Every line trending upward, every drop in cost, every additional ounce of efficiency we can squeeze from a bundle of inputs is the product of deliberate effort—of thousands of workers, engineers, factory managers, and line supervisors redesigning products, rearranging factories, testing and exploring new ways to do things. —Brian Potter, The Origins of Efficiency (304)

Economists look at productivity gains in the aggregate. Rather than examine where they come from, we simply utter the phrase “technological change.”

Brian Potter’s recent book, The Origins of Efficiency, 1 takes a bottom-up approach to looking at productivity improvement. Potter describes various ways that firms lower the cost of production. His many historical examples serve to illustrate and clarify the analysis.

Potter looks at production in terms of transforming inputs into outputs, in which the efficiency of the process depends on five factors: the transformation method; the production rate; the cost of inputs; the size of the buffer (work in process); the variability of the output.

For example, in a bread bakery, the transformation method is the set of instructions for making a loaf of bread. The production rate is the number of loaves per hour. The cost of inputs is the cost of flour, yeast, sugar, salt, energy, labor, and so on. The work in process consists of loaves that have been formed but not yet put in the oven. If the loaves are allowed to rise for different amounts of time, this will cause variability in output.

...read more at econlib.org

~econ