Sunday, August 31, 2014

Wrap Up for August '14

There's plenty in this August wrap up - these past weeks have certainly provided "food for thought". Earlier in the month, Time ran an article about the career advice "no one ever really gives you". Among the (somewhat) unsettling suggestions were "Doing your job well is not enough," and "Who you work for is hugely important. So is where you work."

All I could think after reading the above linked list, is that a number of CEOs have been trying to get out the word for a while - particularly since the playing field has changed in some key respects. The message basically goes: "We don't have all the answers, either for employment or economic stability! Sorry...give us a little help, guys!"

Except...the things that could help, still aren't happening. How many growth summits or helpful coordinated strategies between government and business have we witnessed, lately? Instead, policy makers have decided to tell the public that new growth strategies are MIA and "little can be done". Just the same, none of this pretzel logic has quieted the call for fiscal "solutions". "Fiscal to the rescue" stems from the idea that government magically pulls new business formation (along with jobs) out of a hat where business cannot, I suppose. But Washington has too many short term obligations right now, to provide an encore for that special request.

And since preexisting government obligations are too onerous to actually contemplate (let alone do something about), some economists still want to know why governments aren't stepping in, to do what private industry cannot. (Huh??) Since some folk didn't get the memo that fiscal options are mostly off the table, a monetary response - which would at least be capable of stabilizing economic activity - is instead in line for "takeoff" (our "back to normal" economy) with one engine still missing from the plane. However, as Barry Eichengreen recently noted:
...if the US does experience secular stagnation over the next decade or two, it will be self inflicted.
Timothy Taylor likened the recent Vox publication on secular stagnation to the parable of the blind men who all grab hold of different parts of the elephant and describe what they feel. Mostly, those descriptions were a bit too predictable...plus it didn't help that market monetarist were not even represented among the authors. Something else feels missing from these stories of secular stagnation as well: the idea of a complete marketplace, which has been all but abandoned in the struggle to move ahead with no adjustments to existing institutions, whatsoever.

Thinking about the missing marketplace, I find myself returning to a Zen koan which asks: how do you go further from the top of a hundred foot pole? Because that's what today's economy feels like - as though everyone awaits at the top of the pole, trying to figure out how to continue past the limits it imposes. In the meantime, bonuses become the new raises. As one executive noted in the linked WSJ article, the rules of engagement have probably changed permanently.

Living "as fully as possible" is a good response to seeming limitations. Some would just as soon forget about the economy and find new meaning on non monetary terms, elsewhere. However, passive adaptation to these economic circumstance could mean regression and loss. In "Instructions to the Cook" (1996), Bernard Glassman sought entrepreneurial means to generate connections between those who lack economic access, and the world they live in. He knew how important it was for all individuals to understand business concepts and the fact that money matters. He also understood the importance of including the rich alongside the poor, in common efforts for more integrated economies.

When I picked up the link for the book, I also found a related film which some readers might be interested in, which goes through the chapters of the book. Years ago, I was quite fortunate to learn from - and work with - an intuitive Lebanese cook, who utilized the same cooking principles which also apply to social action: use what you have. More than once, I was worried there might not enough food in the refrigerator to prepare a good meal for the guests who would arrive in a matter of hours. And yet - not only was there always plenty, the guests also enjoyed the results. This is the same principle which would allow any community to begin anew, economically: work with the resources which are already in place.

How to think about the 100 foot pole, in economic terms? There has been so much wealth in recent centuries, that for a long time, no one had to worry about the means of redistribution which became formalized as government fiscal activity. Hence people forgot the degree to which redistribution was dependent on the continual gains of the production residual, which paid workers to aid in the reconfiguration of adapted resources. Production residuals were especially helpful, for they sought to continue the monetary flows which provided new possibilities across the entire spectrum.

Production gains still provide tremendous wealth. However, they no longer work efficiently at local levels which need to remain capable of completing economic processes. To imagine moving "beyond the pole", move local services into the private realm, where they can be negotiated locally and individually. Provide greater flexibility and liquidity, for property utilization and ownership. Allow people to govern their own lives for services needs, so that the wisdom of the elders might have a chance to return. Another way to think of services to digital construction, is as a further strengthening of the net.

Today, government and business alike rely on a strong net, which is flung across the globe. Except there's just one problem. Those components are so broadly spaced that many facets of society - hence potential economic activity - fall completely through. Just the same, a stronger net remains possible. In the above linked book, Glassman refers to Indra's net, where each person and event is connected in space and time.

Local communities could generate stronger nets through becoming broader institutional structures for resource use, than today's business formations are now capable of. In effect, this would allow participating communities in knowledge use systems for services, to become supra institutional structures, by including the resource possibilities in their own midst. These structures would generate strong nets, and few would fall through the remaining holes. In short, economies everywhere need the help of their help of their local economies in order to continue moving forward in the 21st century.

...more links, so I'll give the rest of the wrap up over to them:

Jobs are coming back but with lower pay - what every local economy needs to bear in mind as it considers new forms of infrastructure for the future.
http://www.chicagotribune.com/business/breaking/chi-jobs-wages-inequality-mayors-20140811-story.html

An article from Paul Krugman, (India Times)
http://economictimes.indiatimes.com/news/international/world-news/us-crisis-not-over-america-should-learn-from-europes-experience/articleshow/40308766.cms

This county by county map is quite useful for anyone who wants to get a better picture of local economic conditions in the U.S.
http://www.nytimes.com/2014/06/26/upshot/where-are-the-hardest-places-to-live-in-the-us.html?action=click&contentCollection=The%20Upshot&module=RelatedCoverage&region=Marginalia&pgtype=article&abt=0002&abg=0

Of course every group has viewpoints that don't necessarily line up with one's own, and Ryan Long makes a good point about libertarians in this post.

Cross country comparisons are not easy: Dietz Vollrath takes a closer look at GDP.
http://growthecon.wordpress.com/2014/08/29/what-does-real-gdp-measure/

James Pethokoukis highlights slavery in an AEI post: This map shows where slavery and forced labor are happening around the world.

Not so long ago, it seemed that everybody did (Pethokoukis)...Fewer Americans now self identify as 'middle class'

"I feel like a pawn in a moneymaking game for hospital administrators." http://online.wsj.com/articles/the-u-s-s-ailing-medical-system-a-doctors-perspective-1409325361

Saturday, August 30, 2014

Musings on the Marginalized Landscape

...that is, the circumstance of those who are either unemployed or insufficiently employed. In contrast to the idea of teeming masses locked away from society (as some dystopian stories describe), today's unemployed exist in disparate groups which often appear quite different from one another. These in turn are shaped by institutions, of which the most obvious are prisons which "mop up" the anger of economic exclusion. Of course this is a broad generalization, but prisons remain the primary institutions in the U.S. which attempt to reduce social uncertainties stemming from unemployment or low employment.

Too few hours on the payroll can mimic unemployment, when an individual struggles to save enough for the prerequisites which lead to either shelter or transportation options. Even prior to 2000 when the economy was booming, I knew of homeless people who came to work from tents or their vehicles, at a time when management could still afford to be understanding about their circumstance.

Indeed, there are times when homelessness turns out to be a rational choice. What society sometimes misses - particularly in zoning laws - is that some find more equanimity in peaceful settings which are possible to control, when they are able to live alone. One young man in my workplace had parents who were both college professors. After attempting to live with roommates with a very different lifestyle, he wanted to save enough to live in an apartment on his own, but was set back a number of times by illness (exposure to the elements) before he was able to do so.

Much as low income individuals are often "hidden" in city environments, those without any work at all - who are not homeless on the streets - tend to be hidden in environments which include "more reasonable" real estate. However, a lack of local work options is often the reason for either the affordability or the availability. As a result these individuals may have tenuous relationships with family members, whose lives are also affected by the lack of economic inclusion on the part of their kin.

For many in this circumstance, the additional burden on family members is a recent development. So long as transportation options remained within the perimeter of low income potential, this single factor was responsible for maintaining greater market depth at multiple levels. Some of that market depth has been lost, in ways that now require changes for infrastructure settings, before market depth can be completely regained. This particularly presents a problem for the U.S., in that many cities and towns were laid out with the automobile in mind.

Drugs and alcohol use are heightened in the unemployment and low employment landscape, which leads to numerous knock on effects as well. Because there are few systems in place which allow the marginalized to seek their own solutions, their shortened lifespans often act as a net positive for the states or institutions which are tasked with their responsibility.

The "deadweight loss" rationale is one of the most powerful arguments we have, to allow the marginalized to help themselves. Even from a completely dispassionate perspective, the social exclusion of low income and the unemployed can drag down not just longevity statistics for nations, but also long term growth prospects as well.

And while empathy may sometimes enter these discussions, economic inclusion - more than anything - is really a matter of common sense. Who cares if some elite end up embarrassed by the potential of individuals with "no impulse control and little intelligence", who find it in themselves to prove the naysayers wrong. The only thing we would lose - should the marginalized create a better reality for themselves - is the incomplete marketplace which continues to undermine the stability of nations.

Thursday, August 28, 2014

What Constitutes an Experiential Service?

This question has relevance, in that it provides needed context for overall goal sets in time arbitrage coordination. Some experiential service components satisfy wants or perhaps ongoing challenges, while others satisfy basic needs. These groups would be approached quite differently, in that obvious needs would become core components of services. Think basic = core = inclusive, versus want = peripheral = exclusive.

Within this context, exclusive or unique time use formation is not arbitrarily driven out of group settings by the insistent valuations of basic services needs. This is just another way of describing how time use optimization can work. Without time use optimization, time use skills which should be basic in nature (yep, healthcare), tend to drive out exclusive forms of time use which can provide more happiness. Likewise: at a younger age, basic school core subjects tend to drive out numerous intellectual interests which students might otherwise pursue.

Even so, these "want" versus "need" designations cannot be teased out of the intangibles that represent total resource use (standard of living) settings - nor should they. Instead, services wants versus needs can be accounted for in time use aggregates, where the differences become much easier to quantify. By tracking the finite nature of (aggregate) local time use available for services as a core point of reference, services taxation becomes practically unnecessary for any knowledge use system which 1) provides education for core healthcare skills and 2) tracks time use separately from standard accounting and economic measures.

Today's post is in part a response to an article regarding happiness and experiential product: an article which I subsequently lost, even after retracing my online steps from yesterday in an attempt to find it. Darn! Normally when I come across a link that is possibly postworthy, I try to save it promptly, just in case. While experiential product was not designated as such in the article, I think of the experiential product which is capable of generating happiness, as peripheral and exclusive service product formation.

Fortunately, Tyler Cowen posted a link which also touches on the research (he calls it speculative) and it is here. Also, his reference to delayed gratification is only a partial context for experiential product, as opposed to the delayed gratification one normally thinks of regarding investment. The gist of the article was that experiential product - i.e. not a physical product but one that generates "memories" - creates more happiness than, say, waiting in line for a product which we would either 1) carry home or 2) consider a basic good.

Hmm. There's plenty of product formations (involving services time components) which make us want to pull our hair out while waiting. These wait times all too often exist, for what has become defined in recent decades as basic needs on multiple levels. Hence this kind of negative experience stands in stark contrast to pleasant experiential services which are also coordinated through timed group settings.

How might we contrast the aggravation with the positive experiential setting? Waiting in line for fast (basic or everyday) food might be classified a minor nuisance. Sometimes the wait for service help on the phone calls for a zen attitude. And all too often, waits for the doctor may feel as though a total time loss...at least bringing a book helps!

And yet, anticipating vacation or standing in line for special meals or concerts can evoke positive feelings. Yet if the wonderful meal happened every day, it wouldn't be special. Nor would anyone choose to stand in line for that special meal on a regular basis. That's why 1) exclusive experience is a peripheral gain, and 2) by recognizing basic time use needs - thus generating them in more closely spaced time units - there is still room for the peripheral pleasures which time use coordination makes possible.

So for time arbitrage, it helps to ask: what does coordinated time seek to accomplish? Is the services time in question being correlated with basic needs, or is it closer to what people seek after more basic needs have been taken care of?  Does the collaboration represent exclusive or surprise elements (to generate a unique positive experience), or does it call for more inclusive service formation such as one would expect within the context of daily life?

None of this suggests that access to needed services can't provide happiness. However the happiness that results from life saving and maintenance services measures is due to gratitude, rather than the special memories of unique events. Therefore, life saving methods for both disease and accidents, would be a part of core local education for time arbitrage, in coordinated knowledge use systems for services.

Could some elements of healthcare comprise experiential service product which is closer to the happiness of exclusive settings? Absolutely - these occasional settings would actually be quite desirable in local economies. After all, individualized offerings represent unique ways for individuals to learn about healthcare options because they want to, not because they feel compelled to in a "do this or else" office setting. Retreats for alternative healthcare options - in some instances - can be just as inspiring as any vacation. This is one of many options for aspiring services entrepreneurs (individuals and teams), which could go well beyond the daily routines of local healthcare needs.

Experiential product which generates positive memories can be associated with many services. Presentation is important, and variations on presentation are only limited by one's imagination. As services entrepreneurs, individuals can propose ongoing offerings for locals which represent the intellectual challenges they most enjoy. Parts of life which are now associated with thriving economic regions and "special" cities could make any place feel special. The main ingredient? Simply the desire of local citizens, to make it happen.

Wednesday, August 27, 2014

Midweek Market Monetarist Links and Summaries - 8/27/14

(Nick Rowe) Since it's theoretically possible for the central bank to run out of assets to buy, why not start there, first...http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/08/land-vs-helicopters.html
The job of the central bank is to deal with the world as it is:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/08/second-best-monetary-policy-and-the-strategy-space.html

A determinate equilibrium can trump an indeterminate equilibrium, even if it is inadequate (David Glasner):
http://uneasymoney.com/2014/08/22/the-trouble-with-is-lm-and-its-successors/

David Beckworth posts the slides which he included in a recent talk: http://macromarketmusings.blogspot.com/2014/08/talking-about-past-five-years.html
2% inflation target? No. 2% ceiling to an inflation target corridor? Yes: http://macromarketmusings.blogspot.com/2014/08/about-fed-not-trying-hard-enough-to-hit.html

Bill Woolsey takes a closer look at Scott's conclusions in a recent Econlog post:
NGDP targeting in developing countries

Tight money and protectionist tendencies are likely related (Lars Christensen) http://marketmonetarist.com/2014/08/21/something-very-clever-bryan-caplan-wrote-in-2007-on-anti-foreign-bias/

Was 1968 a black swan event? (Scott Sumner) Delong on the mother of all black swans
Scott's response to a Binyamin Applebaum article: The Fed can fix high employment, it can't fix low unemployment
Progressives have been slow to embrace monetary policy: Better late than never, but early is even better
"...debt crisis are the result of NGDP growth crashes." Draghi doesn't understand what caused the eurozone double dip 
So far the EMH still comes out on top - 2001: A Market Odyssey (Shiller out of sample)
Krugman...too much for Paris? French socialists purge far left Krugmanites from government

Some Econlog posts from Scott:

In a response to a Vox article, Scott also notes that targeting total labor compensation could minimize employment volatility: http://econlog.econlib.org/archives/2014/08/nominal_gdp_tar_1.html
As interest rates fall from tight money and damage credit markets, bond prices rise: Never reason from a bond price change
Mr. Bernanke vs. the structuralists

Older workers as long term unemployed? Oh well...(Bonnie Carr) http://dajeeps.wordpress.com/2014/08/22/janet-yellen-writes-off-older-unemployed-doesnt-get-that-it-is-irrational/

These pictures tell a story (Marcus Nunes) http://thefaintofheart.wordpress.com/2014/08/19/ez-fast-going-down-the-drain-now-joined-up-by-germany/
Perhaps the public has "figured out" more than anyone suspects... http://thefaintofheart.wordpress.com/2014/08/25/snippet-of-a-conversation-at-houston-airport/

A trifecta of "central bank sins"? (Benjamin Cole) http://thefaintofheart.wordpress.com/2014/08/23/the-great-conundrum-faced-by-righty-tighties/
...At least he understood monetary policy! http://thefaintofheart.wordpress.com/2014/08/25/richard-easy-money-nixon-shames-barack-know-nothing-obama-tapes-reveal-nixon-wanted-easy-money-and-to-pack-the-federal-reserve-with-monetary-expansionists/

Ravi Varghese responds to Benjamin's "righty-tighty" post: http://insecurityanalyst.blogspot.sg/2014/08/what-kind-of-dollar-do-they-want.html

Evan Soltas looks at some housing factors which aren't getting much attention. Good post. http://esoltas.blogspot.com/2014/08/housing-weakest-link.html

(Kevin Erdmann) "A problem with programs like ACA is that they muddy the usefulness of GDP. I'm not sure they even effect growth rates coherently, except in the very long term." http://idiosyncraticwhisk.blogspot.com/2014/08/aca-survey-from-philadelphia-fed.html
"...there has been a real loss in potential GDP growth, due to the allocation of capital to real estate in lieu of more dynamic productive assets." http://idiosyncraticwhisk.blogspot.com/2014/08/squaring-circular-logic-of-interest.html

Lorenzo does justice to the topic with an in depth post: http://skepticlawyer.com.au/2014/08/27/ahistorical-pomposity-and-gnostic-sneering-why-academics-write-deep-crap-about-neoliberalism/

Hang on! Don't tighten yet! (James Pethokoukis) Here's why the job market is telling the Yellen Fed to go slow, in one chart

Also of interest:

Ashok Rao considers the proposal by Pranjul Bhandari and Jeffrey Frankel: http://ashokarao.com/2014/08/22/a-nominal-income-target-in-emerging-markets/

"There are two responses to technical change. Raise output, or lower inputs. Since 2000 we've apparently been choosing the latter strategy, and that might be how we continue." (Dietz Vollrath)
http://growthecon.wordpress.com/2014/08/23/lower-skill-demand-in-the-21st-century/

Tuesday, August 26, 2014

Notes on GDP Measure and Time Aggregate Considerations

A number of factors appear problematic in today's GDP measures - although some suggestions represent more "practical" concerns than others, of course. Happiness...do we really need to be able to measure that? Even though doing so appears impractical, this seemingly elusive factor would not actually be that difficult, were time aggregates a part of traditional measures. After all, the ability to optimize time use potential could bring happiness factors within reach of one's economic outlook. Even though much about happiness involves personal decisions, it certainly helps to have more economic choices with others in our midst, to make that process easier.

Local coordination patterns would mean gaining better control of our time, through direct negotiations with others. One good argument for the utilization of time aggregates (services time use potential among local groups) is that immigration would ultimately come to be perceived as a positive - rather than a negative - by many. How can citizens have positive perceptions regarding "excess" immigration, when nations impose severe limits on their members who are allowed to heal? Should the capacity for healing be opened to all members of society, few would still be perceived as outsiders who supposedly only want to "take" needed services from others.

One common argument as to the "inadequacy" of GDP, is that technological advancement is not easy to factor into societal gain through economic measurement. However: this argument often has an underlying implication, which questions the need of citizen involvement as vital for future growth. Who needs the economic time representation of people (on a wide scale) if automation can do the bulk of the work?

For me, this line of reasoning is a fallacy, because economic activity is part and parcel of human life. No one can afford to be fooled into thinking that wide swathes of society can somehow go without meaningful work and still be able to retain integrity and identity. A primary reason we realized such gains from technology in the past, is that it freed us for more challenging intellectual work. No one can afford to stop this process now, just because of the institutional hurdles in the way of direct use of our digital realm for the benefit of all.

What's more, going too far with the idea of robots as the only workers necessary, could present problems for time use as a sufficient monetary anchor. That would be the case not just for market monetarists and economic activity in general, but for everyone at a personal level. This is the time to be moving ahead and making decisions how to spend time among one another - not insisting there are no ways to reasonably do so. Lest anyone forget, humans are central to economic activity. The work that people seek is every bit as much desired consumption, as any vacation. One only need look at forfeited vacation time statistics in the U.S., to get a feel for the forms of consumption which people actually desire.

However there is a more immediate issue, which presents further difficulties for GDP measures. Production measures for services had already skewed GDP results in recent decades, but calculation and measure of present day healthcare is becoming even more murky. Unfortunately, healthcare uncertainties are making it difficult to accurately pin down quarterly components, which impact ongoing economic flows at multiple levels. As Kevin Erdmann recently noted about the ACA:
Frankly, in an industry so screwed up, I don't understand how they can begin to account for economic activity. What is the market price for a medical procedure that is "billed" at $2,500, but settled with your insurance company for $200, with a $20 co-pay?
In a recent post I looked at historical timing in the U.S. as a possible factor for healthcare monetary confusion, in that its current structures were formed when government taxation was also increasing. Almost from the outset, there were hidden costs and redistributive structures which were all but impossible to disentangle. In the above linked post, Kevin Erdmann also noted problems which healthcare presents for inflation, which - while present in education - do not show up in statistics to the same degree.

All anyone can really presume is that education is at least obvious in terms of what is expected of those who participate. That in turn makes the monetary flows easier to understand. Whereas nothing about healthcare is obvious: whether it be one's personal health outcomes, how much money might remain for administrative costs and expenses at the end of the quarter, or even what insurance can be expected to cover. While aggregate skills capacity is needed in all areas of our lives, skills and time optimization are desperately needed in healthcare to assist in some of these uncertainties.

Otherwise, not being able to measure monetary flow and adjust accordingly, is like going down the road in one's vehicle, and not even knowing what gear one should be using. In all of this, it is important to remember that GDP is not a static concept. The essential nature of GDP is that it represents economic flow. There are aspects of income which shape shift within the flow for past and future concerns. But healthcare has become one giant shape shifting monster, which is dependent on factors which go well beyond the economic flows of the present. This situation only becomes more untenable as time goes on, hence it needs to be addressed.

To be sure, time arbitrage is the high hanging fruit in the tree. Just the same, it is still well worth the harvest efforts that would be necessary. If services are to remain a vital part of tomorrow's economy, everyone's time is needed, in order to make it happen.

Update: I neglected to link to an article from FT Magazine earlier this summer which questioned whether GDP had outgrown its usefulness, hence this post serves as an apt "parking spot".

Monday, August 25, 2014

Sometimes, Change Just Happens Before We're Ready

For all my talk about needed change and progress, today I unexpectedly find myself in...an environmentalist position? At the very least, commenters might call me a tree hugger! After not posting yesterday I was determined to make headway with a pile of notes on the desk this morning, only to get some unexpected news. In a sense I should have known because the warnings were there: survey markers were going up around my walking trail but I didn't pay them much mind.

Then, another walker I've seen on the trail for the last three years told me, "They're getting ready to build a softball field. Apparently the work starts in two months." Another short walking trail had recently been laid in the new city park on the edge of town. Except the new trail seemed like the afterthought it really was, hence held little appeal. As a result that only increased the traffic of joggers and walkers on this (longer) half mile trail, which loops back and forth through a mature grove of pecan and oak trees.

No wonder the mention about the softball field was buried somewhere in the local paper where few would even notice. Why was this little strip of school property chosen for a makeover - situated as it is between the two football stadiums - when other properties would have provided more room? Just thinking about the old pecan trees - which will likely be pulled out of the ground - is like pulling out a piece of my heart, and the work will begin in the middle of this year's pecan harvest.

Of course there's plenty of other pecan trees, for they grow wild in this part of Texas. People have picked up pecans freely along the walking trail for years, much as they do in other public areas. Still, this grove and trail is in a welcoming spot, where people have always felt free to exercise or just relax and watch the passersby. In small towns where Main Streets are not much more than pharmacies and a few lonely businesses, it means quite a lot to have places on any day of the week where one can be outdoors in trusting environments.

One older tree by the parking area is well over a hundred years old. I still look at it and remember Dad scrambling up the trunk (shortly before his ninetieth birthday), to shake down pecans we couldn't reach, some years ago. For many years, Dad has paid school taxes from the pecans he's been able to sell. For me it always felt more rational to just pick out as many pecans as possible to eat at home. But then...exercise is exercise!

As Joni Mitchell sang, "You don't know what you've got till it's gone." I never even started my two mile a day walking regimen till 2011, and the trail was probably built years after my high school graduation. Twice a day I've bicycled in recent years - early morning and evening - to the same area where I began and completed the education of my youth.

Property decisions such as this are of course the school's prerogative, for they have much more money at their disposal to determine public areas than the city does. However like so many things school related in small towns, that tends to skew resource use for local activities towards people who are still quite young, along with their parents.

That's why the local football stadium might seem incredibly over the top to some, given the relative lack of resources in other shared areas. And yet, most families are going to appreciate public areas given over to group sports, more than general use areas...right? General use areas must be for older folk such as myself, who often walk along in solitude. Don't older people just want to stay home and watch TV? Or so the rationale apparently goes.

Like others, I'll adjust to the tiny trail that was added to the city park on the edge of town. It will probably become the new morning spot, where I can organize thoughts for the latest post. Even though the stay in my old hometown is of a temporary nature, this particular change just happened to come along before I was ready. The shade and comfort of the pecan grove will always remain in my memory.

Saturday, August 23, 2014

Notes on Nominal Targeting and Services Potential

In recent years, more individuals are considering the possibilities of a NGDP level target for greater economic stability. However there are still some unknowns, regarding the long term viability of a nominal target. Worries about needed skills sets in the marketplace still translate into long term uncertainty. Could lower employment levels negate some of the primary reasoning behind aggregate spending capacity?

Should the contributions of income and wages become less than a nation's commodities markets, supply shocks could become greater problems in nations which lose employment over time, even as they would be measuring income and wages as a component of the primary anchor. These issues are worthy of consideration, as developing nations also consider nominal targets. Low employment in relation to commodities could make a nominal target problematic in some circumstance.

How can the U.S. return to a full employment trajectory, and move beyond the obvious constraints which remain since the Great Recession? Even though labor force participation is still varied and complex in developed nations, more needs to be done in the years ahead to ensure it remains so. Without a doubt, a nominal target would be an easier sell to the public, if it also plays a role in overcoming labor market deficiencies. Even though monetary policy alone cannot bring about full employment, the degree to which it can assist the process, has been obscured by the fiscal and monetary battles which are far from resolved.

One recent aspect of the fiscal/monetary debates are fiscal helicopter drops versus open market operations on the part of the Fed. Nick Rowe pointed out in a recent post that monetary means are better than helicopter drops, because something remains after the fact of open market operations on the part of the Fed. There is still tangible wealth, should the Fed buy land instead.

Even though this makes more sense for Fed purchasing operations, a problem remains in that the value of land and related assets mostly reflects the value of skills sets which are being utilized in the marketplace. Presently, asset holding is frequently a strategy for needed skills sets which often cannot be taken for granted.

If skill sets are artificially limited, asset value and hence growth potential are also limited in aggregate. This also has bearing on the fact that the Fed can only support additional growth in the marketplace when it sees those efforts in progress. In other words the Fed cannot generate additional growth on its own, without coordinated intentions from supply side efforts in the marketplace. If it seems as though the Fed has more power than anyone else, some of that could be a result of self inflicted wounds all around.

First, the Fed needs to be aware of intent on the part of the public to generate new growth, and advocates for growth do exist. Perhaps next year instead of Jackson Hole, there can be a growth summit so that advocates from around the country can meet one another for the first time. (Hey a little daydreaming doesn't hurt!) Once the process of community projects is under way, the Fed can provide assistance for the incorporation of these activities into the measurement of GDP. Ultimately, compensation for these new economic projects can be explained on terms which are understandable to the public.

The fact that only so many jobs can be generated either through redistribution or production residuals, has slowly placed a cap on the amount of growth which has been possible. Fortunately,there is a way to overcome this problem: make services standalone wealth which count on monetary terms. Where government backed services and private profit can only generate wages and income up to a point, compensated time arbitrage can continue past the old boundaries.

Why is this the case? When time use is coordinated equally for local services needs, each matched hour leaves no remainder which needs compensation from redistribution or other profits. In other words, there is no debt: hence matched time becomes a standalone source of new wealth which is also monetary in nature. Even though local services might still have some characteristics of the earlier fiscal backing, they would no longer be exclusive and restrained to strict knowledge use choices. Knowledge work would only be limited by the available time on the part of local residents.

As standalone wealth, it would become possible to think of services on monetary terms. As a result, communities and regions which adopted these systems would be able to generate both work and product through their own capacities and resources.

After a certain point, this would make the newly created wealth of services just like any land, commodity or other asset which could in turn receive backing from the Fed. In other words, services formation as direct standalone wealth, could eventually become a part of open market operations at the Fed. The only limits to growth would be the actual limits on local time use coordination, for services.