In a recent column in The New York Times, Stephen S. Roach, chief economist for Morgan Stanley, questioned the extent to which the United States has made real productivity gains. He argues that measures of productivity used in the service sectors, in particular, are dubious at best. He makes a good case that traditional measures of productivity—output per unit of work time—are unreliable for workers in the information economy, and that government statistics fail to capture the true amount of time that people spend on the job.

His argument, if correct, has serious implications for the economy's future. Misleading productivity measures could well lure companies down the path of false economy. Consider the effect perpetual demands for cost cutting are having on the managerial level. Thanks to the blizzard of pink slips in recent years, many companies are struggling along without talented and experienced people who were once available to shoulder the burden. Those left behind are working harder than ever just to keep up.

That's not to say we're moving backward, of course. In the sector of the business world that we watch most closely, technology has unquestionably helped spur productivity gains. There's no denying that capital investment in the latest whiz-bang material handling equipment, for example, has gone a long way toward making labor more productive. But, as Roach argues, that has its limits.

The nearly universal lament among managers today is that they don't have time—time to read or plan or test new ideas or pursue additional training or simply think. Most executives take their jobs with them wherever they go. And even leaving the cell phone or laptop in the office offers no escape.While the tough cost cutting helps businesses improve the bottom line in the near term, no company, as has been argued many times before, has ever cut its way to growth.

Productivity gains in the supply chain are in large part about inventory velocity and accuracy, and much of the technological investment is ultimately directed at those goals. But the real leaps come from innovation, from those Eureka moments, great ideas that ultimately change our lives. Those things can't be measured on a productivity index, and businesses that fail to give talented employees at least a little breathing space risk choking off the supply of crucial and innovative ideas upon which they once thrived.