Productivity falls (and costs rise) when you have monopolies, restrictive guilds (or social norms), and heavy regulatory burdens

It is a given that rising prosperity is ultimately and only possible with rising productivity.  A corollary is that private and public debt rises when we insist on present consumption greater than present productivity increase.  It can only be done by accumulating debt.

Which is not a problem as long as the current consumption lays the foundation for future productivity gains sufficient to outweigh the dead weight of the debt.  If current consumption is of a nature inconsistent with a future increase in productivity, then the debt eventually induces an accelerated decline in future consumption.

For example, if I incur current debt to consume an education in sciences, engineering, or medicine, there is a reasonable probability that my future increase in productivity (as reflected by future income) will more than outweigh the cost of the debt.  I will be able to amortize and pay off the debt in the future owing to my increased productivity.

On the other hand, if I consume education in communications, sociology, or "education" degrees, then my future increase in productivity might be insufficient to cover the debt.  

If current consumption does not facilitate future increases in productivity, then the only way to address the debt (public and private) is either default or substantial inflation - either of which are deleterious to personal and public well-being and will resolve to a level of productivity below that prior to incurring the debt.  

In general it is observable that productivity increases (and costs fall) in competitive markets with reasonable transparency and information access.  Productivity falls (and costs rise) when you have monopolies, restrictive guilds (or social norms), and heavy regulatory burdens.  In these cases, benefit is being syphoned from individuals and the communal good to specific groups (owners, networked interests, and government insiders/supplicants).  

It is interesting to see this worldview reflected in Kling.  From Links to Consider, 3/8 by Arnold Kling.  

Marc Andreessen writes,

The prices of regulated, non-technological products rise; the prices of less regulated, technologically-powered products fall. Which eats the economy? The regulated sectors continuously grow as a percentage of GDP; the less regulated sectors shrink. At the limit, 99% of the economy will be the regulated, non-technological sectors, which is precisely where we are headed.

Therefore AI cannot cause overall unemployment to rise, even if the Luddite arguments are right this time. AI is simply already illegal across most of the economy, soon to be virtually all of the economy.

He reproduces the Mark Perry chart that shows prices falling for goods, especially electronics, and rising for services, especially health care, education, and housing. Years ago, I debated Alex Tabarrok on the causes for this. Alex stumped for Baumol’s Cost Disease. I stumped for my meme, that government intervention involves subsidizing demand and restricting supply.

Relative prices rise when demand grows faster than productivity. They fall when productivity grows faster than demand. The Tabarrok/Baumol story is that productivity growth is weak in health care, education, and housing because of natural forces. It always takes four people to play a string quartet. The Kling/Andreessen story is that productivity growth is weak in those sectors because of artificial forces—government regulation.

For example, when you buy a home, you have to pay thousands of dollars for “title search” and “title insurance.” In a sane world, the true owner of a property would be held in a definitive database on a computer, “title search” would cost pennies, and “title insurance” would not exist. But the lawyers and title insurance companies lobby successfully to keep the process backward.

Going forward, will teachers’ unions and legacy universities succeed in keeping the education process backward? Or will LLMs herald the appearance of the Young Lady’s Illustrated Primer to disrupt education? Marc the VC optimist expects disruption. But in the post quoted above, we have grouchy Marc who fears that we will have stagnation forever.

I am on the side that says we must always remain focused on increasing productivity.  Whatever retards productivity is likely to be situational and/or transitory.  Focus on the fundamentals, increasing productivity.  And if productivity is arrested, understand what is decaying its increase.

In the modern economy it is often oligopolistic market structures, over-regulation, or restrictive guilds/social norms but that is not always the case.  One diagnosis does not fit all.  There are fits of weather, international supply, shifts in market demands and supply which can have enduring negative impacts on productivity growth.

Just focus on what is constraining productivity growth. Deal with the source.