Is bitcoin really all its cracked-up to be? Probably not, but the innovation behind it is.
The U.S. Bureau of Labor Statistics reported earlier this month that productivity at nonfarm businesses fell .1 percent in the first three months last year. For all of 2017, however, productivity was up 1.1 percent.
Economists watch productivity closely because it is the key to raising our standard of living over time. We live better than our parents and grandparents mainly because we can do more with less.
Santa Clara University professor Alexander Field explains productivity in the Concise Encyclopedia of Economics, concluding: “The bottom line: If a country wants its standard of living to rise over the long run, its labor productivity has to go up. And for that to happen, it either has to save more or innovate.”
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An hour of work this past year produced more in goods and services than it did in previous years. U.S. workers continue to use more robotics and computers, and U.S. companies continue to improve their production and delivery processes.
So it’s not just technology that makes us better off, but the ways in which we use it. Innovative processes also improve productivity, and thereby our standard of living.
One such process is called blockchain. This innovation is a digital ledger of sorts which tracks and verifies transactions. These ledgers reside on millions of different computers and make possible the immediate verification of transaction data.
You may have read about how this innovation supports cryptocurrencies like bitcoin, and you may want nothing of it. The dollar price of these so-called currencies is volatile, exposing investors to significant risks.
The blockchain innovation, however, has great potential.
Walmart is using online ledger technology to manage its food supply chain. This helps the company detect the source of bad food earlier and avoid risks. Airlines are testing the use of blockchain to improve flight data and reduce delays or cancellations.
According to International Data Corporation businesses around the world are expected to spend $2.1 billion this year on blockchain solutions. Most of this spending is expected to be concentrated in the United States.
Not only will U.S. workers continue to get new equipment to work with, they will learn better ways to use it. Better and more secure data will improve productivity.
You may not wish to invest in bitcoin, but be grateful for the innovation behind it.
Peter Crabb is professor of finance and economics at Northwest Nazarene University in Nampa. Prcrabb@nnu.edu.