lehrt. Gastprofessuren führten ihn nach Duisburg-Essen, Frankfurt, Prag, Salzburg, Wien und Zagreb. Zu seinen wichtigsten Publikationen zählen Ordnung, Evolution und Erkenntnis (1991),  Freiheit, Liberalismus und Wohlfahrtsstaat (1997), Wirtschaft, Ethik und Gerechtigkeit (2010) und Wählerische Selektionen (2018). Bouillon gab zudem zahlreiche Sammelbände heraus, stellte Breviere zu Popper und Kant zusammen und verfasste viele Artikel in führenden Zeitungen, wie etwa FAZ oder NZZ. Seit 2017 ist Bouillon auch Fellow an der Liechtenstein Academy.

Surprising Surge of Productivity during Covid-19 Crisis

by Henrique Schneider

Around the world, productivity growth has been slowing. In developed economies, productivity has risen by less than 1 percent annually for several years. Suddenly, in the first two quarters of 2020, amid the Covid-19 crisis, it surged. Surprisingly, most developed economies witnessed an increase in productivity by more than 10 percent; some by more than 20 percent.

In 2015, the Organisation for Economic Co-operation and Development (OECD) wrote that “Productivity is the ultimate engine of growth in the global economy. Raising productivity is therefore a fundamental challenge for countries going forward.” Yet its 2019 Compendium of Productivity Indicators showed that productivity had continued to decelerate throughout the past decade. But what exactly is productivity, and why does it matter?

In economic theory, productivity is commonly defined as the ratio between the output volume and the input volume. In other words, it measures how efficiently production inputs, such as labor and capital, are being used in an economy to produce a given level of output, such as gross domestic product (GDP).

There are different measures of productivity and the choice between them depends either on the purpose of the productivity measurement and the availability of data. One of the most widely used measures of productivity is GDP per hour worked. For the purposes of this report, we will use only this metric.

Explanations for the drop

Productivity not only reflects an economy’s efficiency. The changes in labor productivity approximate how well individuals are doing. Where the changes are positive and high, individuals are paid better, if the changes are low or negative, usually there is some degradation of wage levels. Productivity, therefore, is not only an indicator of economic competitiveness, but also of individual welfare. Seen in that light, the OECD’s 2019 report is troublesome news.

It reveals that, in line with previous releases, the average productivity growth per year continues to decelerate. Countries such as the United States, Germany, Austria and Switzerland were able to increase their productivity by less than 1 percent annually; France by 1.1 percent.

The OECD makes a direct connection between the lack of productivity growth and the labor market: In France, Germany and the United Kingdom, the three sectors with the largest employment gains between 2010 and 2017 accounted for a third of total job creation but paid below-average wages. In Belgium, Finland, Italy and Spain, industries with above-average labor productivity levels saw net job losses.

Economists have been developing theories for the continuous decline of productivity growth in developed economies. The most relevant are these, though they should all be taken with a grain of salt:

Economics measures productivity incorrectly; GDP does not capture all value added, for example of the service and digital sectors
Low productivity is here to stay; recent investments in digitization push labor productivity down because they make capital the main driver of increasing productivity
Low productivity is a temporary phenomenon; digitization needs time to unravel its productive capacity on labor
Low productivity affects services more than industrial goods because there is less free trade in services than in industrial goods. For example, services do not migrate easily, fewer international treaties push free trade in services, and services tend to be personalized
Productivity has been weakening while regulations have been strengthening; regulation decreases productivity
There is an increasing divide between highly productive sectors, companies and people, and those that are not highly productive (the majority)

Enter: Covid

Then, there is the current economic crisis, triggered by the coronavirus. In the first two quarters of 2020, most economies fell into a recession prompted by measures to counter the outbreak of Covid-19. The number of hours worked also decreased. People were laid off, put on furlough or given part-time positions. However, the reduction of hours worked (input) was disproportionately large compared to the decrease in GDP (output), which results in a higher productivity, or a larger GDP per hour worked.

The above graph shows the productivity surge measured as the change in GDP in local currency per hour worked. The yellow dot shows the average change in productivity between 2010 and 2018 in percent. The blue dot shows the change in productivity during the coronavirus crisis in the first two quarters of 2020. During the Covid-19 crisis and in comparison to the decade before, there was an explosion in productivity.

Between 2010 and 2018, productivity in Switzerland rose by 0.7 percent annually. In Austria the increase was 0.8 percent in Germany 0.9 percent. France recorded one of the highest values with 1.1 percent and the U.S. one of the worst with 0.5 percent. During the coronavirus crisis, the figures changed. Between the fourth quarter of 2019 and the second quarter of 2020, Switzerland increased its GDP per hour worked by more than 25 percent. Austria even managed to break the 28 percent mark. Germany increased productivity by 12 percent, France by 11 percent, and the U.S. by 10 percent.

Several factors make assessing this short-term surge of productivity difficult. First, most of the data is either preliminary or based on estimates. Second, as mentioned earlier, GDP is not only formed by labor, but also by capital – it would be an exaggeration to attribute the entire surge to labor productivity. Third, the data for the pre-coronavirus period is on a yearly basis, while the data for the Covid-19 crisis is only for two quarters. Despite all these caveats, the trend is interesting. And it is clear: labor productivity surged during the crisis.

Explaining this trend depends on which of the above theories one chooses to believe. Combining them, four explanations come to mind, from which scenarios can be drawn. Two of these scenarios are optimistic and two pessimistic. None are mutually exclusive.


First, at least in the short-run, deregulation and digitization boosted productivity in unparalleled ways. During the crisis, most countries allowed for some flexibility in their rigid labor laws. Employees could work remotely, could determine their own working hours and could adapt their hours worked to the amount of work. At the same time, companies were more open to incorporate technology such as video-conferencing or remote access into their employees’ work processes. The question is now whether regulators and the private sector are willing to continue deregulation and digitization. If they do, productivity will continue increasing – most probably not at the same rate as during the crisis, but at least at a much higher rate than between 2010-2018.

Second, reengineering of the work processes, more communication and management by objectives or by exception led to the surge of productivity. Because of the measures taken to counter the pandemic, many work-related processes had to be rethought. People were prevented from interacting with each other in the same intensity as before the crisis, and management had to take a more hands-off approach.

At the same time, coordinating peoples’ tasks (notably in the service industry), working in shifts and working remotely, became crucial. The combination of rationalizing processes, better thought-through coordination and focus on self-directed work led to the productivity increase.

In this explanation, technology and deregulation do not play a role. They might have helped but the reason for the surge lies in the management of work-processes. If businesses continue along this path – applying an industrial logic to the service sector – productivity can grow, even if there is no deregulation or no digitization.

Third, the surge in productivity happened due to a selection process in the labor market. Less productive members of the labor force were the first to lose their jobs or be put into part-time work. This naturally led to an increase in efficiency. As soon as these less productive workers return, productivity will dip again.

Finally, the surge of productivity is the fruit of the wrong measurement. It only happened because the metrics do not take outside forces into account. In this case, the outside factors involved higher probabilities of depression or other psychological effects on the people not working or working less, more stress for people working with increased flexibility or remotely, or the loss of social contact at work. Some of these factors will persist even as people return to their work routines. So, what at first seems like a surge in productivity is actually an even larger loss than before the crisis.


In developed economies, labor productivity has been weakening. This amounts both to a loss of competitiveness and to less welfare for the individuals working. During the first two quarters of 2020, labor productivity rose to unprecedented levels. While caution about the precise measurement is warranted, the trend is established. Economics, however, has difficulty explaining why this surge happened and what the path forward should be.

Nevertheless, a combination of deregulation, digitization and optimization of business processes, especially in the service sector, helps raise productivity. The real surprise is that while all this may be common sense for a businessperson, it comes as a revelation to many professional economists.

*Henrique Schneider is a professor of economics at the Nordkademie University of Applied Sciences in Elmshorn, Germany and chief economist of the Swiss Federation of Small and Medium Sized Enterprises in Bern, Switzerland.