Globally, labor-productivity growth in construction has averaged only 1 percent a year over the past two decades, compared with growth of 2.8 percent for the total world economy and 3.6 percent in the case of manufacturing (McKinsey, 2017).
The most common market failures / problems in the construction industry are:
- asymmetric information
- industry fragmentation
- ismatch between the agents of risk allocations & rewards
- dependence on public-sector demand.
I found many organizational answers to this question: improve communication between agents, introduce shorter contracts, improve on-site execution, etc.
However, I personally think internalization would be a great choice: bringing together the agents (like Elon Musk did at Tesla). Then the agents could optimize on a vaster decision set, and the result would be Pareto-efficient. The big question is: how?
My question is: how can a decision maker improve the construction productivity? What would be the answer from an Economist point of view?