Thursday, November 21, 2013

Local Settings and Services - The Balance Within

In this morning's post, I pointed out the need for greater balance between different working parts of economic systems in somewhat broad strokes. So in this post I want to look a bit closer at an element one probably wouldn't expect to find in an economics text: interlocking components of local community which might be more amenable to coordination in the future, than simple wealth redistribution. Even though plenty of discussion abounds for taxation and redistribution, what's missing is an overall rationale as to how redistribution can actually accomplish what it sets out to do.

Because redistribution through taxation happens with limited knowledge and decision processes, many aspects of economic interaction simply fall out of balance with the passage of time. When this happens, sometimes it's best just to start over and keep things a bit more simple - only, wouldn't it would be great to be able to do so without the intervention of wars and calamity. So how might a better balance be possible between asset components and services at local levels?

When societies do not find ways to keep flexibility in living and working arrangements, unfortunately there's a good chance that imposed austerity will finally do the job for them. Yet no one really gains by the lower wealth valuations of bad deflation: neither is that a good recipe for greater inclusion. Rather, asset wealth to services scenarios need to happen within more flexible frameworks for participation. In other words, both environment and services could be transformed so that it is not necessary to be wealthy, to be able to access great services of all kinds (through time arbitrage). In particular, the choice of limited consumption responsibility could give far more time for greater services participation and options.

Presently, one doesn't just move to a neighborhood with great services unless there is plenty of additional income to provide one's contribution. What's more, good services require a stronger association with income, than was the case several decades earlier. Also, even if one's home is mostly intended for a good night's sleep, there is a good chance the dwelling's valuation includes nearby  services and amenities, whether one seeks them or not. Indeed that services consumption "package" approximates investment value as well. It's easier to think about the actual connections between income and services consumption in close up settings, than in settings which separate the activities of business and government, or public and private concerns. For one thing, it's easier for larger settings to obscure the important nominal concerns which are such a primary anchor for monetary activity.

Indeed, that is a big part of my appreciation for NGDP and nominal targeting, because they point to the significance of income potential in macroeconomic settings. Local economies have the ability to highlight how important per capita considerations actually are. Plus, local economic experiments in services coordination have the potential to illustrate natural experiments in this regard. The local economy is capable of providing up close - albeit simplified versions of regional or national settings. To do so also allows the observer to forget about government, finance and credit, long enough to ask: what is really happening with monetary flows between all elements and all participants?

With such consideration, it becomes easier to think how services have been funded until now. And for many communities, this distribution form needs to be altered so that services might take on a more primary role. A balance still exists between asset formation and services, but it is a precarious balance which no longer provides adequate jobs in services for actual community need. Even so, present asset formations sometimes present hardships for residents, as they try to maintain at least minimal redistribution flows through the use of the assets themselves.

While a significant part of this burden could be lifted in the future through technological innovations, this is still but a part of the answer. After all, were innovation to take place - in turn leading to less expensive living and working habitat - there would not be enough taxes from these less expensive and more efficient habitats to provide necessary taxes for services. How to think about this? For one thing, it's the first part of the balance adjustment, from which a services adjustment could follow.

A high tech environment would not only mean less expense for the costs of the environment itself, but also less time needed in the maintenance of the environment. Consider for example, the ease of transporting plastics as containers for consumption goods of all kinds, and the low costs of doing so. For a bit more money, better quality plastics could come into use, which would be adequate for many kinds of modular repairs for instance, instead of wholesale repairs on living and working quarters of the present which involve tremendous resources just to do so. What if recyclable plastics were converted to modular home replacements locally, for instance? What if some environments that are prone to natural disasters could choose modular components over traditional housing?

Such an approach to living and working quarters would free up an incredible amount of time for local dwellers, because it wouldn't be necessary to go to a high paying job all day just to pay for suitable shelter. That would leave more time to engage in skills sets, knowledge use and other important ongoing functions without the higher incomes necessary for more permanent forms of housing and construction. What this means is that the lower cost, resource use and maintenance can provide the setting for an alternative approach to services provision which would be inclusive of entire populations. Previously, it was only possible to reimburse a small fraction of those in communities for local services positions because of the additional responsibilities their dwellings placed on income needs.

Inclusivity for services responsibilities means looking beyond the bounds of institutions, for knowledge use. Not only would this provide ways for communities to reorganize their service needs, it would allow them to reconfigure infrastructures when they are no longer able to maintain earlier infrastructures which they previously relied upon. Communities can ask themselves, how can we - as a group - still achieve important societal goals? That is, when it is no longer possible to tax a limited group of citizens who are either stretched to the limits or simply said no.

Importantly, success stories for coordination in skills sets would not exist in a vacuum, in terms of monetary valuations. The fact that knowledge use has been successfully applied and contributed to the transformation of communities would also make previously low valuations start to rise. However, this would not necessarily be a negative in a broad sense, because it would be an indication for any community that smart skills coordination strategies could provide greater options and possibilities for multiple populations. Indeed, other communities would be inspired to follow earlier examples, where real social value was created - seemingly out of "thin air". That is, the skills capacity came first - and the money valuations ultimately followed.

There are many ways to go about such a process. Plus, the needed adjustments can become more income oriented overall, than present circumstances of limited workplace participation allow. The inclusion of whole populations also means that greater subjectivity for product definition is possible, which can be quite important for services provision. How might coordinated efforts become a more effective community tool, than redistribution? After all, coordination does not have the "finality" of redistribution decisions, which imply failures of all kinds when they are not done "properly" or simply become overwhelming. Coordination gives people ways to start over and try again, which can sometimes make all the difference .

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