Tuesday, December 31, 2013

Time As a New Gold Standard

Even though this has been spoken of by Market Monetarists, the time element has not really been emphasized to a great degree, outside of the fact that it is an important part of the measure for a nominal target. Small wonder, for many aspects of time participation in economic activity are far from clear in the present. Not only is labor force participation at a 35 year low, the employment-population ratio is at a 30 year low, and fertility rates have yet to recover since the recession as well.

So plenty of questions remain: how will primary holdings of wealth be defined in the years ahead? After all this issue has more to do with what we actually consider wealth, than it does relative aspects of inequality. What's more, some would approach apparent inequalities in ways that would take us further, from the concept of time use as wealth. As Nick Rowe said recently, "What the effects of inequality are, and whether it's good or bad, will depend on what caused the increased inequality." So in the meantime, the primary challenge remains: gain the stability of a nominal level target rule, even as stability of employment remains uncertain. Then it becomes easier to sort out where that "endogenous variable of inequalities" actually comes from.

Indeed, I have attempted to deal with the topic of economic time frequently in this first eight months of blogging. But sometimes it felt as though I were "nibbling around the edges" in frustration! So as 2014 fast approaches, this post is my last attempt for the "old year". For one thing, I feel that there are tremendous benefits to the idea of time as gold standard which have yet to be explored. The reliability of economic time value as a nominal indicator, doubtless has aspects beneath the obvious statistical "givens", which contribute to stability. Those further aspects will eventually prove to be quite interesting in their own right.

Emphasizing time as primary can be tricky, because the same forces that appeared to increase the value of time use in the 20th century, have begun to work against knowledge based time use in the present. Therefore, it could be helpful to illustrate lateral time arbitrage in direct relation to resources in experimental settings. Not only would lateral time allow knowledge use a greater role than the present, it can accomplish this without sidetracking capacity from productivity gains. Instead, knowledge use would once be able to contribute directly to productivity and technology, in well understood and sustainable terms.

Unfortunately, many 20th century skill sets were captured in sub optimal ways. In the process, asset formation was gradually perceived as more important than knowledge use in multiple areas. Even as knowledge workers and others protest a present loss of government fiscal capacity, governments can no longer make significant contributions to knowledge use. The main problem in this regard is that knowledge use no longer takes place alongside production processes in understandable terms.

Any time that knowledge use becomes a political football, a delicate balance is broken and the reliability of nominal income may also be questioned - in spite of its continued effectiveness. Unfortunately, there are any number of contenders for what is thought to be central in economic activity, besides the money which represents participants in general: government budgets, finance, business interests, and natural resources are at the top of the list. It was only in the 20th century that knowledge use and skills sets made it possible to include larger segments of the population, in significant economic activity. No sooner than a wide array of individuals assumed vital importance in this sphere, than the significance of that status has become less certain.

Particularly important in all this: what is actually scarce, and what is not - especially in an environment of growth returning to "normal"? The fact that this has not really been answered  to anyone's satisfaction, has also led to a complete lack of transparency in governmental economic processes. When governments redistribute too many aspects of life, it becomes impossible to know how much of one's economic time really contributes to well being or survival for that matter. Think about the standard which the Fed is recently being called to, for transparency. How can the Fed expect to become completely transparent, when government's complex taxing structures don't even make a pretense at logic or common sense?

Most importantly, a lack of understanding as to what is actually scarce or abundant, is now becoming a serious problem for taxation of all kinds. The finite nature of our time can be offset by technological abundance to a considerable degree. But ultimately, this only holds true, when we are not subjected to skills valuations which effectively cancel out the effectiveness of time use on the part of many. Those higher valuations can only be covered by the gains of technology to a certain point.

To a degree, the finite time available to us is even more limited than what a gold standard represents. While additional gold in the system could represent individual and aggregate gain, time use gains are only possible in the aggregate. What's more, that aggregate gain is measurable through population growth and more effective use of knowledge through individual negotiation patterns. Unfortunately, this is the most important aspect of scarcity that governments still miss, in tax based terms.  Plus, government backed economic activity just has not proven capable, of providing the coordination society needs. That's true at all points of life, and by no means is this problem limited to either cities or rural areas. This is why time use needs to be a more central part of the entire process, so that the coordination which governments and limited market formations have missed, can once again take place.

Coordinated systems for knowledge use are by far the best means we have to really take advantage of time as a gold standard. Such systems would make abundantly clear, the limits we actually have. And yet, being aware of these limits is half the battle, because it prevents government from trying to make up for income differentiation in the wrong ways. By making time use an integral part of wealth measurement, it becomes easier to see how resources can work to our benefit. This perspective also makes it easier to see, when finance is once again trying to move beyond the bounds of reason. But most importantly, making time representation primary could prevent us from making the wrong conclusions as to what wealth and abundance actually are.

To all my readers, have a great 2014!

Sunday, December 29, 2013

Time Value is a Leap of Faith

We know that we can create value from our time - not just for ourselves, but for others as well. Why, then, is this so difficult to express monetarily in the present? It's an important issue: not just because of the economic responsibilities we hold in common, but because of the identities we assume through production and exchange. There is no separation of economic activity from our aggregate participation, even if the world of finance tries to make it so.

In other words, economic growth rises to the aggregate level of our actual production and consumption, and the money we print for that process. What's more, we're kidding ourselves whenever we put a stop to multiple means of production, and yet still expect everyone to be financially responsible for their own circumstance. Some in power may think it's possible to define wealth outside the perimeters of actual human participation. But in the long run, economic equilibrium always knows the difference.

Ongoing learning is a primary investment; skills sets and the mental spaces we inhabit, our calling cards. And yet, these forms of capital still end up outside the realm of economic activity that became the early 21st century. Presently, we are actually working harder to keep knowledge use out of the marketplace than we would be, if the tide of knowledge flowed around the barriers that have been placed in its path.

How do we know the tide is being held back? Think about the locations where knowledge and important information are "allowed entry". That is, for what society has deemed important enough to actually consider with randomly mined time value (i.e. not necessarily accomplish). It's an overwhelming environment, where everything of significance that needs to be happen, is trying to materialize along the same channels and limited time frames. From Shane Parrish (Farnam Street):
I'm hard pressed to think of an environment less conducive to rational decisions than that of the modern office worker...Environments play an important role on individual and collective abilities to make decisions and yet most organizations spend zero time thinking about this.
Of course the problem here is that organizations can't really remedy the problem on their own. What this really comes down to is that we have not yet learned to think of many important services in a true market based sense. Even monetary policy can miss this to a degree, in that additional stimulus also has the capacity to add to the service product options (and participants) that gain entry into the marketplace, before translating into higher prices. Or said another way, tight money can also lower divisions of services differentiation in a quantitative sense.

Services have mostly been provisioned in three ways: government redistribution, individuals with high discretionary income, or else randomly mined by institutions in general. That is, even though our time is a fixed scarcity, it came to be used in the 20th century as a random scarcity. Other service utilization remains cultural, religious, or outside of the bounds of rationality (i.e. near slavery or prisoner like conditions). That means we haven't really been free to coordinate services with one another as individuals: a reality which puts many men, women and young adults into compromised realities. Until services are recognized as a valuable form of product in their own right, their status as real wealth remains in jeopardy. When we think about substantial supply shocks, it becomes apparent that services of all kinds are disrupted - not just in depressions but recessions as well.

Today, governments are implored to reduce their budgets, and institutions of all kinds tend to the bottom line by reducing services needs to a bare minimum. Consequently, individuals with discretionary income are the only ones expanding services needs in a relative sense. Even if knowledge use is being funded, the purpose of that use may be different from the perspective of those who contribute time value. Thus in the aggregate - even with private substitution - knowledge use for multiple areas continues to decline in a monetary sense.

In the 20th century, even though we were making investments to improve the quality of our time use, we were still - unfortunately - moving away from the concept of our time as holding intrinsic worth outside of institutional structure. Prior to mass employment, time use took place primarily in managerial terms. That is, time value was structured so as to be responsible for a wide variety of resource combinations in one's immediate environment.  Home economics was just one aspect of this reality, and management didn't necessarily mean status just as it doesn't necessarily mean so now.

Even though the 21st century strongly suggests a return to general environment management, it has become difficult to break away from the idea of time use as secondary to hierarchy. For many groups, boss and employee structures are all they've ever known. What's more, management models suggested in the present exist in conjunction with highly evolved technology, as well as the evolved skills sets of others. Institutions were only the first stop for skills evolution. Today, important patterns for economic activity occur within flexible teams and individual matches, rather than random elements within closely held institutions. This is as true for small communities, as for any city.

Significantly, it is the new technology that calls us back to a (now) earlier form of environment and resource management paradigm - the same evolution of which the 20th century asked us to temporarily reverse course. That is, the technology of the 19th and 20th centuries needed us to subsume identity into divisions of labor that were determined outside of ourselves, when technology could only provide simpler functions of labor provision alongside us.

This is why the reclamation of our time value would be an immense leap of faith. We are quite literally being asked - as fully participating individuals - to coordinate the needs of society, the needs of ongoing production and the needs of local community at the same time, if in fact these vital tasks are going to be done at all. What's more, we need to make this responsibility an understandable part of our monetary framework. Governments have taken these tasks and gone as far with them as they possibly can. Indeed, it is a wonder they have been able to advance knowledge use to the degree that they have.

Recall the earlier time management, before specific division of labor. In this environment, by way of property holdings, we moved between value in use and value in exchange. Generally, value in exchange was the additional product separate from our time. However in today's environment, our time is the very element that has greater value than what the robot or economy of scale can contribute. Often the product (separate from time) is our value in use tool, while the value in exchange marketplace to be created is one of ideas and negotiation.

Because it is impossible to assign contrasting value to complex aspects of knowledge use, lateral time becomes the plane in which we lever arbitrage. Here, time products are decisions, check-ins, verifications, acknowledgements, assistance, encouragement, maintenance, exploration, comparison, contrast, elucidation, validation or simply hearing one another. In other words, we highly value personal time for the kinds of things most of us really don't want robots to do for us. But when no one leaves room or recognition for time value in society, social elements tend not to happen anywhere near the degree they are needed in the aggregate.

There is no denying the missing element of time value today: it can be readily seen in the growth potential of nations, as that growth potential falls away from earlier long term trajectories (aptly illustrated by Marcus Nunes). And yet, sometimes there are glimpses of hope for better outcomes, such as the recent posts on respect. In one, Bryan Caplan suggests we can grow the respect pie (I like that term). Just as Bryan saw a beneficial addition instead of zero sum, the knowledge use pie need not be zero sum, either. Instead of letting knowledge use and valued services wither away because the old methods of funding no longer work, we can put real value back into time use. By doing so, services can once again take on added dimensions, renewed purpose and social meaning.

Services wealth has the capacity to smooth business cycles, bring economic diversity back to local economies, and reorient our time use as the primary intersection for resource use of all kinds. Services and knowledge use are valued product in their own right, even if they never had the chance to be thought of in those terms. Even though our time is fixed scarcity, knowledge use has the capacity to follow an ever growing trajectory. That is, when we refuse to let knowledge diversity be shut down by institutions or economic instability.

Technology allowed us to overcome the problem of land as fixed scarcity, and that was the very definition of real progress. However, in order not to default back to land use for survival, we have to evolve skills use so that technology can continue to work for us. By returning time use to the status of a fixed economic element, we can manage and coordinate knowledge use, just as we once managed and coordinated the resources of land holdings.

Saturday, December 28, 2013

Overcoming Land Use and Knowledge Use Scarcities

There has been interesting discussion about two subjects of late: "inequality" and "optimal" land taxation (yep, scare quotes). Since my notes for both were a bit jumbled, it seemed appropriate to consider them together in this post. Certainly, optimal land use is a random (i.e. not fixed) scarcity. That's a reality which can eventually dash dreams and tax schemes alike. It's too easy to forget that when economic participation becomes limited, land use and land valuations can also suffer. What's more, some of the most problematic aspects of apparent inequality, primarily stem from limits in knowledge use.

Often, what appears to be insurmountable inequality and scarcity, are little more than the restrictions we collectively impose upon ourselves - something that rising income does not really address. The more that wages rise, the more tempting it can be to place further restrictions on overall land use and related assets. This makes us co-conspirators with the governments that restrict our options, and it also contributes to the land use scarcity which now makes homelessness a more difficult default position than ever, to maneuver.

This same lockout effect contributes to knowledge use scarcities, in that there is less overall economic participation to fund needed services on the part of everyone. One of the problems in using land taxation to generate services, is the fact that no one can predict whether many locations can generate a continuous wealth equilibrium. Communities often make the same mistakes as individuals when it comes to erroneous calculations. That is, they attempt to maintain certain levels of wealth redistribution through income capacity and exclusivity, rather than by continuous adaptation and multiple choice options for economic progress.

It's easy to lampoon governments for not being willing to start over, when it comes to the fiscal adjustments that are needed in the present. But governments' desires to make choices based on what generally worked before, are echoed by communities which will use the same economic strategies over and over - as long as possible. When we look around us now and say, "Egad...inequality!", what we're really seeing is a long term result of society's natural instinct to put up walls against economic inclusion, as wealth creation strategies.

Many varying paths have resulted - and converged - from that basic instinct. The fact that people have used exclusion tactics for far too long, has also led financial adjustments which distort monetary policies, savings and investments in general. This happens in numerous ways, especially at local levels where other options for economic activity and wealth creation have been closed off. Just the same, the time has arrived that these arbitrary walls need to be torn down. And it is best to do so with creativity and imagination, instead of war and pointing fingers at the supposed enemies.

Fortunately, land use aspects of scarcity is not as difficult to visualize as knowledge use scarcity, thus they are receiving a fair amount of consideration in the present. Still: forced, ad-hoc and otherwise reactionary land use "solutions" are no way to approach the matter. How to think about the kinds of options people need? First, all possibilities need to be presented in simple and recognizable forms. Otherwise, people would invest time, energy and effort in them, only to be disappointed that there was not enough common vision to sustain the process. What's more, this is not just a matter of walling off higher income communities from lower income communities as people are politically tempted to do in the present. Not only would complete separation of income levels create economic instability, but those static formations would not be sustainable.

So in a nutshell: how to approach what the title of this post suggests? Equality of opportunity means equality in time use, alongside accessibility in resource use. Services access has mostly become a problem for those who do not have middle upper to upper level incomes. What this also means is that anyone who has adequate income to pay for needed services, does not need to utilize systems that generate equality in time use. Just the same, these systems could coexist in the same places and environments, if it is widely recognized what the differences between them actually consist of. What's more, secondary systems of lateral knowledge use are capable of providing vital back up systems for knowledge use preservation. This issue becomes especially important, whenever knowledge use systems that rely on upper income levels become threatened by negative supply shocks or other problems.

Plus, accessibility in resource use does not mean the same kind of endogenous coordination structure, that lateral time use depends upon. Local resources would rely on the same pricing mechanisms as they would anywhere in the world. Any difference in wealth creation for product, lies in the degree to which local community can add value to those local resources before they ever leave the area. However this is an opportunity which far too many local economies have not been able to capitalize on: the combination of (price exogenous) commodity use alongside local endogenous coordination and relevant education. In other words, local pricing (through voting) optimizes services, while global pricing optimizes product and resources separate from our time.

With this understandable separation, many local economies would no longer be forced to maximize wealth creation through asset formations or bare bones commodity prices, just to pay for needed services formations. Problems of apparent inequality would fall away, as people start to produce and consume services that were once associated primarily with either formative years or upper level incomes. What's more, varied combinations of production and consumption formations in multiple use spaces can serve to break down land use scarcities. This can happen in part by loosely formed associations which coalesce for specific and variable needs.

3D printing technology will make it easier to encourage, what previously took place mostly through creative destruction in city locations. How so? There will not be such significant cost for capital, at risk for specific product formulations. That also allows individuals to claim small projects as their own. Because of this, economic activity would also shift back towards knowledge use, in that more knowledge will be required for short runs of product. This in turn makes it easier for those involved in services formations to maintain direct links to production cycles as well. Consider Lee Billings, in an article about architecture:
Architecture will eventually enter a more biomimetic phase as the need grows for more energy-efficient building. Agent-based optimizations could become commonplace, along with new construction technologies such as 3D printing, which would allow unprecedented architectural experimentation and innovation. A revolution may occur in how humans construct and live within their homes. Boxy, self-similar houses and office buildings could give way to a wild profusion of easily produced and altered organic forms.

Snap together and pull apart building components could also allow greater flexibility in working relationships, as well as living arrangements. None of this is to suggest these are "preferable" to solid construction, long term commitments or fixed property purchases for that matter. Rather, land use flexibility provides choices that allow real respect for anyone with "handicaps" of any nature. By creating multiple definitions for economic access, individuals have the chance to survive occasional "steps back" (instead of forward) when necessary, and yet still be able to strive for their life's goals. Indeed, legal rules in the U.S. once gave individuals the ability to either start over or start out incrementally, when they were unable to do so in the Old World.

Flexible land use and building components also make one's personal income less important for economic mobility. Think of the race between the tortoise and the hare. When property and knowledge use take the tortoise into account, far more wealth is ultimately created in the process. That means less financial risk as well, when the world quits struggling to fit everyone into the same mold.  Our ongoing efforts to survive and thrive deserve to be a greater determinant of our life options than they presently are. Consider for example, this advice about our future from the above link at HBR,
What will drive a more "optimal" decision framework? It will require emancipation from fundamental assumptions such as employment and organization.
What's more, ongoing local skills and services proposals could also receive "keep trying" votes of confidence, whenever communities do not have room for them in the present. This is an important indicator, because it's one that many businesses which failed, never really had. Often businesses are missed when they close their doors, and former customers wish there were ways to somehow bring them back.  A "keep trying" vote of confidence, not only indicates what people still want to be able to experience,  it also allows them to get used to new concepts and thought processes that might otherwise act as unsettling disruptors, if introduced too quickly. Ongoing variations on proposals (in local activity calendars) allow people to get familiar with service offerings and how they can work.

Knowledge use and land use scarcities can be overcome. How so? By creating economic time and space for multiple participants over the long run, rather than expecting individuals or institutions to be the sole provider every day of the week or not at all. Monopolies in scarce resources are one thing, but monopolies in services only make people forget how to negotiate with one another for their most basic life needs. Worse, knowledge monopolies make people forget the immense value of knowledge itself. When the differences between real scarcities and false scarcities are not well understood, the idea of "affordable" or "not affordable" is meaningless. By using environment integration and getting to the root of unnecessary time scarcities, it becomes easier to determine optimal choices for our finite time.

Friday, December 27, 2013

What's Important - People, Results, or Both?

In the real world of course, the quick answer is people and results. And yet, many people have difficulty approaching dialogue in this way. Results tend to be about rationality instead of emotions, even though both are part of the process. Turns out it's not easy to engage both at the same time, which explains why leaders (for instance) who happen to be adapt at both, turn out to be the most highly valued leaders of all. So...how might this question get answered for Market Monetarism? Or, when we think of optimal action for economic stability, how does one also express this in personal terms?

This morning I found some links that also continue a few thoughts from yesterday's post: a good thing as economic uncertainty is still very much on my mind. This link suggests it's not "just me" as 70 percent in a recent U.S. survey indicated they didn't feel the economy was truly on the way to recovery. Pus, what I refer to as the forgotten rural areas, are where this lack of confidence is most keenly felt. Small wonder, as some people with little choice but to live in rural environs, despair over whether they can keep the car running so as to continue the job an hour away in the city.

If it's tempting to snicker at presidential candidates re their lack of ability to empathize with average voters, sometimes economists have trouble relating to the average citizen as well. How so? For one thing, economists tend to hone in on aspects of the economy, which don't necessarily reflect the average person's ongoing and daily challenges, in community. This is particularly true if the economist sees government or business in general as the only means of positive action, rather than the coordinated actions of individuals. Plus whatever inferences the economist makes, tend to be the ones that are going to gain the most public consideration as well. Unfortunately, that means a lot of second guessing occurs, as to the circumstances people are actually trying to work with to improve their lives.

For instance, Paul Krugman recently complained that "...high unemployment has greatly weakened workers' already weak position in the relationship." i.e. the power relationship between employer and employee. While this scenario might well be observable at times, unfortunately it has little to do with what actually needs to be done in the present. In other words, it gives not a clue how anyone might approach the present dilemma of economic uncertainty.  Of course it never hurts for employers to be more considerate of their employees!  But how does that meaningfully correlate with the fact that far too few of us have workplace participation in the present - especially in areas which have been economically forgotten?

Or sometimes, thought processes that would be conducive to economic progress get lost in translation, because of the limited academic environments where they take place. Indeed, political adherents on the left and right don't always listen to the more important elements of economic discussions. Thus the most important and substantive arguments are often made on the behalf of people who don't understand their significance. An overt political stance in particular, can obstruct the economic reasoning that people need the most. As for those power relationships Krugman is fond of speaking of, my readers already have a sense how I feel about this.

Power relationships exist mostly in our lives to the degree we lack the confidence (or the imagination), to take part in coordinating ongoing patterns for production and consumption. No one gets real economic results by keep seeking out villains and ransacking their village in yet another morality war. Why does anyone think that is the best way to appeal to people and emotion? Instead of looking for the "right villages to burn", why not consider increasing total economic participation instead. That's the way to put jobs back on the agenda.

The fact that we still don't have adequate passageways for knowledge use and services, also holds back the technologies that can support them. This partly accounts for the fact that 3D printing remains a somewhat "iffy" proposition, in terms of what it will be able to do in the next few years. Not so long ago, the news was full of debate in the U.S. as to 3D printing of guns, whilst in Iran (HT Mark Perry, AEI), 3D printing is already being used for medical purposes. Meanwhile, some states here are putting their primary efforts towards getting rid of the burden of Obamacare, with (???) to replace it. Has anyone noticed that some medical people are even having to take second jobs lately because they aren't getting paid on time by the government?

Clearly, there has to be a positive turnaround in local economic formation, before 3D can be utilized where and how it is actually needed - for production and services of all kinds. I will feel we have arrived when recyclables can be used in efficient, low cost and flexible production, for local building components and by all local citizens. No small community will need to be completely dependent on governments, cities or even auto transportation in the future, once it is allowed to utilize knowledge and resources for production needs locally.

Think about these changes on the horizon: with a bit of effort, we could already be preparing for local manufacturing which adapts to specific needs of all kinds. If we can do this, it also means things can change for the better, before millions of people fall away from the ability to participate economically. What's more, we don't know how those changes in local production capacity will affect overall costs for more basic living requirements of all kinds. Still, there are many legal hurdles to be cleared out of the way first.

How to think about the near future in monetary terms? For one thing, I see long term growth potential as a possible beneficiary of good deflation trends. Just the same, nothing realistic has been done to clear the way for them presently. That is why I am so set against a strong taper on the part of the Fed any time soon. Our local communities have to be permitted to take care of themselves in production and services based terms, before the stimulus levels of the present are no longer needed.

Presently, people in power are still acting as though little of significance has to change structurally, in spite of the realities. Or some power holders give structural needs "lip service" as an excuse to do absolutely nothing. By so doing, everyone ends up ignoring the reasons why so much additional stimulus was needed in the first place: to support the kinds of lifestyle expectations which special interests don't want to change now. So to just take away the stimulus because "it's gone on long enough", yet refuse to do anything to change the environments which required those infusions of money, would be like an ostrich putting its head into the sand.

Future generations need living and working environments that are better tailored to their needs. If ignoring that reality isn't enough, attempts to force them to live by the standards of earlier generations only invites more "bubbles" for asset formations. Meanwhile, government debt loads are the inverse of the "bubble" problem, in that they try to cover societal expectations which go well beyond what many family incomes actually represent.

Hopefully, we can find our way to dialogues that include emotional appeals and results oriented action in the same argument. But until we do, it would be most helpful to maintain the environments we presently have, to the best of our ability. That also means printing as much money as necessary, for total spending capacity. Building societies up only to knock them down again when no one agrees on anything, is no solution.

Thursday, December 26, 2013

U.S. - Monetarily "Boring" Already? Perhaps Not!

Word has it that monetary policy in the U.S. might even be so "good" (relatively speaking) that it could become boring soon...Say it isn't so! (Lars I'm not picking on you personally) To be sure, in some respects it appears as though monetary issues are headed back towards "normalcy", as statistics and bottom lines continue to improve. Might this state of affairs even be reminiscent of the Great Moderation in the U.S.? Okay I'm being a bit melodramatic, but then I'm not quite yet ready to sing "Happy Days are Here Again".

Fortunately I'm in good company with plenty of Market Monetarists, who remain concerned whether greater economic stability is a certainty in the years ahead. Still, 2013 was a year for progress and not just in the U.S. by any means. Indeed, there has been enough improvement in the economy that Scott Sumner anticipates Market Monetarists will no longer expect further monetary stimulus in a year's time, give or take some wide variances in opinion among MMs!

In a sense the ongoing challenges come down to a one word question: Why? That is, why is Market Monetarism embraced by its advocates, and what they believe it can accomplish. Reasons - of course - vary. Yet individual positions will matter more, as the conversation moves forward. To a degree, advocacy for Market Monetarism came about as a somewhat impartial observation, regarding indicators that appear most capable of providing monetary stability. That basic premise of course continues to be the case. But behind the premise, also lie the millions of lives that have been affected by long term unemployment. What's more, this strict focus, which does not really include an active (symbolic) "why" except in terms of statistical efficacy, is frequently challenged on its face by those who doubt its capacity. This is true not just of economists but by observers in general.

And even though a nominal level target can provide economic stability, there is not yet a symbolic explanation for its rationale in anyone's mind. That means nominal targeting remains susceptible to misinterpretation or misapplication - even when people don't necessarily realize that this is happening. In the process of reaching out and attempting compromise with the concept itself, I've seen Market Monetarists ridiculed too many times because they allowed the conversation to take place solely in measurement based terms. Something is still missing here. We need to be able to indicate why this measurement can provide stability, beyond the economic language itself. What is it specifically about the level target that has this capacity? Can this stability still happen even if money no longer operates under recognizable circumstances?

It's not good if I question the continuing premise of IOR, for instance. Whether or not I believe normalcy is possible with IOR, laypeople have to be able to relate to the answers to these questions or they will not find reason to back the Market Monetarist framework. After all, we need all the support we can get, when in fact bureaucracy, business and academia obstinately stand in the way. In the 20th century, seemingly it would have been enough for central bankers to be convinced of the applicability of a nominal target rule. Even if central bankers were open to nominal targeting now, that alone might not be enough to create overall agreement in the 21st century. Certainly the political realm is not ready to provide productive input at the moment or any time soon, and we need to craft a broader appeal that reaches to the heart, not just the mind.

The gains of a nominal targeting rule - while they may appear to be about one institution, really are nothing of the sort, for the economic gain they represent goes well beyond the idea of institution itself - even if the action is something embodied by an institution that represents economic activity. Therefore the discussion of Market Monetarism suggests the possibility of reaching beyond institutions for solutions in general. What's more, a Market Monetarist solution to unemployment problems that is fully integrated with economic participation at all levels, is much preferable to an MMT solution for instance that would attempt to provide a base income with no true ties to consumption and production capacity.

To be sure the fact that I don't live in a "bustling" city has some bearing on my personal viewpoint.  Not much here appears truly different than the days of the recession, re what is observable on a daily basis. Indeed, more shops and restaurants around the nearby downtown area have continued to close, in spite of oil production capacity gains. None of the recent stimulus efforts have changed my basic outlook. I remain convinced  that rural areas especially need domestic summits at a national level, so as to find greater coordination for economic participation as government roles decrease over time. And, I'm frustrated that nothing is happening on the supply side in terms of organized action for economic coordination, in spite of the incredible possibilities that exist. Let alone the time that has passed that something - anything could have been tried at a national level. Instead we've gotten mostly diatribes against economic activity in general, and little more than theatrical reactions to the diatribes!

Seeing as how much of the economic discussion remains mired in political think tanks, prominent publications and academic environments - economics blogs notwithstanding, the debate is stuck. It's not accomplished what I thought it could, and I apologize for the scattered confusion of thoughts in this post as I worry about this problem. Something about these formats is apparently still not ready for the widespread national discussion which needs to happen. Nor have these debates inspired anyone to take to the road to bring about economic momentum across the country. Taking to the road to talk to people instead gets totally wasted on political elections. Believe me I would take to the road and talk to everyone who would listen, if I could, right now.

Many cities in the U.S. do not feel that they have reliable strategies to move ahead in the future, in spite of the recession in the rear view mirror. Plenty of cities would be glad to take part in domestic summits as well: cities and rural areas likely have more in common for new services strategies than they realize. Supply side services issues such as this are still not connected in anyone's minds to monetary stability, but they really need to be. While economists can sometimes support public efforts for economic revitalization and also help with such efforts when asked directly, it really is up to individuals outside of institutions to take up these vital economic issues on their own. Even though they are in the interest of city and country alike, domestic summits are outside the purview of specific institutions.

What's more, the services we capture through economic coordination are a major part of what our government cannot provide for us, though it would if it could. None of us can afford to continue leaving our Main Streets and neighborhoods devoid of real life, anymore. If we focus on this and make plans for the growing reality of economic transformation, these are positive actions for the future that our government will eventually be able to support.

Before Obama was even elected, it bothered me to hear him speak of change because I just didn't think he had a way to make it happen. Not then, not before the economic situation overall had become so desperately obvious. To his credit, I have heard him say that it is all of us that need to make a better reality. One only hopes that he - or whoever follows him in the White House, will give us the chance, if and when we come forth with potential solutions of our own. Until we do, nothing about our monetary reality will be boring - or certain, for that matter.

Wednesday, December 25, 2013

Each of Us, a Filament

Electricity, from where sparks are born,
And there's reason to celebrate on Christmas morn,
Even if we know not, the reality
That just deepens the meaning, of the mystery

Each of us a filament, on interconnected strings,
Multi-colored lights for the tree of life.
There's this moment in time, to pause from the strife,
Feel the energy,
as it courses through cold dark night

From the distance, great brightness from many strands
of light from the fire which was given to man
Somewhere, past the pain, confusion and fear,
He waits with gift of calm, surely he still hears

After each fury,
The wind whispers down
There's stories yet to tell, another storm settles
Do we still know how to make this special
Who collects our wishes, who travels to tell...

Who watches us gain courage
Every time we stand tall
Or waits outside when we're broken and small
Who wants us to remain
On the dry side of the bridge
Yet holds the river of unknowing,
Even as we climb, back up the ridge

This could be what forever feels like
light from each filament for a path in the night
Can we remember why you brought the fire
Will we remember how you brought the fire

Midweek Market Monetarist Links and Summaries - 12/ 25/13

(David Beckworth) Meanwhile, the Eurozone staggers on defiantly without monetary crutches:  http://macromarketmusings.blogspot.com/2013/12/the-qe-block-versus-emu-block.html
Broad money growth in Japan is recovering: http://macromarketmusings.blogspot.com/2013/12/how-is-abenomics-doing.html

How many women in the U.S. stay out of the workforce because of the marriage penalty? (James Pethokoukis) http://www.aei-ideas.org/2013/12/why-slowing-us-labor-force-growth-is-bad-for-us-economic-growth/

Of Milton Friedman and the k-percent rule (Josh Hendrickson): http://everydayecon.wordpress.com/2013/12/19/yellen-optimal-control-and-dynamic-inconsistency/
David Glasner responds: http://uneasymoney.com/2013/12/20/milton-friedmans-dumb-rule/

Interest rates still tell us very little about the stance of monetary policy (Marcus Nunes): http://thefaintofheart.wordpress.com/2013/12/19/extended-insurance/
Marcus considers monetary policy reaction to oil shocks in the 70s by the U.S., Japan and Germany: http://thefaintofheart.wordpress.com/2013/12/20/the-great-inflation-is-being-revisited/
The CBO measure of potential NGDP can be misleading: http://thefaintofheart.wordpress.com/2013/12/23/not-so-fast-ed/
Some additional NGDP perspective for important Fed graphs: http://thefaintofheart.wordpress.com/2013/12/23/right-before-christmas-100-years-ago/
Benjamin Cole takes a closer look at QE3
World trade volume is still falling away from trend
Marcus considers six countries in a continuation of the previous post

Britmouse provides recent UK numbers: http://uneconomical.wordpress.com/2013/12/20/uk-2013-q3-quarterly-national-accounts/

Peter Sisko (Money Mischief) provides a brief overview of the work of the Fed, for the past 100 years: http://moneymischief.blogspot.com/2013/12/100-godina-fed-a.html (Just use Google translate)

Lars Christensen asks, how might a nation's resources be privatized? http://marketmonetarist.com/2013/12/18/some-inspiration-for-matt-zwolinski-my-suggestion-for-a-venezuelan-citizen-account/

For someone who indicated he might be too busy to post much during the holidays...(!)
(Scott Sumner)
how important is finance for RGDP or the path of NGDP?
...where we learn that even Google has "institutionalized" confirmation bias! The "stance" of monetary policy
The Fed has "edged" closer to Scott's October recommendations
The Fed wasn't quite happy with QE but didn't want to tighten...
How difficult is monetary economics? Somewhere between rocket science and quantum mechanics
Some clarification for John Carney on the monetary base
Britmouse also responds - "For reasons not clear" Krugman ignores aggregate supply
How is it useful? Krugman on the Phillips Curve
Two quick comments on taxes turned into quite a discussion.
John Cochrane could be confusing "money supply model" with monetarist model
In response to Nick's post, Nick Rowe on Cochrane and Williamson
Good post: How many economists can answer this question

Nick Rowe - "You get barter because the quantity of medium of exchange is too low"
In response to the recent finance/macro theme - Does finance need money/macrofoundations?
Nick in response to John Cochrane
and - Enough with announcing targets for nominal interest rates already
Correlations between nominal interest rates and inflation rates involve Long run, medium run and short run Fisher curves

Some helpful clarification from Bill Woolsey - How Important is Shadow Banking?

Whatever we have to worry about, Evan Soltas suggests U.S. savings rate isn't in that category
Evan wants to know - http://esoltas.blogspot.com/2013/12/how-did-we-miss-swiss.html

(Lorenzo) Central Banks fighting the threat of rising productivity?

Also of interest:

Uwe Reinhardt's healthcare viewpoints are always worth taking the time to consider: http://economix.blogs.nytimes.com/2013/12/20/the-economics-of-being-kinder-and-gentler-in-health-care/?_r=0

Bart Wilson's last post for Econlog (for now), A Literary Theoretical Treatment of Prices

Wishing all my readers the Season's Best, whether "young" or "old" - near or far!

Tuesday, December 24, 2013

When Competition Yearns to Breathe Free

What might be the result? Jonathan Finegold's quote of the week was sufficiently inspiring that I am compelled to start this post with these words by Armen Alchian here (from Economic Forces at Work, 1977)
In every society, conflicts of interest among the members of that society must be resolved. The process by which that resolution (not elimination!) occurs is known as competition. Since, by definition, there is no way to eliminate competition, the relevant question is what kind of competition shall be used in the resolution of the conflicts of interest. In more dramatic words designed to arouse emotional interest, what forms of discrimination among the members of that society shall be employed in deciding to what extent each person is able to achieve various levels of his goals? Discrimination, competition and scarcity are these inseparable concepts.
Regular readers know, that I feel we don't have enough marketplace passageways to make adequate inclusion possible. To this blogger at least, that means a lot more elimination (of potential competition) happens than Alchian's words seem to suggest! What's more, arbitrary limitations for economic entry (in business starts and services) are easy for special interests to capture and define, because they appeal to some very basic psychological motives on our part. While the scarcity of space is nonetheless real in physical terms, the scarcity of mind capacity in terms of relative aggregate need, is but a discriminatory fiction.

This results in limitations of a physical or environment defined nature, as well as the knowledge use realm: albeit in quite different capacities. Still, both "handicaps" appeal to one's desire to either reach beyond present status or prevent others from accessing our "perch", as captured by environment requirement (regulation, zoning, strict product or service definition). This generalization goes exponential if our perch costs a lot.

Also, knowledge use limitations often stem from the fear of being taken advantage of or subjected to substandard service in some way. Of course this is something that happens in any event, thus individuals in today's special status quo can pay dearly, when the problem becomes them. Or maybe certain individuals in question weren't really the problem, but were the only ones that could be easily flogged to make up for the special privilege bestowed upon them.

Plus, it becomes tempting to tighten up the rules of the game, creating "forced stretches" on everyone's part, during times of material abundance and gain. This leads to expectations re how flows of goods and services are "supposed" to happen for the rest of infinity, even if the good times don't remain so great. Alternative flows therefore become frowned upon...

Just one aspect of the economies of scale problem, is the present challenge in food preparation by food trucks. Food trucks allow economic entry through lighter financial obligations and overhead: all of which allows nimble adaptation not really possible at the restaurant level. Certainly the restaurant owner may feel threatened. However, it's uncertain how long some cities can hold back the tide of young people who do not have jobs at the ready and are compelled of necessity to create their own. What if a city arbitrarily decides to commit to greater economic inclusiveness, over the cries of its established businesses anyway? How might it approach the matter?

Let's consider that seemingly automatic take-advantage-of-psychology aspect, re how we as a society unwittingly circle back, creating our own unhappiness. It's that legal thing we do which allows five steps forward, no steps back, and then the real possibility we lose control over our lives. By financially maxing out our aspirations and distaste of "inferior" services, every time! What's more I have a good post from Bryan Caplan for the illustration of our subsequent quandary. Here's Caplan, in his goodbye to Bart Wilson:
Bart points to an experimental resolution: People like being in control of their own lives - and gladly accept lower-quality outcomes to avoid being under other people's thumbs.
To paraphrase a bit further from Caplan's post, even though people systematically make bad decisions, they value their right to do so.

But...but..that's not what we've been doing! (No kidding) Well...at least we've been giving the illusion of "allowing" only the "right" decisions and perfectly respectable suitable environments. Oh my when I think of the relative freedom (in terms of overhead responsibilities) of flea market booths and the relative degree of "mistakes" they allow as compared to the inviolability of some building lease agreements. Sure, you can buy respectability just so long as you never fail. Hello legal? We would have accepted a less than perfect outcome. Sorry we didn't indicate that to you sooner...

Even so: who - with the seeming capital equivalent of a flea market booth - doesn't want a real environment to interact with the public? What we do know is that the business and financial folk will accommodate that wish much of the time, with pleasure. Except: buying "respect", whether one actually needs it or not, isn't cheap. And if respect doesn't pan out there's not much left to sell. Which leaves me with one question: Why don't we count business losses in unemployment statistics? Okay, one more question. How much of a stretch would it be to take Alchian's discrimination dig, as discrimination against ourselves? In the game of life, we and our business partners allow ourselves the right to step ever forward but not to step back even lightly - only the right (?) to fall back in the hole for what it's worth.

Another question I asked recently also seems relevant here: why can't we approach our economic environments a bit more like some of our challenging and inclusive games ? After all, most games don't say one or two strikes and you're out - they encourage us to keep playing. Whereas our legal and bureaucratic system isn't fond of economic games, thus has become quite a stick in the mud. Except, it doesn't realize how many lonely and desperate people now exist in the world - all because of short sighted arrogance.

Some time ago, the cost of entering economic games became unnecessarily high on Main Street for those who provide (relatively) marginal needs. Yet when marginal needs end up assigned to larger interests, they often lose "interest" in carrying them. There's many ways to create fun and greater choice with economic activity, and no good reason why Main Street should remain exempt from a plethora of possibility. How might occasional, or "not constant" needs and consumer desires, be reintroduced? Most importantly, how can they reside in places that don't constantly go empty in between.

For every person who wants to "beat" everyone else into submission - and whatever institutional ilk they belong to, I'd "submit" there are probably at least ten more who have much more fun keeping the game going (paging legal...paging legal...). Hmm there's bound to be some studies on that. For our purposes here, these are the people who will keep their doors open to the public until every last dime is spent in the effort to stay economically alive. Even if the hapless entrepreneur didn't have enough left over to give to all the charity drives this year. Who loves the game? Say aye!

Sunday, December 22, 2013

Oil Production is a Random Scarcity

Why is that so? After all, recent oil production is a positive trend for near term growth in the U.S. The point is not to trivialize that growth in this post title, but to consider its importance into a larger context. For some emerging economies, oil still has a substantial role to play in terms of integrated growth and environmental definition. That is no longer the case in the U.S. Indeed, the (physically) expansive transformation of our environment from fossil fuels belongs to the 20th century. While today's substantial production uptick is a positive economic shock, it may remain somewhat muted, because the consumption cycle is not really affected by new productive capacity this time around.

Even so, it's hard to grasp the full impact of that reality. That's especially true, when the temptation remains for some central bankers to assign a more central role for oil production (as wealth creation) than it actually represents. In the part of the country where I live (even though it's more about processing here), oil production remains front and center. It would have been hard to imagine the recent good fortune for oil production a decade ago. However, overreliance on oil production as a primary economic factor has hurt local economies any number of times. That's been true for Houston in the past, and continues to be responsible for partially dormant Main Streets in too many oil based locales.

The fact that oil wealth is not as important as before, is also indicated in the fact that pricing likely won't really drop in the U.S. in spite of production gains. Emerging economies have picked up in consumption even more than the degree to which the developed world has dropped off. Also, perhaps it would help to clarify what I mean by oil wealth as a random scarcity, as opposed to fixed scarcities of time use and land for instance. Fossil fuels as elements of production have gradually decreased over time. Even though we will continue to rely on fossil fuels, other resources are gradually assuming more important roles in technological evolution.

Sometimes it seems that arguments as to capping or limiting fossil fuel production are beside the point, in light of current utilization practices. Instead of reacting to "overuse" of fossil fuels, such time might be better spent considering environment formations that rely less on extensive transportation, and also ways to capture fossil fuel value more effectively for the long run. For me there are at least two important issues in this regard. First, people need to set about creating future infrastructural realities that are not as (directly) dependent on fossil fuels. Not just for people who can't afford to own autos but for those who elect not to. Walkable communities are at the top of that list.

Second, there are ways to maximize gains from fossil fuels while they still exist in relative abundance. Why not utilize fossil fuels for more flexible and sustainable product formations, especially in a country that no longer relies on them as primary wealth? In other words, people without cars could also have simpler high density environments than are now the case. In some circumstance, fossil fuels could transform environments with materials lightweight enough to be easily picked up and moved about. Some versions of these environments would also be possible without the need for robots, cranes or other mechanized assistance for that matter.

When it comes to daily or routine activities, using large amounts of fossil fuels to get people back and forth down the road is in some ways a loss of imagination, not to mention unnecessarily spent fuel. (As to biofuel use for everyday trips...insanity?) On the other hand, it is the occasional trip not connected to everyday needs which provides the greatest benefits for life choices, by far. These are the future transportation needs that would benefit from incentives to preserve fossil fuel use well into the future.

Plus, better knowledge use systems for services, would make it easier for people to live and work together in closer densities Among other advantages, these community arrangements would have the benefit of less transportation expense for daily needs. Not only would a wider variety of service arrangements be possible in closer quarters, but these options could be arranged so as to overlap in common areas and spaces through time arbitrage. Even in my mid twenties I remember discussions with others, regarding the "optimal" size of a city. We wondered, how was so much economic diversity possible in a city of 25,000 for instance, in earlier times? Whereas by the seventies, some of those same advantages seemed to require a population of millions to achieve a similar cultural result.

Long before the advent of the auto, people were able to utilize time amongst one another by more flexible and resourceful means - a process which 20th century transportation reversed. Now, the task is to once again bring economic diversification into closer proximity to our lives. It will be interesting to see how the cities of the 21st century are able to adapt.

Saturday, December 21, 2013

Potential Production for Future Growth Cycles

One reason it has become difficult to think about significant additional production and growth, is the fact that economies of scale have already circled the globe many times. Okay. What about something that isn't about external economies of scale, but instead takes advantage of our own (vastly underused in the aggregate) time availability? Or, one could say that economies of scale still exist in the negotiation capacity of an internal realm, even if the external realm has seemingly been "picked over" so to speak. I get that the primary argument against what I suggest most likely boils down to this: it's hard, to get people to think in those terms.

What's more, I completely agree with that criticism. Even so, once a different system for time use is adopted, it would essentially only need to be figured out once and then passed on for future growth cycles. People moved away from barter for a very good reason: money was a lot easier to use. Unfortunately, at some point along the way, money wasn't quite so easy anymore. That doesn't mean stepping back but moving forward. What's more the very meaning of money is getting stretched until we do move forward, and we need better methods of overall wealth capture before people forget what money truly represents.

None of this is to suggest barter of goods: cutting edge production capacity does that best in most circumstance, when in fact nations can utilize it.  Rather, the idea is to learn how to arbitrage time effectively, with ongoing education for further arbitrage advantage. In other words, we don't look at our time as a "good" that for whatever reason didn't sell in the marketplace, but instead use our time to produce an entirely new good that the marketplace did not already have available for a significant subset of the population. What's more the good in question is not separate from our time, even though we utilize goods as a part of our time.

Unfortunately, methods people rely on to create wealth have become difficult to widely utilize. That's the only reason I even suggest a system that while hard to learn: once learned, would offer knowledge use passageways that simply don't exist, otherwise. The latest iteration of these arguments was triggered by a telling graph that has been making the rounds. More than anything, those limited wealth  gains indicate the degree to which agricultural commodities and fossil fuel production have become the primary fallback wealth of the U.S. as of late. While there is certainly nothing wrong with our particular resource fallbacks, clearly we need more than this to build a future. At the very least the U.S. can take comfort in the fact that it is not alone among nations in this regard.

For one thing, the production required in fossil fuels and commodities doesn't require a substantial part of the population. That's why manufacturing was such an economic gain, because it did. There was room for increased overall participation, because both resource extraction and extensive product formation were involved in the process. What's more, that's also why consumer led wealth worked out for so long.

Consumer led wealth required greater participation on the part of most of us at the consumption or aggregate demand end - if not the production end. Therein lies the great mystery. How do we produce so that we can consume, if in fact society advances by requiring not very many of us, to produce? We do so by becoming individual producers of knowledge services as an altogether new component for a substantial portion of the population. In other words, more production and consumption in the aggregate, rather than simply maintaining consumption to prop up limited services production that has become problematic.

Let's break this down a bit. Going back to slow economies (to create goods separate from our time) would also put more individuals back into production cycles in order to consume. However, that would take away from the production gains that allowed us to live better, through the more abundant (efficient) production of those same goods. What that boils down to is that some would feel good about slow economies while others would just experience more poverty in the aggregate. Okay, knowledge use arbitrage is a slow economy too, right? Perhaps in the sense that we would not feel so rushed to make decisions. But we would not be taking away a more efficient knowledge based services economy, as in the first production based circumstance!

Another challenge: why pay for more knowledge use if we're getting by with what we already have? First, knowledge use and services are the glue that holds together the productive elements of economies. What's more, this is work we'd rather be doing for more money (than basic monetary reimbursement) but still for the most part would choose over manual labor when in fact we could. Some services have been necessary all along (through redistribution) for the earlier knowledge use pathways that facilitated the Industrial Revolution. Also, some of these services are what we came to rely on from the economy in the 20th century, so that families could experience more freedom in the choices of time they spend with one another.

In other words, even though equal or lateral time use does not add to growth in a "normal" wealth based sense (our time "cancels out" instead of flowing between different valuations), this process would not subtract from production wealth, as services sometimes do in the present. Why so? For one thing we would be arbitraging services choices directly. Thus, government would not be making those choices for us through special interests that capture the wealth benefit first. Not only would more flexible services activity become possible, but knowledge would be usable to a far greater degree. By making knowledge a product of time use in its own right, people would no longer feel the pressure to adhere to the hard limits borne of supposed "efficiencies of the present. A wide range of knowledge choices would once again be possible.

How much of the output gap of the present might be filled by the spread of knowledge use for all, and not just the few? It's impossible to say, because some formations of present knowledge use would ultimately change in the process. Still, it's probably not too far off the mark to suggest that opening this potential marketplace, would also give people the confidence to consider a far wider range of asset formations, than they have been willing to consider since the Great Recession. It is always easier for people to take part in the consumption of wealth, when in fact they are realistically linked to production processes as well.

Christmastime for the "Lapsed" Protestants?

Sometimes I find myself ready for the new year a week or two earlier than it actually gets here - the holiday season can do that to me. Maybe I've just heard "All I want for Christmas is You" (gag) on TV one too many times... About the joking post title: No, I'm not really a lapsed Protestant, at least as far as I'm concerned! It just depends on where one happens to be standing if they say something like "well, some of your miracles are pleasant myth stories in my head." Since I don't need to rub anyone the wrong way, I certainly don't say that very often!

Saturday Night Live does holiday reruns including an old "Christmastime for the Jews" skit. That skit made me wonder, how do people who no longer celebrate Christmas in in a "big" way, think about all the busy rituals? After all, Christmas means different things to different people, but these days in public we mostly see and hear the shoppers' version. Meanwhile, some of the Christmas songs I enjoyed the most, seem to be mostly "locked" inside churches instead of the public places where they were freely played when I was young.

There was at least one recent post by an economist (my age) referencing the Christmas tree at home. Of all the decorating I did over the years, the Christmas tree finally became a bit too much, in spite of the enjoyment it provided. As I type this post, there are some enthusiastic people taking part in a parade up on Main Street, for I can hear the fire truck sirens and honking in the rain.

It's been almost a decade since I've celebrated Christmas inside a church, and several years already since I've had the occasion to celebrate the holiday with others in any gift giving sense. One of the odd things about doing any form of Christmas "solitaire", is that it does make the "reason for the season" a lot more noticeable. Jesus certainly wanted people to love one another. Some days we can't help but wonder, who really believes that? Recently I was reminded about the iffyness of love, by a woman wearing a t-shirt which said "If you don't believe, you don't belong". Ouch. Believe what, exactly? Since maybe I don't belong in the conforming sense that t-shirt suggested, does that make me free to believe anything I want to...

And solitaire has a way of suggesting one's own take as to what Jesus and God might be doing at any given moment. There's a number of versions in my head where Jesus comes to visit God - who knows what galaxy, and God asks him to sit down for a drink or two, to reminisce about old times.

God: How's your latest venture going, on planet XYZ?

Jesus: Not bad, not bad at all. I'm glad to say that these folk aren't afraid to speak of diversity and freedom in the same sentence.

God: Are you still sensitive about Planet Earth, after 2000 years? After all, it is but a starter world, remember. And just think! (Jesus winces) They're celebrating your birthday this week!

Hopefully I didn't offend anyone with that imaginary dialogue...will stop while I'm ahead! To be fair, I experienced openness and understanding for a long time in church environments before I ever encountered the opposite. For the most part, different Protestant denominations can be tolerant and accepting of differences. Indeed, the possibility of getting "burned", ultimately seemed to depend on the degree of one's commitment to a particular church. One reason that possibility became important to me was the fact that older individuals had the best reasons of all, to grow closer to their church environments. Yet, I couldn't help but notice that the hurtful "divide and conquer" mentality which occasionally emerged amongst congregations, tended to hurt the older members the most.

There are many good church recollections over the years that I will always hold close. For instance in my high school years - saying a prayer with the Presbyterian pastor before opening service with songs on the piano. Or, sneaking in an occasional song while playing the organ, better suited for a rural Baptist congregation than the little Episcopalian church where my most special memories reside.

If the meaning of Christmas seems artificially separated amongst church members and the rest of society, maybe that's no different than other equally artificial separations between institutions in general. Sometimes, individuation helps cultural identity. Other times such as now, individuation stands in the way of economic progress, and it's not always easy to tease out the difference.

However my readers like to celebrate the holidays, in the (new?) Protestant tradition I'll offer both - Happy Holidays and Merry Christmas, as well. Those Cornish game hens will be just enough, to make a holiday meal for me and Dad. And, what would Christmas be without cornbread dressing? Heh.

Friday, December 20, 2013

Governments and Some Other Broken Links

Why do I think of governments as broken links? To be sure, I didn't always think of them in such a way. After all, much of the history that is preserved, comes from timeframes when governments were indeed strong. In the good times, we think of governments as capable of preserving knowledge alongside many other productive elements of society. Not only have governments proven capable of taking care of their citizens, but the records of their achievements and provisions are long indeed. And yet, governmental functions break down just the same, over time. It's doubly hard when governments break down after so many people have come to depend on them. Too many political factions do not want to look at the fragility that is Washington today, but it's time to do so just the same.

At some point in the 20th century, some aspects of the economy started to change, quite dramatically. Indeed, there were numerous shifts that occurred around 1973 when I graduated from high school.  But instead of any real dialogue between government and citizens as to overall societal direction, people mostly shifted gears in the same patterns. For decades in the U.S., it seemed as though the old manufacturing order could be replaced by a "consumer society" that had grown increasingly reliant on imports from globalization. Indeed, the consumer picked up symbolically where manufacturing left off, and standards of living continued to rise across the U.S.

A broken link which really matters for governments today is redistribution of wealth for services. For - when governments struggle - services break down unnecessarily and unexpectedly. It is hard for people to provide more for their governments now in taxation, after decades of moving towards less discretionary income in the effort to improve standards of living overall. At a time when services are  more important than ever, governments can strive to make them a central feature of wealth creation, instead of relying on other parts of the economy to fund them. But in order to do that, services will have to move well beyond the domain of the institutions that limited their availability.

The fact that everyone waited too long to start this process has placed some important aspects of services in danger - particularly in healthcare and education. Everyone utilizes services of all kinds, and benefits from them greatly. Just the same, the fact that governments became too closely associated with special interests in this regard has many individuals either going without, or others wanting to reduce services in the aggregate because of the further taxation they presently demand. Because of the close connections between government and services, present fiscal cutbacks reduce some of the very growth that citizens benefit from the most.

One of the worst aspects of the education dilemma is the fact there are unproductive conversations all around, as to what education is "appropriate" or "not appropriate". Education and knowledge of all kinds can be valuable products, for Pete's sake! We have bought and created countless products in the marketplace especially over the last fifty years without questioning why people thought they were worth the bother of anyone's time. If someone wants to buy the product, quite often that has been justification enough for its existence. Odd to think how some libertarians would get bent out of shape about drink size rationing for instance, then turn around and belittle humanities classes. This is still a consumption function!

Perhaps because education was largely non profit with immense expectations from redistribution, we ended up tearing it (along with plenty of teachers) apart piece by piece. Is it because of what education is "supposed" to do - that is get us a "real" job with lots of money, that we belittle education when this doesn't actually happen? To be fair, nations have not really had to deal with the knowledge quantity and capacity of the present, until recently. But now that the problem is here: at some point governments will want to give their citizens a chance to create better pathways for knowledge use that can last well into the future.

Even so, education never should have been broken apart so thoroughly from ongoing production and consumption processes. Not only does that division hurt rural areas of the developed world: it also hurts developing nations which prepare education for their children, only to have them leave the community afterward. For a while it did look as though the bulk of economic activity would take place in the factories of the 20th century. However when that reality started to change, is when this conversation about the future of services really should have begun.

Blame games aren't useful in any of this, because these processes have been going on for a long time. Best to start untangling the broken links and finding ways to reconnect them in more useful and tangible ways. By so doing, education can once again become part of daily economic activity on the part of everyone. But we also have to erase the boundaries between institutions. Without a doubt, some of them would initially seek to prevent more substantial knowledge use pathways from happening.

Private services designations suffer many of the same marketplace limitations. The fact these activities may be viewed as subordinate to "normal" wealth creation, or else limited in product definition, leave them available mostly through taxation, redistribution or insurance pools. It almost seems they never even had a chance to realize a free market, and each new regulation is just more piling on of what already was the wrong direction for solutions. It is important to get past societal perceptions of services as inferior wealth, for knowledge use of all kinds is the very glue that holds together developed nations and their economies.

Presently, people see governments as actually standing in the way of getting things done. One way to break through the gridlock is by allowing direct democracy to play a role in services provisions. To be sure, people cannot safely place pools of money or (random) scarce resources into direct democracies. However, the fixed scarcity of our time is the great leveler, when it comes to people discovering what is actually possible to accomplish. When everyone has the chance to use personal time arbitrage for local needs and services provisions, complicated taxation strategies can finally be seen for the inefficient time destroyers they actually are.

For a long time it seemed as though redistribution of random scarcities could make up for the limitations of our time, but this has turned out not to the case - not even close. Rethinking services is among the most important issues that nations will have, in the 21st century. What's more, there's an easy way to think about the reorientation of both healthcare and education in the process. All too often, we have treated healthcare as an end result, and education as a means to an end, when in fact both of these processes need to be reversed. Healthcare should always be a means for living life fully instead of the end game that money has inadvertently flowed to. Likewise, education should be an end in itself, for the course of one's lifetime. If our time becomes a real component of these basic activities, it may be easier to bring a clearer perspective, to both.

Wednesday, December 18, 2013

Where is the Starting Line?

...To a more sensible economic future, that is. I've been fighting a head cold recently, brought on perhaps by a house that got too chilly lately. My ability to concentrate has been somewhat impaired, so hopefully this post will make some sense! At least I've been able to find some interesting links to tie in with today's thoughts: finding our way to a better economic future, is a topic that weighs heavily on many minds.

The other day, Tyler Cowen asked, why is liquidity flowing through economies in such a non neutral fashion? For me, this question can be answered by the fact that special interests force many to accept product formations that are simply not appropriate for their present resource use capacity - thus the monetary disequilibrium that follows. However, the fact that both finance and governments are determined to keep hammering square pegs into round holes, makes it difficult for macroeconomic (monetary) measures to work as effectively as they otherwise could. Let alone the ongoing confusion between statistics and numbers, versus how money needs to be able to flow through economies.

What's more, it's not hard for finance to insist on center stage, when mathematical functions remain front and center in economics departments. For instance, I was of the belief that history of economic thought was poised to become a more important element of higher education requirements. But according to Gavin Kennedy it looks as though some economics departments are instead heading in the opposite direction. Think about this as a striking example, of worthy issues that never even make it to school curriculums for any number of reasons. How many communities and educational entrepreneurs would be able to provide worthy "homes" or destinations for knowledge (homes that can be shared online), whenever educational institutions cannot? That's why I believe in opening up education at all levels to educational entrepreneurs, in local economies willing to start anew.

Because of institutional limitations, many thoughtful and hard working students don't learn about important aspects of life, that could have considerable effect on the way they approach the world. For a student, great teachers mean many things. Does it matter if a teacher says I am not going to teach X (something that may seem central) if the student would do better to learn about X at a different time or even in different context? Institutions of learning haven't adapted to the subjectivity of our fixed time scarcity. Yet each student has a unique time and place for learning, and that matters.

It was an HBR post "Great Entrepreneurs Pick Great Markets" a couple of days back, which nonetheless reminded of the vast marketplace which most still assume to be off limits in the present. Institutional knowledge based wealth capture is so taken for granted that many now think of labor time as non scarce, instead of the finite scarcity it represents both for overall economic stability and the reality of our own lives. That much diminished accounting of human time is a huge mistake. After all, when we don't calculate aggregate economic time participation in direct terms, our economy is forced to make adjustments indirectly: adjustments which cannot maintain equilibrium for the long run.

Rob Go (HBR) speaks of the moats that exist in some marketplaces, acting as effective barriers to entry. For me, the problem is that they interlink with multiple "castles" which in turn rely upon one another for their strength. Those moats cannot be approached head on. Instead, they will need to be actively questioned through limited first mover measures and economic examples over time, which prove capable of removing the negative externalities of undirected personal time.

These moats are precisely why it is hard to find a starting line for economic entry in any normal sense. For instance, Kurt Schuler in this recent post, looks at the fact that nations are used to government being the monetary "go to" for educational purposes in general. He wants to know - is that really necessary? My thoughts: Some start up knowledge use systems, as they are adopted, might want to experiment with monetary printing by more direct means, for educational entrepreneurs at local levels. Such printing could still readily integrate with larger monetary systems.

At the very least, some realize that the desire for a basic income is not as simple as waving a magic wand, as this guest post by Max Sawicky at Next New Deal indicates. For one thing, conservatives are not so anxious to alleviate poverty as they are to keep special interests from benefiting at the expense of lower income levels which do not have their own adequate political representation. Just the same, special interests would not give up their mostly unnoticed gains so easily. Again, first mover problems such as this are why focused economic efforts (and experiments) at local levels could point the way to new integrated economic practices. Not only would these work to benefit lower incomes in the long run; people from all income levels can learn to play more direct roles in the broken down production and consumption functions of the present.

Understanding is key now, to keep urban and rural economies from splitting apart. A complete separation of regional economies into political factions would not help anyone. This is especially evident in ideas of peer to peer economies that revolve around sharing of resources, goods and "slow economy methods" which are intrinsically fine. Just the same, alternative economic measures can be pursued with the understanding that they need to be choices - not life crippling necessities which also translate into low income poverty. That means making the limited capacity of our own time use a central element. To do so, strong links to production efficiency alongside services coordination, need to be maintained locally in monetary terms.

With today's technology, sometimes it seems as though one could put together better functioning  knowledge use systems and set them down anywhere, but that isn't really true. How prosperous is the area that is being considered for knowledge use systems? Do they still have good employment prospects and if so, of what nature? Or, has the area declined too far, for anyone to be compelled to initiate complex undertakings? There seem to be "sweet spots", where people would be willing to relocate and start over, yet still have a base to work from in terms of possible growth. What kinds of companies are in the area? Remaining traditional services? How many who live there actually work, and if they do, do they work nearby or commute elsewhere. When domestic summits are taken on, these are important considerations.

Most important here perhaps, is a link Tyler Cowen posted from a Ryan Holiday post that I find myself compelled to respond to. So I'll do a bit of a "take down" re the words that Ryan framed for his wall. Scarcity...hmmm. Now I know exactly why Tyler's latest book bothered me so much.

Yes, of course quality land and related resources are scarce. Oftentimes we can visit special places such as this, yet know that living there isn't really an option. Plus, those that do stay will make more money in relative terms because it costs more to live there - hence local wages can be an entirely different matter from national wages. Still, people have the capacity to increase wage value over time, by making places desirable to live which don't necessarily have geographic advantages. Land can be made quite attractive, when people care about it and for it. One's desire to improve land use should be just as surely a skills attribute for community, as one's pocketbook. After all, that particular initiative is too important to ignore.

Intellectual quality or "good ideas" what to produce, entirely depend on the passageways and destinations that people create, so that knowledge in all its magnificent diversity might have the chance to enjoy the accolades it deserves. What's deemed as "good", also depends on income infrastructure needs. Knowledge only appears scarce when we start to think that human worth in the aggregate is scarce, because primary value is supposedly caught by those castles and moats we'd rather call stagnation, than face up to. Being told that we can't use knowledge to help ourselves or our neighbors, is like being told we can't garden our own little plot (of scarce time), simply because our soil is not as good as the soil in the garden up the road!

In other words, our willingness to support one another in a framework for widespread and diverse knowledge use, creates value for knowledge use and innovation which otherwise would not be possible.  I'm sorry but when Tyler says things like intellectual property is scarce, he aggravates me no end. Does he really want the future he portrays?

It would be one thing if institutions had roped off an inhabited area of economic potential that actually held life of its own, but they roped off wealth potential in such a way as to pretend it doesn't even exist. And yet, everyone is sick and tired of the taxation to fight off the endless demons that  come out of that forgotten place. Some people now think money is worth little because it has no choice but to also represent that forgotten place!  If our institutions refuse to budge now, the rift between productivity and those who can't take part in productive economic endeavor, will only grow.

Institutions of course continue to grab up the "quality" labor we like to call scarce, but that particular definition is one of defeat, in terms of knowledge use potential. Meanwhile the negative externalities of "low quality" labor continue to expand, to such a degree that the random capture of high skills use potential has finally become a false victory. All the while our institutions are forced to somehow support the rest - a responsibility they don't want. I can't say it enough, no one wants to pay for the ones that have been left out...or feels like they should be the ones "stuck" doing so.

When people get left out, there is no direct way to tend to their condition humanely and we end up with private prisons and other horrible conditions. Therefore, the only humane solution is let people help themselves through applied, recorded and measured knowledge use - through their own time use arbitration. If we face up to our "stuck in the mud" institutions on this issue, I think they will eventually get the point. It is better in the long run to let everyone prosper.

And until we do, our financial realm is going to look like one giant monstrous pretzel, trying to figure out how to financially account for the forgotten without anyone noticing, who could have just been allowed to tend to their own affairs. Safe assets are about letting everyone use resources to create wealth. Safe assets are about understanding what the potential of technology actually holds for us personally - not just about devices to hold in one's hand, to communicate with the world. That means allowing technology to create environments that don't constantly overwhelm us with needless complexity.

This is where the starting line is: the scarcity of our time use which is paramount and has to be taken care of before anything else even matters. If money is not allowed to represent the potential of our economic participation in the game of life, the use of money may not have the chance to regain normalcy again in our lifetime or indeed the generations after us. Domestic summits, now. Nominal targeting for our own, very real fixed scarcity, now. Nations can thrive again when nations learn to give their own citizens a real chance to help themselves.