Sunday, June 30, 2013

When Knowledge Use Is Limited, "All Good Things Must Pass"

...Yes, thankfully, only eventually. Civilizations generally prosper for a quite a while before the Taxman wins out. And, the prosperous good times generally last long enough, that to see the real connections between redistribution patterns alongside limitations in knowledge use is an "inconvenience" to the status quo. If we could condense the idea of economics to the thought of a small village where a few locals have a locked money (skills) chest which is mostly brought out for special occasions and bragging rights, i.e. honorary healing perhaps, it becomes easier to see how eventually no one really gets healed anymore. And that's healing in a direct sense...let alone the healing that needs to happen between disciplines where sickness generally occurs in a body's connecting points. Much of economic life is like that as well.

Better than any science fiction novels, which provide better opportunities for retreat and reaction than real offense (yes I'm diehard non fiction), are the countries which show - how in fact - good things do eventually pass. Being the oldest by ten years, one might say my brother was lucky in any number of respects, for he had a chance to learn not to do what I generally learned from doing...yep, the hard way. (By the same token I inadvertently tend to make people grateful for what they have...) And so Greece is like the "older sister" that my country would do well to learn from (HT Marginal Revolution), in terms of safeguarding what we still have even in the face of inevitable change.

By no means do I mean any literal translation. For one thing, many in the U.S. do not have the same kind of close association with agriculture - on any number of levels - which people in Europe have, and thus job market hopefuls here are highly dependent on the knowledge based skills they still hope to tap into, in the 21st century. What encourages me, as to the above link, is knowing that not every intelligent individual in Greece has "left the premises". And by no means should anyone leave their knowledge skills unused, just because one's nation is finally falling down in the job of supporting said skills. It's mostly a matter of thinking about knowledge skills use differently. Plus, anyone who has been keeping up with these posts knows I'll be "hunting" for further rationale as to starting from the same vantage point, in terms of knowledge use, because I believe a whole new world of potential is opened up by doing so.

However, it's not so much the healthcare angle I wanted to touch on here as the educational angle, which is also a continuation from an earlier post. Even though the monetary valuations of teachers are not so limiting (for economic access) as some skills sets, we are nonetheless running into limitations problems as to actual ability for students to hope for teaching positions, even with a PhD. As for new educators still capable of being "folded in", monetary rewards are no longer as reliable, given the associate positions which are the most commonly available in the present. And in the humanities, fewer students than ever major in these areas for fear of not finding work afterward.

Communities have the capacity to stabilize education and make it far more relevant (especially in economic terms), but I want to address some important underlying questions which don't always make into the discussion. First, how do we not only preserve, but also expand those aspects of education which hold such meaning for educators, students and peer to peer participants at individual levels? Social settings matter, although not necessarily in the forms we tend to utilize now. Much about the settings we think of as "holding" education need to be reconfigured into wider definitions of both form and space, especially in that some of the more public settings involving large groups need to move towards special occasion and other spontaneous gatherings.

What really matters is getting away from sterile routines where knowledge is taught with little immediate purpose or larger connection, something a charter or private school could be equally as guilty of as any public school. (Jonathan Finegold's quote of the week seems appropriate here.) While it will always makes sense to bring individuals together in similar timelines, they need to be able to easily adjust for individual circumstances, and ongoing activities which do not necessarily involve entire groups. Just the same, the process of reestablishing community trust at local levels, also means making much of the environmental redefinition of both work and education activity as public in orientation as possible.

A second question: how to further integrate local efforts into a collective societal level? Not just in the sense of coordinating both ongoing education and work with the use of our own time sets, but making this activity renewal a way to actually solve larger issues that today's institutions grapple with mostly in their protected domains. Somehow, we can evolve the idea of education back into the idea of ongoing community economic activity of all kinds: therefore not just in the limited sense of apprenticeship connections with business, by any means.

The school experience is quite important for anyone, even those of us who didn't necessarily feel like a central element in the process, perhaps! Rather than abolition of schools in community (which only hurts them further), the idea is to make them more open, informal and casual in broader orientation, while somewhat more formal and specific in individual orientation and work/activity related contexts. In other words, break apart the silos so the real work of life can once again take place  amongst the grounds that exist between them. By so doing, the arbitrary timelines of graduations and consequent social exclusions those graduations imply, can also fall away. Which would also mean the ability for all members of community to remain in combined processes of coordinated work and related education at any point in their lifetimes.

One of the greater paradoxes of late is the implied need to let go of the greater hopes for our own  efforts, which were supposed to be so important in the first place. And the fact that we believed our own abilities important enough to invest in, should tell us that what we deem vital is indeed important to others as well. There are ways to make that knowing matter, for all who believe it is worth the time to invest in knowledge - whether by money, or by the use of our own time and dedication. When nations can not realistically support their citizens efforts, by no means should a nation's cities and individuals be crippled because of the lack of resolve on the part of their power holders for economic progress.

Saturday, June 29, 2013

Skills Sets and Time Choice Optimality in Arbitrage

While the blogosphere is a bit slow, this is probably a good time to get into more basic aspects of my work in some upcoming posts. How might we think of skills arbitrage differently from - say - the skills we utilize for a job, the way we would pose our skills identity in a resume, or even the skills one might imply from similar groupings in time barter? While most of these are based on valuations derived from societal factors (i.e. exterior valuations), the skills arbitrage sets which we consider under a total or common pool composite, are based on interior valuations which make the best use of our personal time primary, to the greatest extent possible regarding what is "doable" with others (agreed upon by both parties) at any given moment. Again, the fact that we approach our time use from the same starting point makes it not only possible to seek out those who utilize time from similar (multiple) levels of engagement, it also allows us to make better educational choices for time use in an overall sense.

Oftentimes a resume, in that it asks us to list what is relevant regarding our provisions for the workplace, is not so much about us. Rather, it is about what we have actually been able to contribute to the companies or individuals which hired us. In other words, while some of our skills may be reflected in a resume, chances are they could be a limited aspect of our abilities. What's more, those aspects do not necessarily have a practical, primary or even ongoing component in our daily lives. Or, if our paid work is of a more practical nature, there's a good chance that in our off time both our minds and metabolisms will understandably crave the chance to do something completely different. Being able to do so - in turn - further energizes us for the paid work we undertake.

What's more, our skills sets beyond the identity of paid work are not just about hobbies or extra interests, which once were a part of resumes. Skills sets are everything about the ways in we actually approach our lives. Not only do we change skills sets over the years which we routinely tap into, the ones we are the most adept at are not necessarily those which  provide the greatest challenges for us in the present. Some of those more substantial "natural talents" may not even be among the ones we are conscious of, such as the individual who normally manages household finances, for instance. Plus, we do not have to be particularly good at a given skill in order to enjoy it and even to spend time with others engaged in that skill, in some way. We forget sometimes that learning processes don't necessarily "happen" amongst two individuals of noticeably different skill levels, but just as often between people who are approaching similar experiential or validation processes through other aspects of commonalities. Equal time arbitrage matching allows this to happen in recognizable, thus measurable form.

One of the bigger problems with skills barter in particular (besides government interference which shuts barter down, of course) has been the limited terms in which people tend to approach it - that is - mostly as an attempted replica of what people do in the workplace...only without the money attached. This becomes a problem in that what people are really trying to do is gain the better arbitrage for the value they perceive a "job" set as holding in the workplace, instead of the optimality of their own internal time structure as coordinated with that of another. In other words, the arbitrage value for skills barter is perceived as external to the agreed upon setting, whereas skills arbitrage represents not an external optimization in an immediate sense, but an optimization of one's own time use given the most important challenges of the present, as able to gain match potential to others with similar sets of challenges.

For instance, even though music has been a big part of my life, I finally reached a point (ten years ago) when it became apparent that I would need to set aside the time once given to music, for the new sets of challenges in my life which took me in a very different direction. That doesn't necessarily mean I wouldn't teach piano again, (along with music theory) to someone in the present if circumstances permitted. It only means that teaching piano is no longer a practical primary skill set I would reach for in arbitrage settings, unless it was in fact the main skill request by someone who was high on a list of my own time priorities for other reasons.

The reasoning (behind such a decision on my part) matters for anyone who is seeking the best means by which to apportion their time in overall context, and there are multiple facets to the reasoning process. Part of my personal reasoning, for instance, had to do with the actual importance music once held for me, let alone the separate fact that it was no longer able to remain viable in an economic sense. How so?

The way we approach a discipline is very important, given the degree to which it demands our mental faculties and how others expect us to apportion our time for whatever reasons. In that sense, familial or societal "permission" are quite the same (Or, a partner saying "no" to our going back to college is like the workplace which demands at least 40 hours of our time). A most appropriate example in this regard are doctors. As they find their time choice options further decreasing, some are now simply choosing to opt out of the profession altogether. What's important in this regard is the degree of sacrifice a discipline requires, and why in fact the expected sacrifices and requirements actually exist in the first place. For doctors, the basic problem ultimately became an exterior (societal) imposition of time sacrifice, rather than time choice. However, unfortunately, the societal response was also rational, given the self limiting nature of healthcare skills sets from decades, even centuries earlier.

For myself - as regards to the practice of music - there was also an interior time "imposition" which mattered in a very different form: one that existed because of the additional role music also held for me in a creative sense. When we find ourselves compelled to approach life in creative ways, to a degree that is an innate impulse. In other words, such a faculty exists even if we don't particularly like what results from its use! Consequently, we inadvertently end up challenging status quos which we don't particularly want to upset. For me, an early experience in that regard was with a music theory teacher who became frustrated when I wrote songs with minor fifths, even though there was supposedly "no such thing".

What that also meant in a larger sense (for time priority) was that music mattered to me - a lot. The problem in that regard was that if I gave a little time to music, I would often end up wanting to give more time to it, which represented an imposition on what finally became more important responsibilities, as the opportunity costs of remaining in college in the early seventies were a bit higher than the present in wage based terms (long story short...the "you need to be a secretary" lecture). Only when the choice of office work became unsustainable a couple of decades later, did I finally return to music in a serious manner (along with bookselling) and continued until the changes of the 21st century proved too great for many musicians to commit to staying with a band. And my back "gave out" when I tried to move keyboards and equipment around on my own for too long.

In other words, many different kinds of factors come into our choice sets: some of which are because of our own internal circumstance and valuations, and some because of the external circumstances and valuations of those around us. If it is not always possible to think about the differences, to a large degree that has been because of the fact that valuation of our skills sets have been societally externalized for so long. That's the part which will need to change. In the next post I'll explore some more skills options choices also from an educational perspective.

Friday, June 28, 2013

We Will Not Go Quietly

What ever happens in the near future, one thing for certain: it will not be quiet. So perhaps we still have a chance for good (as in stubborn good) outcomes, instead of everything economic (hence political, etc.) turning out really lousy as it threatens to, now. When people come around the neighborhood with signs that say Impeach Obama and someone has put a Hitler mustache on the president's image, and no one sees a problem with that but puts it on the front page of a local paper? Yes Obama is quite clueless but he certainly wasn't the main source of many problems we are dealing with now. So, if any president is ever going to listen to the public, people need to present some unified objectives to him or her that actually relate positively to one another, instead of conflicting with one another. That's usually what people in power hear, the conflicting versions of what everyone wants.

There is a Don Henley song from 1989 which slips into my mind, still. That song seems all the more significant, when it appears people are ready to give in to a supposedly "inevitable" decline. In the past, certainly there were economic declines which were not preventable. However, I would like to think that today, the long term stagnation "knocking on our door"  is imminently preventable. In times past, people tended to think of solidarity in terms of highly specific groups and values. But today, the need for solidarity is different, because the individual solidarities of the past finally worked against the common interests of our humanity. There is tremendous need for people to pull together in a societal sense.

Turn this thing around.
I will not go quietly.
I will not lie down.
No I will not lie down.

If only I could talk about all this without my emotions getting caught up in the process. But I continue to be afraid that people are giving up. So, this post will also pick up from the last one, where I spoke of possibilities for coordination in terms of environmental reform, in which we also allow trees to turn into old growth forests we can walk under, instead of cutting them down to bring indoors and finally subjecting to termites. No, I didn't quite say that in the plastics post, but it certainly was part of the implied reasoning.

How to coordinate possibilities that actually relate to each other? Domestic summits are one approach, even it they might have to be planned to take place in another year or two from now. Just the same, here are some ideas: Strategies for communities which would be starting from scratch could look at everything from walkable solutions for living and working, to how local building and construction options could be carried out by participants in the community.

For those communities which would be interested in skills arbitrage, a summit which explores the variety of skills people want to utilize amongst one another would be quite useful. For any who are interested in follow up potential, further classes as to group arbitrage settings could also be provided. Both of these summits could also look at the kinds of public environments that participants might want to create for work and retail space, to see how many similarities participants actually share.

Also, a summit which explores building component potential would be especially important, for those who wish to get into more technical and infrastructural aspects of the environments which participants actually want. Some would want to see how these environments could be put together in flexible and changing patterns depending on season, or exploration as to work adaptations.

Of course the most important aspect regarding these ideas are the legal requirements to make lifestyle and environment reforms possible in the first place. This is true not just for new forms of zoning and regulations (in adopting areas), but also in terms of knowledge use among all the participants themselves, who would have extensive preparation ahead of such a move, were such a community to take place. Perhaps the biggest difference between these possibilities and the kind of cities Paul Romer envisions are that the participants create the desired environment through sets of agreed upon options, and the efforts to do so would generally be in a nation of which a group already belongs. So the legal activities required to make it all happen, would be in nation processes.

If any of my readers are interested in such processes please let me know. Or, if any of you have heard about things such as this already being tried, that info would be most useful! Ultimately I want to explore these options in some form, and eventually I want to be able to travel, in order to do so.

Could Plastics Provide Liftoff From The Zero Bound?

We know where a lot of the "slow motion" money has's "parked" at the point of interest on reserves so as to provide support for already existing housing. Certainly, that policy of monetary support was needed to stabilize the economy overall, even though too much emphasis was placed on housing and not enough on unemployment. But now, it is time to start moving money back into broader markets overall and begin the focus on generating real economic momentum. The Fed told us many times it could not do the job alone, and as citizens we need to start helping ourselves. The best means to do so? Provide more incremental ways for everyone to move ahead into the future. In order for that to happen, the versatility and potential of plastics is the best place to start.

To be sure, some will be able to resume ownership in the homes which are coming back onto the market. Just the same, this particular method of local wealth creation is already being acknowledged for the extremely slow growth  it actually represents in the present. Only a limited number today can reasonably expect to own property in a "traditional sense", as legally defined in the U.S. But that is no longer true just for consumers. Business possibilities of all kinds are limited, in large part because of today's outdated zoning and codes. Many businesses could make the decision to retain people instead of building robots, if their own building codes were freed by the potential of lightweight and strong building materials that plastics could become.

Our landfills are already full of the very material that could be adapted to the printing capacity of 3D technology, which also means local manufacture of snap together components for construction possibilities would be doable anywhere. Each piece could be amenable to technological innovation as well, making many of the extra functions, expenses and other extreme aggravations that go into homebuilding completely unnecessary. There are few better examples of the possibilities of good deflation, than allowing technology through plastics use to greatly simplify our environments, just as technology has expanded and deepened our communications.

However the best part of all: the incremental ownership that such processes would make possible, even for those with the smallest of incomes. Because of its mobility and flexibility, plastic could give us environments that we can shift about, repurpose, and put together again as needed. That would allow us to find out what actually works in the present, for living and working amongst one another in new ways. For any community that wishes to start anew, working with plastics to make a more survivable world for all participants is the best place to start.

Use of plastics would also make it possible for people to experience ownership without being overwhelmed by the process. Not all people, as they age, have the ability to provide the maintenance for traditional structures which often need extensive remodeling with each passing decade. Even brick homes with only limited wood framing and walls eventually succumb to problems with water, plumbing issues and insect infestations. Pull apart components, on the other hand, could simply snap into place (even as primary support), making expensive remodels of bathrooms and kitchens completely unnecessary for those who cannot afford to take them on. DIY could become something that no longer need destroy relationships, finances and one's health in the process.

The very idea of sticky contracts and wages in the marketplace can slowly be busted apart, as local economies adapt to more flexible and incremental means for economic growth. Any community that takes on the challenge of environmental renewal can provide inspirational examples for others, not to mention the potential of doing so with materials already readily available at home to a large degree. Also, land use can become more oriented around the actual, always movable location a citizen chooses to utilize at any given moment. That would also allow a more coordinated public orientation, which citizens can readily combine for one another as needed and desired.

What of the larger coordination that would be required to make any of this possible? To be explored in the next post...

P.S. This note is to "park" a link, "Brain Sets Prices With Emotional Value". It's a good fit, regarding what people may need in terms of living options and what actually gets offered to them, i.e. the "emotional" response to buy. From Eureka Alert, HT Mark Thoma.

Thursday, June 27, 2013

A Summer For Seeking Focus

For a number of years I lived in a two story house where - when one descended the stairway; at the lower level was a picture containing an image which at first glance made little sense. However, if you were able to look at the picture in a certain way, the previously unidentifiable image would come into focus. Some people were able to look at it just right...

I never found the image! There are times when I still feel as though my focus is not sharp enough now, even though the picture I seek is in my own mind, and no longer a literal one at the first floor of a house. Just the same, this has become my summer for seeking greater focus, even though the heat of the South tends to slow me down. There's a darn good reason why people vacation this time of year...Even in times past when more people worked their gardens and farms in a serious way, a lot of that work tended to get done before the sun ever came out, so that one could take advantage of what coolness there was to the day.

For some, spring feels like the "starting point" of a year. However, for me, it was always the longed for coolness of fall that seemed to inspire new beginnings, along with the start of classes and new semesters. The logical question then might be, why not just cut back on the workload till my energy level is higher and it doesn't take a cup or two of coffee to get started? Life doesn't always offer up opportunities in such readily definable chunks, and for several reasons it feels important to really use the time I have now. Or, shorter version: life is short!

How to express the picture that is hard to see? (Some days are clearer than others) In somewhat wonkish terms, perhaps my "search" could be expressed as: how can greater efficiencies be had in an aggregate sense - efficiencies that are nonetheless a net result of individual motivation, aspiration, and spontaneity? In a post yesterday, I explored a few aspects of individual effort which do not connect up in any realistic way to larger realities. Even normal economic thought would characterize underutilized potential as waiting for inclusion and possibly depreciating in the process (wow, multiple meanings there).

But it's not as easy to speak of the ongoing mental and even physical energy in economic terms, which is expended in seeking economic and social inclusion. With today's measurements that capture mostly the physical product, our ongoing efforts for economic access tend to show up in GDP when we buy the wardrobes, the transportation fuel, and maintain the car for the job interviews. Plus, considerable extra effort to maintain economic inclusion was expended prior to the Great Recession, when business start up activity was still more readily observable at local levels.

In the past two months, I've begun to explain how the process of redefining economic circumstance might "feel", or be expressed. But I need to do a better job of connecting dots in ways simpler to understand in an immediate sense. After all, these are not just problematic issues for the U.S., of which I am a citizen. Continuing growth is an issue for all nations which have experienced slowdowns in similar fashion, in spite of seeming advantages of developing nations for quicker growth in the present.

Ultimately, it's about bringing skills into the mix as an integral component. If anyone really thinks about that, they start to realize we can't just slide potential knowledge and skills wealth in around the edges of our current reality. Whatever happens also has to actually feel like the progress of recent decades. For that to be truly possible, we don't just liquidate with fire sales for"extra" skill and aptitude into bottom feeder wage schemes...also not a very inspiring approach for education in general. Nor do we keep trying to unilaterally lift all wages to somehow reach the unrealistic terms of living, as defined in low technology and high maintenance settings.

Instead, we have to reconfigure the important tasks of our lives in ways that we share the most integral elements of those tasks, with all who wish to take part. By the same token, we share the work that robots can't do which we have previously tried to fob off on the first unlucky person that comes along, including our own family members. There are ways to practice democracy that don't leave us constantly impoverished by the actions of others, and by which we can also improve our own condition. But to find them, we have to bring the greater goals of our institutions out into the open, where we can actually put them into use for our own destinies.

Wednesday, June 26, 2013

Statistically, I Belong To A Group That Can't Be Trusted

There are, of course, many of us in this significant group. But perhaps it is in the developed nations of the world - where we are supposed to be the most responsible for our economic livelihoods - that we may in fact be held in the most suspicion. For the developed world is mostly made up of environments which don't leave a lot of room for hardscrabble adaptation or random settings. Therefore, as long term unemployed, we are generally hidden in surroundings where others still have well understood and specific ways to interact with one another. Whereas, without a job to go to, we have choices along a certain limited spectrum, but those options don't readily intersect with the choices of people around us. Therefore, we may find our own routines and stoically maintain them, but when we are around those who don't know us, the unknowing itself may still create uncertainty in some settings, regardless of our actual reactions to the settings themselves.

And - as a group - our reactions to this odd set of affairs run the gamut from acceptance to despair, each duly noted by society in its turn and mostly from a safe emotional distance. In particular, anger is the potential element which people are the most compelled to respond to and guard against. There are - fortunately - the peaceful moments when we can accept our fate with equanimity. Yet, the fact that we sometimes win our personal battles doesn't readily translate beyond ourselves. Whereas when an employed individual wins such battles, there are positive effects that can go well beyond one's own personal sphere, into one's community.

What's more, there is presently no cohesive roadmap or playbook for any of our actions or responses; no broader context for our focused efforts and oft remembered previous commitments. The playbooks that exist for others, work mostly for the emotional shadows of yesterday that we continue to wrestle with in our dreams. If we are older, others probably do not question that we hold back from obligations we can't actually make. But if we are young, the holding back can be readily misunderstood as to the logic it may actually hold, regarding our own recognition of our additional limits and boundaries. Others may persevere just the same for our commitment in the spirit of a conquering force, or they might observe our sanity, try to capture it and transmit it into some form of subservience. Yet the very acquiescence to such intentions can change our own equanimity and autonomy into something else entirely different.

We are fragile, and yet in certain ways we are not fragile at all. For in long term unemployment, we are exposed to the ragged edge of life's greatest challenge to find the intention in our destiny. What might have been an ordinary "garden variety" denial, is brought into sharp relief, by the mirror of ones own rejection. Whatever we ignored before only comes to visit again in the too open morning, if in fact we did not relive it in the night.

Why can't we can't be trusted? Because we undermine your feeling of personal stability, of certainty.  You may feel confident enough to trust me directly, but to do so means you take a chance on giving in to other confusions. By allowing me into your world, the lack of an economic anchor in my own can make you question some of the aspects of your life which you would otherwise, unthinkingly and comfortably take for granted. By turns you might feel pity or even a mild form of resistance to the nature of my own response to circumstance. I am a part of that thing which is not supposed to happen on any number of levels, and the fact that it happened anyway has no ready answers or solutions. By being unemployed, that makes all of us in this group the biggest question mark society has: did we bring such circumstances about purposely, or is this something that can even be helped?

Shake It Up! (Turn Over Pyramids, Zero Bounds and Various Bloated Bottoms)

Who remembers The Cars song by that name, from 1981?

Not long ago I wrote a post which referenced Maslow's pyramid structure (should have included "Maslow" in labeling system...can't find the link!), and afterwards thought about the fact that he exaggerated the bottom of the pyramid, thus implying a limited importance of the upper portions. Of course, that might have been his impression because of a research focus on successful individuals. Still, those designations of aspiration (which also matter for happiness in general) didn't necessarily appear to extend to the overall population in any aggregate sense. Ouch!

However, through both formal education gains and the digital realm, a greater appreciation of the upper portions of the spectrum is now commonly acknowledged, which probably accounted for multiple takes of Maslow's hierarchy of needs pyramid in these images. I especially liked the one where someone scrawled Internet on the bottom portion! Some pyramids in those images had been reconfigured in such a way (a less bloated "bottom"), that various attributes were spread much more evenly throughout the entire form. Not only does debate continue as to what is particularly relevant in the Maslow pyramid - but in a related note, U.S. food pyramid issues never really got "resolved", either. For instance - until 2005 - one version had a bloated bottom which my metabolism considered to be way too much bread. Finally, USDA replaced its 19 years of pyramid with suggested portion sizes (now called My Plate).

Of course, one problem for us is that we don't have much room for the upper portions of a Maslow hierarchy of needs in a monetary sense, which represents human skill potential. At the very least, this neglect of happiness factors might not be an especially new problem, as civilizations have often taken advantage of especially stable periods of prosperity to "build out" as much as humanly possible. There are a fair number of ancient pyramids around the world which attest to such prosperous periods in time. For all we know, people are happier in time frames when such obvious prosperity doesn't exist, but for now that's just one of life's mysteries...

Now there's a paradox...why would people crowd out "upper quadrants" of happiness potential with overwork (and under technology) for the more basic components of life such as housing? This paradox of  "more than necessary" housing also accounts for one Keynesian mystery of the present: why didn't the need for work disappear, as society prospered?? (hint, giant mortgages to pay) And, of course, for those on the other end of the spectrum, why haven't we benefited more from good deflation by now? Hint, the "inflation" that dared not speak its name, in the form of lifestyle grandeur for paupers and all...

How, then, does all this tie in with the zero bound? Perhaps one might think of the one percent as the top of a "pyramid scheme", but it's really about the fact that today's interest on reserves took up more "parking spaces" than ever should have been necessary on the first floor. Where once adequate flow existed throughout the entire monetary system, the zero bound was also able to capture a tremendous amount of basic life needs, all wrapped up with a bow as though they were societal upper aspirations. Healthcare - as it is presently defined - certainly counts for this summation, in that it presently "eats" money in ways not unlike housing itself. Nominal targeting is one way to think of making the bottom less bloated, so that money becomes freed up for all the activities that make up our lives.

In a way, the last food pyramid, with its vertical wedges, made me think of the greater balance which NGDPLT implies. However, the same confusion which existed as regards to that previous food pyramid, seems to exist now whenever the fluidity of actual components are taken into account for nominal targeting. To shift the pyramid to a smaller base, we can focus more on the entire structure, and less on the moving parts near the ground floor. Let's "shake it up" and get money back into motion.

Tuesday, June 25, 2013

Why No Storied Examples, Of The Economic Lives of Our Communties?

Yes, this subject may seem a bit mundane, to some! I managed to get a "second wind' for writing on this hot summer afternoon, but there's nothing as dramatic as the recent BIS report to get me riled up! Since there's not a lot of blogging "bandwagons" to jump on at the moment, I'll return to some earlier thoughts re an activity I never actually had the nerve to do: that is, stand outside a Wal-Mart entrance to ask people, what is the source of your income? Do you have a viable job circumstance or is government helping out somehow? Some people might not have taken kindly to such questions, so in those days I mostly just talked to people I knew about those issues. But I always wondered what the answers would have been. Perhaps it was the result of living in an area where few people had good jobs, that made me so curious how people were actually "getting by" in the first place.

Behind those questions lay a deeper one: how were countless small communities actually taking care of themselves, economically? There was a time when sociologists used to hang around various communities asking a ton of questions and then reporting or writing books on the results, but I don't remember examples of economists doing the same thing. Was it just that economists were concerned no audience existed for such studies? As a bookseller, I would have taken a chance on multiple bookshelves of such results, were there economists curious enough to take on the task.

Think of all the unwritten histories of multiple entrepreneurial and related economic efforts, that have taken place in these backdrops and community contexts. Who succeeds, who fails, and why? How do people continue about their economic lives when efforts at self employment don't work? Of course a couple of newspaper articles and evening reports may materialize - most often for a long term business - but not much more. How many stores along the main and side streets close their doors, without so much as a memoir or recollection as to their passing? Or, how do people go about providing needed services for themselves, after service providers  and other related institutions come to town, only to leave once again? Sure, reporters often show up or call when it appears a business is in trouble, but that becomes the end of the story, as the community moves on to other matters. Perhaps it wouldn't matter, if people didn't have so much of their lives and resources wrapped up in these ongoing efforts to be a part of the destinies of the places they live. It is as if we are programmed to look the other way, when so many among us take substantial risks and yet fail.

We detail and document the expectations and actions inside of family and institutions, so why not the intricate economic relationships and expectations between those who take active parts in the environments which hold our institutions. These individuals are quite dependent upon one another for economic outcomes, yet in ways that don't seem to get acknowledged by society. In the larger sense there's often the assumption that prices take care of any coordination necessary, but is price the only coordinating mechanism we have to prevent considerable loss and risk among economic actors? Countless rules and regulations don't exist to reinforce coordination between institutions so much as to exacerbate differences and competition, between them. If we have coordination between production processes of supply chains at various stages of production, why not for municipalities and the various ways in which their institutions actually interact with one another? When I first became seriously interested in economics, these were some of my initial concerns.

In part these elements fascinate me because of the degree to which people take economic life as a given, without examining what is actually happening, especially at the level of small community where true economic realities desperately need to return. There is the micro level and macro levels of our textbooks, but they don't tell the story of interrelations between institutions which are far more dependent on one another than they are often willing to let on.  Appearances matter, so one hears stories of storefront windows with pictures of the previous goods sold there, or a local Chamber of Commerce puts up a "retail" store of some sort, after the real ones disappear. The bulk of whatever local life is left tends to exist in the churches and the schools, which also become the default political polarities in the wake of economic loss. At school, children act out the chain reactions of loss and ostracism which many of their own parents have experienced.

Somehow we take it for granted that economic spontaneity is supposed to be about the gamble on one's resources, daring and dedicated commitment, rather than the actual changing circumstances of our challenges and desires in community settings which are also constantly changing. Therefore, each economic gamble tends to become a fixed element in a superimposed fixed social universe which - instead of being a realistic part of one's challenge, becomes a defining element of whether one "wins" or "loses" in life. That's the sad part of how economic life gets determined, because the fact that people actually move forward or fall back in incremental ways does not get acknowledged. Too many buildings now stand empty and unused across the U.S., because our incremental human nature loses out to contractual and social expectations.

Some people, in places with little work opportunity, try to make up for what they miss by playing numerous economic games online, or watching cable shows that offer up the details of intricate production processes. But why has it become so difficult for local communities to recreate the real thing? All anyone has heard are the legal details of what they cannot do, and there are precious few words coming out of Washington as to what people can do, once again, to help themselves. No one should have to stay indoors and pretend. Every place needs to be a valid part of our economic future, and the digital realm will only serve to remind people everywhere what they don't have, if in fact they don't have the social permission to make a better economic reality, at home.

Services Dependence and Other Cliffhangers

There is a symbolic aspect - as to the Fed's desire to "back away" from supporting mortgage backed securities - in a backdrop which basically amounts to wealth creation confusion in a long term sense. While nations especially turned to housing as a primary source of wealth in the first decade of the 21st century, underneath it all was the knowing that services were really the biggest part of the economy, in terms of ongoing flows that are the most significant component of a nation's GDP.

Any municipality also knew that the government's support of the housing industry also meant indirect guaranteed transfers for services flows, an implicit component of the overall equation. Municipalities have relied on the indirect federal support of housing for decades, as well as direct forms of government support for services to fill in the gaps. So when politicians become belligerent as to scaling back services, as they have in the United States - yet with no real explanation how wealth can reasonably expect to be maintained without them, it becomes difficult for any nation to maintain progress as a realistic vision. For the Fed to also speak of scaling back QE in an environment where efforts for debt reduction are already underway, life starts to feel as though one is just waiting for the other wealth creation shoe to drop.

How to account for such a discrepancy, in that the very element an economy depends on the most, i.e. human skill, cannot actually be accounted for as a direct form of wealth - in spite of our personal investment and time sacrifice? This is the dichotomy of the present, which - because our skills do not translate into direct wealth and yet they are what people need most - leaves nations scrambling for "safe assets" in the wake of crumbling earlier dependencies. Safe assets are not just what individuals rely upon for their own economic security. Safe assets are also what nations rely upon for their continued economic momentum.

While I feel that the above thought processes somehow tie into the recent rise in interest rates, (this Econbrowser post has some really helpful graphs) I'm still at a loss as to explaining what the interest rate movements actually mean. I remember vividly how the "high point" for those rates felt in the marketplace for jobs: a time when one went from what felt as though a sudden uncertainty, right back to the previous certainty within short order. However, the story today is definitely going to take some time to sort out. Even though people decry some of the very assets that are deemed safe, they need for those assets to be safe, on multiple levels. Should the marketplace start to signal that said assets are in fact not so safe, further rationale has to be found. Uncertainties of the present did not come on so quickly: they took time to develop. What's more, what seems to be rational takeaways from recent events are by no means commonly accepted - in fact continue to be widely disputed.

Even the support for NGDP level targeting arises from both sides of the services and hard assets spectrum, and so the wider struggle for definitions of wealth creation are also reflected in nominal targeting dialogue. In spite of political constituents' assertions that hard assets are "primary", no government is going to let go of the services it deems vital, unless it is absolutely forced to. But the overarching problem remains in that governments have inadvertently devalued human skills in a direct sense; as governments still force most skills use through institutional wealth capture. By way of example, government in the U.S. basically stopped many forms of barter early in the 20th century, in order to capture skills use for taxation. Skills barter in the present is also discouraged in that people are expected to pay taxes on bartered skills use, even though many individuals resorted to such transactions because they had no money in the first place.

For our government to have forced limitations on skills use by such a wide scale, also indicated its confidence in its own institutions to fill the gaps: a confidence which for more than half a century, did not appear to be misplaced at all. Indeed, some of the lingering concerns over unemployment in the sixties could possible be attributed  to a collective guilt on the part of older individuals still in government, who remembered the effort to get some stragglers off the farm and into "real (more readily taxable) employment" only a couple of decades earlier. That was no small effort, in that only 100 years ago, stories abounded of those who managed wealth creation from home, and saw government efforts to get people into "real employment" as unsustainable.

Of course, it took more than a century for those chickens to come home to roost, and as a result, the people who remembered the earlier sets of circumstances can no longer say "I told you so!" However, perhaps the real lesson here is not that we shouldn't have believed in the promises government tried to provide for our security, but rather that we need to forgive our governments for the effort. What's  more - in the interim, a tremendous amount of social, economic, even historical progress has been realized.

For, it is those gains of the twentieth century which provide indicators as to how we might further evolve, and the institutions which once worked so well, are actually the perfect starting point for the ways we can further define wealth creation in the future. Yes, we need NGDP futures markets, especially now, for the continuation of hard assets in the understandable forms they still hold. But we also need to create what would amount to a form of nominal targeting services markets. That would be the part of wealth creation we realize in a local sense, for the knowledge and skills sets which we now need to reclaim from the clutches of our own institutions and governments, so that we might all regain strength again.

There is no return to the agrarian wealth of 100 years ago, from which one could still exercise freedom of knowledge use. Nor is there any true dream of progress through robot labor, which might nonetheless attempt to exist in a seriously odd fashion with the former wealth form, if municipalities do not in fact work to create fertile grounds for human skills use on their own. But, to simply do nothing and let services go because "the money does not exist" also would destroy dreams, people, knowledge and services, and ultimately the hard wealth which dreamed of ascendance merely by its own presence.

By our own efforts we can create knowledge and skills wealth anew, in ways that not only make it primary, but allow us to utilize hard assets in far more sustainable ways. The wealth that one can see and touch, always depends - in the end - on the wealth that we find in our own means of coordination with one another, for without the creation of such purposely defined roads, with their own new sets of knowledge use properties, the way forward would not really be possible.

Monday, June 24, 2013

Bad Deflation is Not Creative Destruction

Whodathunkit? Or...the other title I wanted for this post was Creative Destruction For You, But Not For Me (so many good post titles, so little time). If the blogosphere seemed a bit sleepy or disoriented recently, nothing like an outrageous BIS report to wake it up again! (Boo Hiss it's BIS - okay I promise I'll stop, I'm killing myself here) It's probably a good thing that there's too many links for me to realistically list, but I have to mention Simon Wren-Lewis. Lest anyone think that the economy can "dog paddle" into the indefinite future with a teensy cap on "everything as usual", good luck with that (WSJ are you listening?). Eventually, refusal to budge off of a status quo that now means significant unemployment, likely means that resistance to change turns into bad deflation, somewhere down the line. This is no time for all the economic players to sit at the table and simply pray that theirs is not the bad hand.

Without a doubt some of my readers must be confused by now, because on regular occasion I sing the praises of authors who have been most happily adapted (adopted?) into Austrian thought processes. Therefore, the word austerian is most helpful, because it gives me a chance to readily distinguish certain areas of discourse from Austrian writers who inspire me and who I believe to be imminently respectable. Austerian is also a great word because it's not so much meant for Internet Austrians (again, not quite the same as Austrian) who are but a small subset of this group, but actually indicative of people from many walks of life, moneyed and not-so-much so, who have inadvertently painted themselves into a corner by their own expectations of themselves and others around them.

The primary difference between this far flung group and others who wish to limit money printing is that austerians tend to see money primarily as representative of hard assets and assorted real estate rather than services, even though these areas of life generally play out in local economies as two sides of the same coin. Unfortunately, if services disappear in significant ways, the very ones who dissed said services tend to follow, in spite of what they felt or thought about them.

What about the normal and upbeat rationale one normally hears as to wealth creation: where does it go in times like this? Why the sudden slamming on the brakes - that is, dropping NGDP off a cliff in such a way that made the Great Recession inevitable? Indeed it doesn't make sense how central bankers could have convinced themselves that letting this happen was the right thing to do, and the fact that they did means the public is no longer so quick to trust them as before. If central bankers had believed in their previous methodology, why would negative expectations cause them to back off so quickly? How did they think that wouldn't send the wrong message to the world?

And - as for those who got "cold feet" about their own course of action - think how that runs counter to what so much free trade literature actually extolls. When we read about the progress of production efficiencies and technology in the twentieth century, there's not so many praises sung about the primary forms of wealth (building construction) we actually came to rely on in the present. And even though some really serious people decided to pull the "emergency brake", no one ever bothered to explain why, even though there were plenty of discussions as to who was really to blame. So when we hear how we need to "sit back" (a couple of decades, maybe) and wait for creative destruction to do its magic, what exactly are people referring to, and why isn't anyone actually starting the process now? For something that sounds so active and positive, there's a lot of passive resistance and defensiveness going on...and I for one will not be happy if "creative destruction" is just a copout phrase or excuse for war.

And even now, we know that many forms of new innovation, production efficiencies and free markets (in some respects anyway) finally helped to pull us out of the Great Depression. BUT...not before a lot of people were killed, and a tremendous amount of wealth was destroyed first, in far too many nations. No one was particularly interested in innovation for a couple of decades, it seemed, until a lot of potential economic players were knocked off the field, both literally and figuratively.

In other words, creative destruction seems to be great so long as the ones in power are not the ones having to deal with it. How would governments large and small pay for services, if it weren't for their citizens running like hamsters on the mortgage treadmills? Oh, it's easy to praise creative destruction from afar, especially when it involves wealth creation which doesn't threaten one's own particular piece of pie in the first place. In a sense, the present day output gap in NGDP represents a vivid crisis of imagination. Which perhaps would not be so bad, were it not for the fact that the output gap also represents a massive loss on the part of those who would have gained work and a decent life, from those forbidden wealth generation processes. The scary part is that a government which refuses to lift  regulations against innovative construction, is a government that ultimately courts bad deflation destruction.

What's more, the central bankers knew all along that the crisis of imagination on the part of proud austerians was behind the problem, which is probably why the Economist had this oddball article heading the other day: "I'm a Central Banker, Get Me Out Of Here". The worst part? The central bankers finally - when it was too late - knew they were going to get the blame for bankrolling whatever the austerians wanted in the first place (mindless growth with practically zero innovation and technological gain), until everyone actually lost their nerve. A nominal targeting rule would have at least stopped the process before it went too far along and sucked up too much future income, but who wants a reasonable rule when it's not necessary?!

Fortunately, there is actually a simple way to express the lack of coordination which has led to the stalemate between central bankers, governments and citizens. While central bankers and citizens would happily blame one another till doomsday, the regulations of local economies are in fact the real culprit. The only reason it is not readily apparent that the outdated laws, regulations and zoning are the actual source of the problem is that no one in power has a single thing to gain by speaking out against a broken status quo. No wonder Buckminster Fuller must have seemed like a bit of a dingbat, to some.

A big part of what appears as business cycles is just the effort to put too many citizens into outdated forms of construction which are not well suited to their income, and thus, financial needs. Yet municipalities have been reluctant to update construction methodology for fear of losing construction jobs and the outsized tax base that became available for services. But the need for everyone to have income for that outdated housing only made the problem worse over time. Bad deflation can be overcome by giving construction over to innovation, and by creating more sustainable forms of services which do not need to rely on yesterday's representations of building and construction in order to happen. When that happens, a lot of finger pointing and wealth destruction will no longer be necessary.

Sunday, June 23, 2013

Trust Works Better When It's Not Outsourced

While my reactions to recent national security issues don't run as strong as some, I nonetheless wonder if some day I'll get called in for my own radical nature! Since I've never even been arrested or spent a night in jail, I'm not sure how I would take it if my government decided to get mad at me personally. Just the same, all the effort on the part of national security to "keep us safe" (from ourselves?) seems a bit over the top, and if it goes too far I don't really see how it could turn out well. So if anyone with national security is reading now I just have to your citizens a bit more, it's "for your own good".

Yes, local trust has broken down far too much, which I've discussed  a bit in a recent post here. But rather than just handing the job over to government, I think we would all do better to find new ways to create trust a lot closer to home. Not with more surveillance cameras, however, but by common ground and purpose that gives people real reason to come together again. Not only would we feel better for the effort, but to do so would also provide a more reliable foundation for the service and knowledge based economies which need to be built in the near future. Whereas, I'm not really sure if potential employers would want to fork over money to private contractors with the latest big data, just to get all the details on someone's personal life. If I were hiring today it would be a whole lot easier to hire someone I knew. As for anyone selling such information - that's a heck of a way to have to make a living, especially when it's our government providing the information. Mmm, people just thought they didn't like the post office!

For some reason, I've find myself mulling over thoughts such as this recently on a local walking trail, where if people have seen you enough, some will acknowledge you and extend a greeting. There are a number of factors which make the trail a "trustworthy" place. It winds back on itself so that multiple walkers can be seen at once, and the people who use the trail are generally fitness oriented in some capacity, which also ties into other aspects of lifestyle that people share. It's the "share" part that perhaps helps to ease anyone's doubts as to the strangers they might meet. Just the same, these occasional greetings are not even close to the level of trust one would once have expected to find in a small town. But in all fairness, there's not as much commonality or "sharing" to be had these days, unless parents still have children in school or attend local churches. In both churches and schools, while others don't really know the details of their neighbors lives the way they once did, at least the basic details remain.

Of course, face to face social networking on such a scale has not been the case in cities for a long time. The trust factor once a part of small towns ceases to be a true possibility, when cities reach a certain size and people become strangers to a greater degree. Compared to what small towns were able to provide for themselves, cities had their rules and regulations for good reason, as Mark Thoma explained in this post from 2010. Having come from a small town, he could see how the local social and gossip networks provided their own unique form of quality control - not many regulations necessary!  Just the same, in spite of regulation gridlock beyond belief (if you do something - anything - outside your home, there's now a good chance you're breaking the law) we get the additional big data layer of surveillance, as though the existing rules were not already enough, as to what we can and cannot do.

It would be one thing if all those hordes of data mining were actually going to accomplish something worthwhile. But what? And they don't come cheap, either. For most of us, the things and people in life we need be concerned about are still going to be our responsibility, big data or not. At the very least, when people ask questions of one another to determine whether trust is possible, there are quite good reasons on everyone's part for doing so. What's more, if the process goes well there may be benefits - whether something as simple as friendship, acquaintance, or perhaps positive economic ramifications for those still fortunate enough.

Perhaps something good will come from this latest government nonsense. I'd like to think that citizens at some point can simply say, we appreciate your concern for our safety and well being but - you know what? We really can do this for ourselves. No government stays strong for long when its citizens finally become too weak. And this time, it really seems like our government isn't giving us enough credit for our own ability to take care of ourselves.

Economic Integration Now

Some may hear Tyler Cowen's warnings about economic slowdown in the world and think: well, he assumes the party's over, so may as well quit worrying about it. That's not the way I see it. I see him as prodding sleeping giants with a stick, as though to wake them up while there's still time to do so. Of course I could always be wrong, as Cowen is no easy read! I just don't see why he would bother with his insistent message, if the long term economic consequences didn't really matter to him. Nonetheless, some of the latest from yesterday's NYT article below (and so inspires me to do a little "prodding" today, of my own):
Indeed, the future path of developing countries could be much different from that of recent, high-growth success stories. The next set of emerging-market winners, for example, may retain very large pockets of poverty. And as the expectation of a single, common path for economic development fades, governments may need to rethink what they can accomplish - and how.
A certain thought has remained with me in the years of notes which finally led to this blog, perhaps because of an obviously changing access curve for entrepreneurs in the U.S. from the nineties on: people in the nations who joined "the race" more recently, had to start at a much faster running pace than the entrants of decades earlier. In spite of vast differences in appearance and cultures, there are now underlying economic factors in every nation that need to match up with one another, in terms of how we approach the world. For even though the playing field of capitalism remains similar in many ways, it is not so easy to maneuver as it once was. Cowen spoke of the underlying advantages of nations which "got there" (in presently defined terms) earlier, and in part because of my own extended familial circumstances, I could relate.

Whether one sensed the earlier generational advantage in the U.S. depends on the degree to which they experienced it in their own family histories. Many in my extended family (also my father) completed their college degrees (after WWII), while a series of mostly economic setbacks meant I didn't complete my college degree in the seventies. Today, similar sets of limitations exist for the countries which - in their efforts to adapt to present day markets - find that doing so means tighter definitions of what those markets are actually supposed to encompass - tighter definitions for what the competition is supposed to be, and the institutions that make it happen for people - or not.

Perhaps in part because it has been so difficult to turn back the increasing tide of restrictions: nations were willing to avoid the increasing misery of unemployment and other lack of economic access, by printing adequate money. That is, unfortunately, until recently. However, the growing separation of lifestyle definitions has only continued apace, until now there are too few options left for people who can no longer create the kind of self-employment (or perhaps find employment) to fulfill their own dreams and responsibility sets. In my own country, lawmakers continue to ignore those growing problems of economic separation at their own peril. We have to somehow take steps to create true economic integration and access, while there is still time, to do so.

We still need the option of printing adequate money, especially by a rule of nominal targeting, to guarantee economic access. However, when people assume that is the only thing that needs to happen and therefore leave the structural environment of restricted economic access unchanged - indeed, even allow it to become steadily worse so that no one gets hired anyway -  in spite of our best efforts it is like throwing money into the wind. No longer is it just a matter of individuals and their families who are having to pay the price. Increasingly, it is cities and towns in the U.S. that have been built on these unsustainable realities and to put off structural reform any longer means that each city...each town takes a very real chance on not being able to survive into the future. Unfortunately, this is something that neither party in Washington understands today, neither Republican or Democrat. I do not want to lose my country. I hope that people will rise up and find economic access for their own, so that we do not have to live with a future of ghettoes, gated communities and dashed hopes.

Use technology to make a good life for us all, don't just give technology to communications and robotics. Nations, use technology to allow your citizens a better life, don't just save technology for your exports. Nations, allow integration of knowledge so that we all might come back into the world, dream and live amongst one another again. Allow economic and social integration so that we can once again grow in incremental ways - after all, the last time we had a chance to grow incrementally was after we let too much of value simply slip away in the Great Depression.

We should not have to allow devaluation and deflation on a massive scale just to figure that how bad that really is, in order to learn how to live reasonably and responsibly again. Get rid of the million and one stupid laws now that prevent economic access of every kind. Don't go so long to wipe those stupid and socially destructive laws off the books that everything loses value, again. And then when you've done that, keep printing the money that actually represents the capacity of every single human economic actor, who wants to be a part of what happens in this world. Don't fritter those economic gains away on trying to separate your people from one another, by way of mansions in town and trailer parks hidden in the woods.

It's time to quit putting people in prison just because they have become frustrated by lack of economic access. It's time to quite blaming people who have given up on their lack of economic access. It's time to start allowing people to use their own minds for the betterment of one another, and for themselves. Nations, show your citizens you believe in them by allowing them to actually use their education for one another instead of allowing education to waste away in the limitations of your outdated institutions. Just do it. Next time anyone chuckles at Market Monetarists for being unrealistic, take a close look at your self and ask, what have I really done today, that might actually help people, all people, gain better economic access? Whether you choose to stand in the way of structural change, or you refuse to print more money at all, it all comes out the same and the perfect ends up the enemy of the good.

P.S. This little post from Jonathan Finegold, with its gem of a quote by William H. Hutt (1939), is in large part responsible for any strident direction my post may have taken!

Saturday, June 22, 2013

The Last Macro Show?

...And at this point it's not easy to know the story line in the "picture show"! Like Marcus Nunes, I was struck by Paul Krugman's assertion that Market Monetarists are "homeless", in that they don't even have a political party to call their own. Oftentimes I've seen the lack of specific political identification as a plus, but as Krugman inferred, there has been little political response to Market Monetarists that would contribute to positive action at the Fed in the present, especially given the fact that Ben Bernanke is now slated to leave. However, it was Scott Sumner's remarks in a post today that I'm still trying to make some sense of - and it's not the first time he's made suggestions that macro as a field could "lose its rationale":
If NGDP growth is stable then macro as we conceive it today (which is mostly a demand-side field) will disappear, and that means market monetarism will disappear. Even worse, the residual problems (and there will be supply-side problems) will appear to be failures of market monetarism. And we won't have any useful advice to offer, other than "Money won't solve that problem, nor will demand-side fiscal stimulus".
How to respond? I'm not even sure where to begin. Except to say, Market Monetarists in general are quite concerned about supply side issues, even if the primary impetus for central banks and macroeconomics until now has been demand driven. So - if not Market Monetarists for the coordination which needs to happen in the future for both supply and demand related growth...who? Keynesians are primarily concerned about the interactions between government and the economy, and other areas of economics tend to be more concerned with supply side issues. In fact, some Austrians don't even see macroeconomics as a truly legitimate area of the discipline. In other words, I don't know who else is prepared to consider supply and demand side problems in the same context - let alone see them as worth taking on together, as the most important economic issues facing us today.

Before any readers think I'm overly concerned as to Sumner's musings, believe me - I'm not going to let other Market Monetarists off the hook that easily! Perhaps it's just hard sometimes to think about what actually needs to happen for monetary policy beyond the near term, especially when the primary goal of a nominal targeting rule has yet to be established for a central bank. Some who are not strictly Market Monetarists are also grappling with monetary concerns of the present, such as Miles Kimball who has tried to envision how central banks might normalize central bank operations in a negative interest scenario. Even George Selgin had this to say in a recent post: banking alone will no longer suffice to make our (or any) monetary system sound.
Something else is needed. And that something must of course consist of the base regime itself. Broadly two alternatives exist for such reform. These are: (1) the restoration of a base medium consisting of some form of specie, or perhaps of some other commodity; and (2) reform of the existing fiat regime. Both options have advantages and disadvantages. A major advantage of the second is that it is likely to be less disruptive. This advantage isn't itself decisive. But it does supply one important reason for not simply dismissing out of hand proposals for imposing strict rules upon fiat-money issuing authorities - including rules that call for targeting NGDP.
Clearly there are economists as well as "concerned citizens" such as myself who are willing to put in whatever effort it takes to find solutions. Just the same, it is a bit discouraging that few in positions of political power are ready to come to the table with others outside positions of power, because that really is what it is going to take to move forward. What's more, because of those not willing to budge from previously held positions, much political goodwill and economic stability continues to be jeopardized.

Those in government positions, the Fed, and economists most connected to the status quo have the most to lose, if they in fact are not willing to consider real alternatives. Which is especially true, in that the problems of the zero bound threaten to remain with us for some time. While "homelessness" may be a convenient talking point for Paul Krugman, the fact that Market Monetarists are not politically connected should give him pause, as to the deeper implications of that fact. Something tells me there will be plenty more action on the stage, before the "last" macro act takes place.

Knowledge Use as Direct Democracy

While many notions of direct democracy nowadays seem far fetched indeed, it helps to put such thoughts in context, and I need to start doing that, as this blog is now "two months in" and so this is an important  post. My thoughts as to direct democracy are somewhat utilitarian. However, not in terms of forced redistribution of which I mostly disagree with (for services) on grounds of what have become totally skewed incentives. That is why - in terms of coordinated skills arbitrage - I insist on level starting points in time use as a free market tool for all economic actors, and this post will attempt to provided more explanations as to "why", in that regard.  I promise, an equal starting point is not the "evil" you may think it is! Perhaps some of the rationale here will indicate why a libertarian such as myself still believes that democracy has potential to work effectively.

First, the point in such a possibility as equal time use is not that we are "equal" to others in all respects (which we most certainly are not), but that we deserve equal opportunity to seek out what we deem useful arbitrage in community, from all who wish to utilize time in ways that are capable of somehow corresponding with our own needs and desires. Through ongoing and systematic voting for (desired) basic service sets as a "price" mechanism (to indicate possible time use and time investment potential), young people also gain an idea how to structure learning options which correspond with a community's changing needs. Such an educational base also serves as a jumping off point from which individuals can engage in special skill set preferences, which they then "market" as additional and more spontaneous community offerings. That same basic educational set can be augmented by "just in time" additional knowledge use in when it becomes important in larger group settings, as well. When we gain the opportunity to directly compete with one another in service offerings limited only by our own imaginations, nothing about life ever need be boring or mundane, again.

Why is this not possible with today's services offerings, where some are automatically gauged as "more valuable than others" based on one's "time sacrifices" or innate abilities? Unequal knowledge use rents ultimately change the playing field for every other economic player in irrevocable ways. People therefore try to revert to representative democracy to "force" policymakers to make up the differences, but there is simply no way to do so in spite of appearances to the contrary (Obamacare). Once skills sets are subjected to scarcity controls even to a small degree, there is no more turning back, thus the holders of said skills have to also limit the degree to which they can freely engage in the use of those skills. What's more, their life becomes mostly a sacrifice for the special privilege they were given, and so knowledge use in its present form is not unlike slavery in this respect - high paid though it may be. They become bound by the institution that sets the rules for the limitations, and have no free market by which to negotiate with the rest of us.

Whereas our institutions once provided strength for knowledge holders and governments as well by this process, the strength of these rent capture measures has begun to wane. This inconvenient truth is especially significant, in that it now lead to distortions of financial markets which in some ways serve as a last resort for societal attempts to find rebalance. Only by negotiation from equal vantage points can we regain strength in our economic dealings with one another. Unfortunately, much valuable knowledge use definition (in monetary terms) has finally become what accrues mostly to the one percent. In such a reality, arguments for less reimbursement "somehow" to knowledge holders in a system which also demands total sacrifice on their part, is mostly semantics. What's more, the efforts to do so only make the representative democracy that used to work in this regard, appear as a travesty in the present, because of its increasingly inability to remedy the problems caused by special privilege.

In a sense the Great Depression "forced the hand" of greater wealth creation that ultimately led to a resurgence in services on a greater scale than had previously been possible. However - in the present - wealth is not held in the same ways that made that earlier form of adaptation possible. To be sure, people remain aware that resources do not just "spring into use" by the fact of their existence, and the value of human ability is frequently extolled in this regard. For instance, Matt Ridley's book "The Rational Optimist: How Prosperity Evolves" was - for me - an inspiring read a couple of years ago. I read echoes of those same thought process this morning, as Mark Perry of AEI highlighted a number of points Don Boudreaux of CafĂ© Hayek recently made about human ability.

However, such arguments can often quickly devolve into ill disguised attempts at continued institutional control of human ability. In spite of limitations on progress which consequently is not quite "real" in a societal framework, certain important capacities of knowledge use are mostly reserved for the one percent because of the incentive structure itself. Such limitations are also why earlier civilizations have often advanced in important technological areas, only to fall back again. Interestingly, some of the common beneficial knowledge which survived and spread, has also been purposely devalued (old wives tales?) by institutions in the present (herbal knowledge for instance) only to resurface as derivatives and patents once again limiting benefits to a public that pays for something supposedly "completely new".

When people realize the degree to which so much vital knowledge has been removed from the public domain, they will finally become anxious to retrieve it and put it to use once again in the knowledge commons from whence it came, in spite of an ongoing backlash against specialized knowledge in the present. There are, for instance - healthcare options that institutions have little space for, which can be utilized at local levels by people freely participating with such knowledge as it encourages personal education and skills negotiations as a direct result of one's efforts. Again, equal time as true arbitrage potential is what makes the direct democracy aspect possible.

This is all the more important in that even representative democracy is somewhat endangered in the present, to a large degree because of growing knowledge use limitations. The same problems with (actual) scarce resources which make direct voting referendums difficult, make realistic voting options extremely difficult for what are now artificially bound institutional services. The same knowledge use limitations that made services growth possible in earlier economic times, only point to a decreasing aggregate utilization as economies mature, thus knowledge use limitations become a true hindrance to any nation's strength, in the long run. However, a government's willingness to trust its own citizens to provide services for one another, can make all the difference. In order to gain true free markets in services, we have to be free to both choose and participate, in order to make that happen.

Friday, June 21, 2013

Cities, and other Nominal Targeting Possibilities

To a degree this post follows from my previous post: however this one will hopefully make sense on its own, if readers don't have time for the above link. In the midst of a summer lull, some Market Monetarists such as myself feel a bit wistful for "what could be" (i.e. how different Fed activity would be right now if only NGDPLT were the rule) and of course I'm stubborn enough to keep thinking about it, even in the middle of some folk's vacations. As to the recent actions of the Fed and subsequent reactions to now inevitable tapering: it's not hard to tell that markets want more growth than Main Street is prepared to "serve up", so another goofy analogy is that I'm not afraid to remain in a hot kitchen in spite of it all, with more thoughts of future growth...

This morning's links provided some fun in the form of good news and bad news stories. First the "bad" news (hehe), HT to The Browser and a recent quote for the day:
Only someone miraculously innocent of history could believe that competition among ideas could result in the triumph of truth - John Gray
Tell me when it's over! Seriously, perhaps it's a good thing I've not had time to read enough history, because I'm just enough of a dolt at age fifty eight to have a bit more optimism that that. Now I'm not completely sure which John Gray was despondent enough to give up on humanity, but looking through various John Gray quotes online, this was far from the only one that sounded fatalistic. To put it simply, I believe that with a bit of organization, cities still have the capacity to utilize and capitalize on good ideas, even if their institutions are not in a position to be able to do so.

Now, for the (actual) good news, and this time the HT goes to Ryan Avent for the link. In "Trans-Atlantic Trade and Its Discontents", the authors indicate that in spite of the problems which finance, housing and mortgages created, "...the euro crisis never became a trade crisis, in stark contrast to the 1930s trade wars (italics mine). In fact, one of the key conclusions to be drawn from the balkanization of the European finances and divergent euro growth over the last three years is that the European Union's single market needs to be deeper." Now there's a perspective one doesn't hear a lot of, lately.

Of course, the authors of this article also point out that political factions make the possibility of further trade improvements less realistic, than they should be. But what remains encouraging - even now - is that setbacks for trade in both the developing and the developed world are not so great, where production efficiencies do in fact continue to exist. What's more, we can hope that people are careful not to lose too many of the gains from trade this time, so that no one has to repeat the losses of multiple markets at the same time: just one of the unfortunate results of the Great Depression. Not to say that some trade won't fall prey to protectionism - but with a little luck, globalization won't break down the way it did in the thirties. Because of the vast differences in how tradable and non tradable goods production are conducted in the present, local economies in any number of nations definitely have a role, in how this situation ultimately plays out. Often it will mean starting over with a fresh template that challenges plenty of old assumptions all around.

In developed nations; even though the main problems still appear as primarily finance related, they nonetheless stemmed from a similar series of events at local levels, where real estate as wealth became a prime impetus for additional services provisions in many locations: a process which finally became like a dog chasing its own tail. In order for any city to move away from this self-defeating cycle, there are two primary structural components to be considered.

First, local economies need to envision greater mobility and flexibility in both living and working circumstances. In part, that means establishing new varieties of zoning options, where individuals also have the ability to manufacture lightweight building components and supporting infrastructures. Another important aspect of such zoning is the inclusion of those who wish to live and work in closer proximity to one another, than automobile use allows. How might citizens envision such environments with flexible building components, which can be pulled apart and reconfigured for different economic settings as the need arises?

Cities also need to create more inclusive social structures for knowledge based skills and services, which are slowly being scaled back over time in traditional terms. One way to think about the process itself: allowing skills sets which are often non tradable between institutions, to become tradable goods through diverse arbitrage settings . How so? This goes back to the above refutation of the John Gray quote: by coordinating knowledge use across multiple disciplines and forms of economic activity, cities and indeed towns as well, can create greater competition amongst ideas, by allowing their imprints in multiple places, whatever the "truth" is. The more we are able to bring knowledge use processes into our economic lives, the less we have to fight over what the truth is, in the first place.

One reason nominal targeting is questioned as optimal in the present is the fact that some assets and resources presently appear to be of relatively greater important than the actual use of our time. By learning how to match time to economic life in more optimal ways, it also becomes easier to convince others that time measurement of nominal targeting is in fact the best anchor for monetary stability. While there is a learning curve involved in making knowledge use a more central aspect of wealth creation, once it is coordinated into recognizable and practical forms, many aspects of services will become far simpler in organization as a result. Such simplification would also go a long way to reduce the need for taxation - except for the taxation of tradable goods which, as the above article indicates, still do not suffer from the problems of finance in general, and services in particular in parts of the Eurozone.

Part of this process also involves citizens refusing "business as usual" to the financial entities which often "dictate" austerity now. It is simply wrong that any nation's citizens' receive all the blame for profligacy - that of which was the very terms the bankers and construction interests brought to citizens, to begin with. People can create their own incremental approaches to ownership and business formation, if and when their financial institutions refuse to help them. There are only so many people who can go back to the earlier sets of expectations, and local economies need to be creative in finding new ways for their citizens to thrive, instead of hoping they will locate elsewhere. For that is indeed the problem: no other "elsewhere" presently exists, as too many cities and towns have became bogged down with the old formulations of wealth creation and services provisions which no longer work as before. Greater inclusivity is not just a "feel good" measure for cities in the present, it is really the main option cities now have, to regain economic stability.

Nominal Targeting Measuring Potentials, and the Local Factor

In a Measure of America Report, it was determined that well being rose in every state (of the U.S.) except Michigan between 2000 to 2010, based on life expectancy, education and earnings. However, would such measures have held true for the states from 2010 to the present? To be sure, this is the right kind of report to bring out when people want assurances that the economy is returning to normal, especially when it "appears" recovery is just around the corner. Just the same, this is no time to say, job done! Just look at this great report! As James Pethokoukis of AEI titled a recent post, the Fed has essentially washed its hands of the new normal U.S. economy. Ryan Avent at The Economist is not any happier, in that it has become clear that the Fed is reluctant to engineer the escape velocity which would allow the economy to escape the zero bound: a circumstance which now also leaves the U.S. closer to a "Japanese equilibrium."

While the states report wanted to look at factors besides GDP to gauge economic well being, the three it used were misleading in a number of respects. To date, educational gain has continued apace whether or not compensation (let alone integration) for said education happens. Plus, both life expectancies and earnings in this time frame are a carryover from decades that were part of a positive equilibrium overall. To get a true feel for recent changes in the economy in an immediate sense, it helps to look at the patterns between our nominal income and aggregate consumption. NGDP measures are also the closest proximate we have to daily and ongoing realities: here, graphs especially tell the visual stories.  Even though NGDP may not (presently, at least, for it could) register well being in a collective gain sense, it does tell us now whether we are actually doing our best to maintain it.

While GDP may not seem especially important in certain respects (not all money making is of a positive nature, duh), it really depends on what we are trying to determine through the use of the indicators themselves. There's a tremendous difference between, say, here's the money a nation (or city as it could well be) registers, and the way the money components actually interact with one another. In GDP, a nominal focus also allows us to zoom in on some of the important particulars. Nominal targeting readily shows changes re inclusion and exclusion of economic actors involved, and also shows how people go about meeting their present and ongoing obligations to one another: which after all is what printing money is really about. Much about our economic lives can come into sharper focus through the level targeting of NGDP. What's more, consideration of local conditions through the process can bring the economic picture into an even clearer view.

Why do local concerns even matter for NGDP? After all, nominal level targeting is supposed to be about aggregates and national levels. Part of the beauty of nominal targeting is that it is capable of scaling up or down - in other words - local to national in terms of income to consumption obligations and expectations. That's just a simple model aspect of the measurement itself. Just as important are the patterns that local economies tend to generate - and repeat - in an aggregate sense. What happens in local economies doesn't just stay in local economies. They imprint further examples in other regions which utilize resources in similar ways and tend to create similar employment patterns as well. Effects depend in part on whether the resources reflect long term economic flows (educational investment) or are more contractual and fixed in nature (housing ownership).

When we "come in closer" to look at the particulars, we also get a feel as to some of the larger concerns people have, why NGDPLT - for all the promise it holds as a central bank rule, nonetheless has some remaining obstacles in its path. For one thing, there are structural concerns that get far more wordplay in excuses instead of solutions: which is why Paul Krugman had this retort: "I get annoyed at the phrase structural reform, especially in Europe by very serious people".  Structural issues aren't the only ones that seem to mean a million and one different things to different individuals. So, too, does the unfortunate designation: inflation. However the news isn't all bad, and I want to argue in this post that local economies have the capacity to tease out some of the pertinent issues in both structural and "inflation" designations, through specially targeted measurements that indicate how overall flows might be effected.

Inflation - by any other name please - especially lurks in the places that we have every capacity to observe more closely. Countless costs get attached at every step of economic processes, without anyone really stopping to calculate the effects (While such a process would be daunting at national levels, local measures could provide examples for larger patterns). These completely counterproductive processes occur because various elements react to one another instead of coordinating with one another in the same economic environment that they share. Indeed, some of these hidden costs (rent for someone),  still exist outside any actual measurement of income to consumption capacity, which is what makes it difficult to determine whether any inflation at all can actually be attributed to central bank activity in recent decades.

Where tax monies or subsidies are a significant factor, the idea of maker versus taker in any redistributive sense becomes even more skewed. These are the sorts of black holes where good deflation born of productivity gains are swallowed, by taking of said gains through every means imaginable, before they are realized by the consumer at any level. But unlike some, I have a fascination as to how one figures out what lies in those black holes! (Aahh, now you know why this blogger wishes she had kept up with math when she was young) I remain convinced that local economies are the primary source of a significant amount of their own unemployment. Anyone want to convince me otherwise? Go ahead, make my day!

It is - in part - these aspects of complexity that also make some wonder whether the gains of nominal targeting might not get buried in the details, but a closer look at the nominal workings of local economies could give us a chance to break through a considerable amount of that complexity. There are so many ways to determine what actually affects prices that have nothing to do with inflation as we once knew it. There are also many different kinds of structural roadmaps that could be contrast with each another. Both of these processes need to happen in specific ways, so that people know what is actually at stake.  This is no time to simply stop the process of economic rediscovery, just because some of the national numbers look "prettier on paper". Out here in the real world - for instance - the hard reality remains that the better unemployment number for the Fed is mostly more people dropping out of the workplace. In fact that is likely what the Fed is counting on, by tapering QE before it gets too close to the unemployment deadline.

Admittedly my perspective of the measurement capacity of nominal targeting is somewhat different, for I really came to the idea itself with a Main Street viewpoint of the potential it held. While this makes my perspective somewhat unlike the language of those who approach nominal targeting with a financial or macroeconomic background, it was that implied potential for the transformation of local economies that made me so excited about NGDPLT in the first place. Ultimately, internal resets and coordination could take the place of a long series of reactions that only hurt everyone in the long run. Better knowledge use coordination and dispersal could also make many communities more competitive with one another than they are now. Nominal targeting could keep local economies better grounded in their expectations overall, as they gradually gain a better feel of the perimeters they actually have to work within: a perspective that also makes the "pie" larger over time. While some of this might appear as structural reform, what it is really about is simply people learning how to live with one another again, and each successful example is potential for others in a nation, as well.