Saturday, August 31, 2013

Why Didn't The Fed Bail Out Main Street, Instead?

Answers to this question are not as simple as they seem, in that it also depends on how one defines Main Street. While Main Street conjures up visions of vital centers where innovations happen, companies thrive and a recession in the rear view mirror, there is a different and in some ways more significant Main Street which dominates in the present. The second version is more akin to a sort of backwater - even at times rural interpretation - where wealth is not so much about innovation or cutting edge, as it is about preserving a status quo which has continued to grow in recent decades.

Because this second version of Main Street is presently more significant in terms of aggregate wealth - by far - it is also the one most closely aligned with governments and finance in general. How So? Wall Street holds this coalition of finance at the ultimate level. The same wealth that less prosperous towns and rural areas hold primarily in their home ownership, is defined by the same parcels and instruments that were adapted at the highest levels of finance. Europe adopted similar structures for its wealth holdings as well, which allowed it to integrated with our own.

In other words, the innovative Main Street that is primarily associated with thriving cities, wasn't actually the part of the economy in dire need of assistance. Given the degree of aggregate wealth that real estate holdings actually represent, the actions that the Fed took to bail out the banks and Wall Street start to make a bit more sense. In the run up to the financial crisis, it almost seemed as though a passive element of the economy could be turned into an active element, as technology hit speed bumps coming into the 21st century.

And banks, of course, were at the very center of this (essentially) passive form of economic activity. Some years ago, just before people from all walks of life starting talking about potential "helicopter drops" from the Fed for Main Street, I finally understood the "mystery" of new, nicely built banks, sprouting up like weeds in the most unexpected of places (cities, towns and countryside) at the very moment it was becoming clear that other businesses were not faring so well. In some instances, new banks in tourist areas even pulled out some of the same stops as local business Chambers of Commerce, by presenting a thriving business or tourist oriented front when other local retail locations were struggling to maintain what tourists were actually looking for.

Looking back, the fact that banks in the U.S. were expanding when housing growth was being called into question, only underlines their confidence that they would be taken care of in the event of any significant financial problems. After all, to undercut banks and leave them without help from government, was to undercut what government and citizens had upheld for so long - real estate as primary wealth. No wonder bankers could do basically what they wanted and get away with it! In a recent FT article, Tim Harford likens the bankers to toddlers which have gotten out of control. While it's tempting to think of "cutting them off at the knees" the problem is one of a fragile network of wealth definitions which institutions of all kinds continue to rely upon.

Just the same, this rowdy bunch - who are doing quite well, thank you - remains on everyone's minds: even if too few of those complaining about the bankers are able to offer solutions that make sense to other "camps". In an article for the Project Syndicate, Brad DeLong also questions who is going to be the focus of the central bankers - the macroeconomic camp, or the banker's camp. For the banker's camp has little to no interest now, in the growth that would really pull the economy away from the recent recession. Because of the banker's quest to make sure inflation doesn't grow, those who would remain economically engaged and open new businesses, are the ones that pay the price.

The real challenge for both camps is to pull away from the passive interpretations of what wealth has come to represent. What's more, a focus on fiscal assistance from government suffers the same problems in that it can not establish regenerative growth on its own. Brad DeLong believes that thinking in nominal terms is what causes the banker's camp to hold back, but he has misstated the problem.

Bankers don't have adequate reason to delineate wealth in nominal terms. If this is a "fixed pie" of wealth that they appear to be holding back, it is so in terms of the portion and definition of wealth they believe they have the right to represent. Nominal targeting would allow the public to discern the outsized portion of the economy which bankers desire to dominate. That in turn would allow the public to set about returning that ratio to more active and true growth based elements. A continued focus on government to "save the day" with fiscal policy only serves to keep the balance of power in the banker's hands.

Thursday, August 29, 2013

Imagine Free Markets in Services

Notes can "get away" from me: they'll pile up quickly if I'm not careful, so I try to keep the ones actually sitting on my desk to a bare minimum. As I try to stash yet another "finished" group into a nearby folder, some "scribble" consolidation has to happen. So I sometimes have to remind myself to use the organization strategies an English teacher taught me several years ago. This time I found - in the chaos - a post which has been "suggesting" itself for at least a week. And...you thought this was easy, didn't you! (just kidding)

Some of the musings here are actually brought forward from my last post, in which I considered how people might eventually utilize online activities in more useful and beneficial ways. Ultimately, online time needs to count for more of what actually gets important things done. Also, it needs to account for better relations not just across nations, but for people who live across the street from one another, as well. In the present, such ideas remain a hindrance to many institutions who still try to go about their activities as though internet doesn't even exist in any practical sense. Doesn't that feel a bit odd?

Services of the present - bound as they are by the dictates of previous circumstance, often include some of the strangest default points imaginable for people to be enduring. Usually we don't give services a lot of thought until they impose upon - or perhaps some would say oppose - our daily reality. Generally our first reaction is to the inanity of the procedures we are expected to endure and the second reaction is...well there's no other way to overcome how this is going to be presented to us. Indeed the prevailing wisdom is: don't like this transaction where real human contact is not an option? Get used to it because there's more where that comes from tomorrow.

Readers may recall I was quite relieved that an automated procedure got me back online quickly when my internet connection was disrupted recently (although it doesn't usually go quite so smoothly). Some folk are so used to navigating automation procedures that they don't give them a second thought. When automation procedures take care of problems quickly, we'll take them any day over waiting 28 minutes for an actual person to actually pick up the phone. The problem comes in when we're calling with an issue that the ten "options" the automated system has, simply does not match up with. Searching online for answers helps sometimes, but not always. Do we really have to give up on solving what may be important issues re our ability to function well, when this is in fact the case?

In a sense, this is the same unfilled "hidden demand" that is the equivalent of the "hidden supply" problem of the present - i.e. the "not quite measured" unemployed who is weary of heading out the door for yet employment application drop off, because of the ZMP message he has already received several times over. We haven't quite figured out how to offer our skills sets in the present because our institutions have served to make them uneconomic. What's more, some of our "revered" institutions are presently fighting it out over who gets to "serve" us: the uproar over private and public school choice is running strong. By now the reader knows I don't think either one of these are workable in their present forms. We need the choice to provide services for one another on our own terms, in order to gain back our own humanity and self worth.

What do we want to accomplish - today, tomorrow, next year? In a practical sense or in a larger sense, institutions in their present forms are not structured to answer such questions. What interests us? Sometimes individuals create product which can reach over the "static" and provide something that does, but far more of us need to be able to do this regularly for one another, than is actually happening right now. There's the work we need to do for ourselves, the work we need to do for others, the learning we need to be able to take on for each. One of the first things we can do to imagine free markets in services is to calendar - and schedule - the possibilities we could try out in a local skills and knowledge use marketplace.

Over time, things that "call" to us for further learning and sharing can be placed into semi-formal, but not rigid, institutional structures. These interactions can be validated by recording more relevant aspects of the transactions - what we gain from sharing interests, responsibilities and their related activities. Each new semester can provide the excitement of placing our present offerings before the public to see if enough will respond to make it worth our time and effort to pursue that particular activity right now.

Also - by way of example - affirmation of collective worth beats the heck out of piano teachers (for instance) having to put up piano lesson posters (for prospective students) at street corners alongside get rich quick schemes and weight loss posters...or, getting disparaging glances for advertising said piano lessons in public, when one isn't practicing in the "right system" with a teaching job from public or private whatever. Since when did education become about creating extra-institutional worthless skills sets except for the lucky few?

What's more, our governments need value in use structures for everyone's survival, value in use structures that don't get taxed so that people lose the ability - yet again - to help themselves when they need help the most. Taxation here would destroy the incentive for people to consider common need as surely as too heavy taxation destroys the ability of economic access in all its possibilities. Life is good when everyone allows the knowledge prior to win (for once) and an ultimate degree of knowledge utilization becomes possible.

Again, imagine services. What makes them group oriented or individual to individual service oriented? What service and production sets can be presented through informal group settings? What does a community need to do for itself, and especially how can it utilize the skills its institutions don't have room for? How then can a community also come into better balance with technology, so that monetary equivalence is possible with simple base representation instead of ""floor" wages?

How can communities create more value from what their citizens already have, thereby creating more value for all? Never assume that the right to produce lies only outside ourselves, because when we do, we get entirely too confused as to what consumption is actually possible. When we realize the right to production exists within ourselves, we can also envision how to present the product that works in the now. When we try to vote for the redistribution of scarce resources, we are voting for the wrong thing. Vote for skills and services potential - for that is something we can all provide, in abundance.

Wednesday, August 28, 2013

"Keeping It Real" This Side of Paywalls and Institutional Walls

Recently, Tyler Cowen noted that another blog was being picked up by a publication, and so the blog would eventually go behind a paywall. Although certain "groups" would still have access to the blog in a year's time, not everyone would. Something to be concerned about? Some commenters didn't think so and at least one pointed out that this process has been ongoing for quite some time. As for myself, I don't really have a beef with paywalls, for people need to able to gain some income from writing wherever possible! Paywalls or no, some writing serves as a form of "paid positioning", some writing happens because there is a wide audience for it, while for others...people simply need to make sure they can be heard. That's something the internet greatly facilitates in the present.

Just the same, one wonders how different the paywall/non paywall environment might eventually become. Might both remain vital, but for completely different sets of reasons? We often hear about everything eventually becoming "fenced in", and yet there's so much to gain from what has scarcely even been explored yet. With a little luck it won't all get closed off. Does government really worry about such open territory, or does today's surveillance even have anything to do with that? How such questions ultimately get answered, certainly matter. Most of us rely on the internet to keep up with what's going on in the world, also for communication, and especially for entertainment.

But that's not even tapping the surface of its potential. Just think what the internet could do for better forms of democracy, for instance. Instead of the quagmire of the present, local economies could actually cast votes on a quarterly basis for the kinds of services people want to exchange. Then a free market could be created from the voter's choices that would shape local education efforts and "tax" choices. That's just a local example, but there are larger examples that could tap into the visions people actually have for redefining resource use in the 21st century. Government does a lot of things, but it does not do a very good job of capturing the changing aspirations of its own people so as to make them real possibilities. Perhaps this side of the paywall can begin to explore where governments have not thought, to tread.

Meanwhile (back in the present world), experimental versions of interactive possibilities tend to happen within institutional settings, or the gaming escapes where people get to dream up their own variations of resource use in imaginary terms.While the internet is becoming more important in certain educational areas, for the most part that's in a limited sense. Textbook publishers find it easy to make interactive online offerings that require educational "gateways" or paywalls (so that texts don't just get downloaded for free) and that model also has the capacity of freeing up time for professors.

At the very least, for some students and professors (particularly in economics), the internet is starting to become a place where one can "park" their work, and engage with others who have similar interests. How might this eventually transpire? That's one of the big unknowns of the present. To what degree will people be able to actually carry their work online, on this side of the paywall? Or will the most important elements of our work remain hidden - and to an extent excluded from the public as a result - by institutional expectations.

Some early online possibilities have already been quashed, at least temporarily. For example, people who offer health related advice online are being expected to cease and desist, which leaves those without health care in the highly uneconomic state of scrambling to learn on one's own, i.e. mostly from books and with little input from others. Not only is this a problem for the consumer, it is also a problem for different healthcare institutions and groups which remain - in legal terms - a long way from being able to sharing needed information with one another as patients are shuttled between them.

In the meantime there's plenty of extra phone calls, by which everyone attempts to keep up to informational "speed". Sometimes it's the home health people trying to maintain already fragile links between hospitals and patients, or doctors and staff who no longer have overlapping hours at hospitals to keep information flows on patients. How can today's doctor continue to "own" the memories of their patients given their stretched schedules, so that needed information is not lost? While some of this is due to limitations in actual physician availability, one still hopes that the internet can come to the rescue of this situation to a far greater degree than the present.

The potential of online communication presents tremendous possibilities for future health care, and for many other aspects of life as well, if the legal hurdles can in fact be overcome. The internet brought home the uncertainly of the terms life expected of us from the 20th century - a fact which adds to present day unrest in many parts of the world. Now we need to use the internet to define new terms for the 21st century which make more sense to everyone.

Midweek Market Monetarist Links and Summaries - 8/28/13

David Glasner is doing a series of posts which will help him prepare a paper for the Southern Economics Association, re the 100th anniversary of Ralph Hawtrey's "Good and Bad Trade". This is the first:http://uneasymoney.com/2013/08/21/why-hawtrey-and-cassel-trump-friedman-and-schwartz/

Lars Christensen also co-wrote a paper with several colleagues re who would be best suited for the position of Fed chair - Yellen or Summers: (looks like Obama has already made up his mind)
http://marketmonetarist.com/2013/08/22/the-bird-fight-yellen-vs-summers/

Nick Rowe asks, is money exogenous or endogenous?
http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/08/is-money-exogenous-or-endogenous.html

Bill Woolsey, in this post on the Pigou effect, also gives consideration to exogenous or endogenous money:
http://monetaryfreedom-billwoolsey.blogspot.com/2013/08/the-pigou-effect.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MonetaryFreedom+%28Monetary+Freedom%29

Britmouse explains how the Riksbank are deliberately missing their targets:
http://uneconomical.wordpress.com/2013/08/22/the-riksbanks-catch-22/
and posts the nominal GDP numbers for Q2:
http://uneconomical.wordpress.com/2013/08/23/uk-2013-q2-nominal-gdp/

Evan Soltas posts on a "natural experiment" in North Carolina, where unemployment benefits are being reduced from 80 weeks to 19 weeks:
http://esoltas.blogspot.com.au/2013/08/unemployment-among-tarheels.html

Marcus Nunes highlights the first "farewell" speech for Bernanke, by Binyamin Appelbaum:
http://thefaintofheart.wordpress.com/2013/08/23/the-first-farewell-speech-has-been-drafted/
Marcus also provides a link for the Robert Hall paper which got the Jackson Hole conference off to a not so good start:http://thefaintofheart.wordpress.com/2013/08/23/jackson-hole-conference-off-to-a-bad-start/
Sometimes The Economist is convinced I've read my "monthly quota" of articles already, so I'm always glad when Marcus catches a good Ryan Avent post which I might otherwise miss!
http://thefaintofheart.wordpress.com/2013/08/27/bob-hall-defended-the-absentees-colors-very-effectively/

How much does the Fed tapering actually affect other countries? Scott Sumner asks why it would be a concern in particular, for Indonesia:
http://www.themoneyillusion.com/?p=23135&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Themoneyillusion+%28TheMoneyIllusion%29

Surprisingly, I'm in agreement with John Cochrane for once, and so is Lars Christensen. However in my case I should clarify that people need better life choices than the current crop of banking options! Or...make banks irrelevant instead of heavy handed Fed regulation, which also would not work out as intended.http://marketmonetarist.com/2013/08/27/the-danger-of-an-all-powerful-central-banks-against-macroprudential-policies/
Lars also has an oped on prediction markets, linked in this post:
http://marketmonetarist.com/2013/08/28/prediction-markets-and-uk-monetary-policy/

Also, an essay from Deirdre McCloskey which I thought some of my readers would enjoy:
http://www.deirdremccloskey.com/editorials/boulding.php

Tuesday, August 27, 2013

What Airbnb and Fast Food Strikers Tell Us About Local Economies

First, why might there be a connection between these seemingly different things? The reason I see the possibility of a link between the growing use of Airbnb for additional income support (by informal landlords) and the recent "fast food" worker (and related retail) strikes, was my own quest for living in a city on near minimum wage income, about fifteen years earlier. At the time it was still a fairly reasonable option to rent rooms from home or apartment dwellers - when one had a lower wage job - in many cities of the U.S., even though many apartments were already out of the reach of lower income individual renters.

Even as cities often struggle to limit the growth of Airbnb, they are partly responsible for the creation of these economic adaptations, by their own maximizing strategies of exclusionary policies. As a result, travelers now seek the same couch or bedroom spaces which were once rented to local lower income workers. An informal rental marketplace in cities which was once well within reach of the lower income worker, has come into an unexpected collision course with the budget conscious traveler.

While other living options still exist for lower income, they tend to be found where public transportation routes either didn't exist, or have faced cutbacks in recent years. That means the lower income worker also needs to be able to own and maintain a vehicle in order to take advantage of rental possibilities in outlying areas within commuting distance of work. Whereas travelers which now rent city spaces, have the nearby transportation routes as an additional perk, and they can pay a more significant price for the same space. What the traveler is able to pay, further assists the renting landlords who of course already have budgeting concerns which prompted them to open their homes to strangers.

By no means were informal landlords the only ones feeling the pressure, to choose the nightly traveler over someone they could build a more reliable relationship with. Travelers were willing to take their chances because of the growing expense of hotels. Now, the pressure gets "passed on" - in the form of strikes - to businesses which can ill afford to pay greater wages to low income workers. And of course the low income workers, who are simply trying to find a way to remain in the workplace, now find themselves incentivized - around the countryside! - to take the whole sorry proceedings out on their hapless employers, for lack of a better solution.

The primary reason I have the least sympathy for local municipalities in this growing lack of affordability for lower incomes, is the fact that municipalities are always the ones with the most leeway in provisions of choice sets for both production and consumption in any overall sense. They are the ones who can make the difference for all of us to have a better life through more reasonable zoning and regulation, and yet they choose not to and continue to get away with it. Every arbitrary zone or regulation only serves to lock out more possibilities for the ability of people to thrive.

At some point, local economies have to account for the fact that their citizens need to have a wider range of both consumer and producer options depending on actual income, which need equivalent offerings in the marketplace. Until such offerings are available, the call will always go out for wage increases which - today - only tend to stretch elements of existing systems further beyond their carrying capacity. What's more, efforts on the part of central bankers to cap the "inflation" which really originates in this escalation of unnecessary local requirements, mostly succeed at throwing even more people out of work, or out of business, to compensate for artificially inflated ideas as to what real wealth should represent.

There is a world of survivability options for all kinds of economic actors, which municipalities have simply left out as possibilities. Many businesses - which out of necessity pay lower wages - just don't have that kind of leeway in their choice sets for survivability. In the long run, such measures either force them to use more automation, or leave for more affordable environments. However, other local economic actors who take part in these settings, don't always have the option of starting over elsewhere. Over time, as these issues go too long without being addressed, the ramifications finally go well beyond the exclusionary circumstances which they begin with.

When municipalities choose the upper end of livability options out of convenience and the most wealth gain possible, that doesn't mean it is always possible for their local business and residents to do the same. In turn, that limits the number of businesses that can set up and offer work to local residents, and it also limits the number of potential residents who could come to live and work, which means they often remain unemployed because they can no longer afford to live where work is actually being offered.

Cities have to realize that their citizens now need new strategies. As a series of graphs from a post at MacroMania aptly show, (especially graphs two and three as related to investment) citizens can not always be expected to spend us all back to prosperity, when local economies have already claimed too much of the take. In a recent post by Business Pundit, a series of illustrations indicated that 50% of income went to housing, education and healthcare costs in 1975. By 2013, 75% of income went to those same categories.

In other words, by the time the necessities of life are met, only a quarter of one's income is left for more discretionary purchases, and that is for the average consumer in terms of statistics - let alone the lower incomes. It is time for local economies to stop imploring Washington for ever more help, and start making life easier for their citizens on the terms they are actually still capable of. When cities begin to find more inclusive ways for all their citizens to participate in economic life, everyone will be the better for the effort.

Monday, August 26, 2013

Unemployment is Interdisciplinary

It occurs to me that my focus on unemployment today may appear as somewhat of an odd thing! After all, the beginning of new semesters has always been about starting fresh, and the hopes that go with such thoughts. In the context of making decisions about the future, and commitments to match, wouldn't it be great if students didn't have to think about the possibility of unemployment or - at the very least, if only there were classes someone could take on the subject itself! Especially when knowing the "right" courses to take to "avoid" it are not so simple as it may seem. Multiple rationale exist for what appears as a surface phenomenon. When one hears about high skilled jobs going unfilled, for instance: how easy is it for those with the "right" skills to be where they need to be, and when?

The ramifications of unemployment hit home for people from all walks of life in ways they may scarcely recognize. Indeed, making the greater effort for societal inclusion early on could be the best preventative measure of all. But when a nation chooses not to address the causes of unemployment head on, it's more difficult to undo the damage afterward. As for students, the possibility of unemployment remains as something that might have to be confronted after numerous parties have been thrown, notes and textbooks have been pored over, and tests have been taken. Isn't unemployment (or underemployment) just the back door of a house that one might see when the front door could not be taken?

Today, the possibility of unemployment is everywhere and always the front door: the place where dots connect, disciplines struggle to meet, and the forgotten crossroads where the underlying elements of a societal language emerge. Yes we have interdisciplinary studies and calls for more interdisciplinary skills in the workplace (something institutions tend to be a bit short on) but this isn't quite the same. Few institutions or groups look at unemployment in the same way, let alone have any strategy for dealing with its ramifications. From a big picture perspective, unemployment is a matter of societal imbalance. More importantly, it is a huge rip in the fabric of aggregate wealth that nations rely upon.

Already, the problems of unemployment in the 21st century are starting to change the way we think about education, and not in a good way. Supposedly - for instance - one isn't really "thinking straight" if they get an English degree. Luckily, this was not so true for a good part of the 20th century. After all, my father is living proof that one can be quite pragmatic by inclination, and yet still have a college degree in English to their credit. Even so, in the South, it has been true for a long time that anyone with "too many books" in their homes (particularly when they run well into the thousands) doesn't quite make sense to the population as a whole.

While the reader might wince at this reality, there is a good reason for it. Even though credentials matter, so too do personalities for the jobs that (once) lasted a lifetime, and anyone who stuttered in high school (like my Dad) or was shy, had a slight disadvantage coming out the gate. Being popular in the South, among other things, still means not spending an excessive amount of  time with books. Nevertheless, in demographic terms, Dad was fortunate indeed. There were lots of reasons he didn't have to worry at a young age about a good job that not only paid the bills, but also made it much easier to save money as well. Today that's not quite so easy. Saying it's not really so is not just beside the point, but also delays finding solutions.

What we need to do is quit pointing fingers at one another, and get to work on putting the pieces together, as to how people have gotten themselves into this predicament. Numerous factors contribute to unemployment and they all have their place in active consideration. Non solutions are when society tries to find ways to simply pay the people who aren't employed, which over time just makes economic systems even more unbalanced than ever.

Consider what happens today in community planning which mostly tries to focus on "green" this or that, or getting the "right" employers or the appropriate "mixed use" area that supposedly unleashes economic potential on its own. There is no economic potential to be unleashed until the reality of supply and demand in people based terms is addressed for the bulk of a population - and not just the ones with the pocketbook of the moment. In other words, the effort to address root issues of  unemployment and its associated living struggles, needs to be front and center of any community plan.

Such efforts to address unemployment can begin informally as well. That would allow people to move beyond present day constraints of getting the right information and knowledge to the places where it is needed most. For instance, countless papers are presented in higher education which don't necessarily have ways of matching up to other complementary work. People can be readily brought into informal processes who are not constrained by the missions in their formal job or career roles. Complementary research can be planned at the outset in many instances.

While there are numerous practical aspects of such efforts, the study of unemployment is especially about digging deeper to find out what people really want to do and how they want to go about it. Communities can start by forming virtual universities, which would include locals coming together to compare aspects of online discussions that particularly motivate them for local, national and international action. Plus, locals can work together to encourage dialogue that may be somewhat constrained online as well, in that the local focus allows more definite context in some circumstance.

We don't really know what kinds of product people actually want, in that institutions have had many limitations in the kinds of product they are capable of presenting to the public in recent decades. That alone is a big reason why unemployment is such a problem now. The important thing is to explore the kinds of product, services and experiences people have either come to expect or particularly need, which are not being met in present day institutional circumstance.

Only by discovering what some of these thought processes actually consist of, can the issue of unemployment be addressed in ways that suggest future solutions. To be sure, there are the immediate aspects of zoning and regulations which stop business formations, job potential and living solutions right now: all of which need to be addressed simultaneously. However there is no reason why short, medium and long range goals cannot be discussed as multi-setting considerations and active components with intersecting dynamics. Until now, unemployment issues have primarily been the province of monetary policy, but the reality is that unemployment needs to be everyone's concern, before greater expectations for the new century can truly materialize.

Sunday, August 25, 2013

Economic Activities and Reasoning Skills Go Together

This is another one of those sentiments which many take for granted, and indeed have for quite some time. People who might otherwise have no reason to negotiate or have any formalized dealings with one another are said to do so because of our economic environments, and consequently gain from the process. The fact that strangers are willing to come together in mutually agreed upon settings, also speaks well of their capacity to live amongst one another. But when we dig under the surface a bit, can it be said that this is still the case?

How many people do we still observe, who are actually involved in the kinds of activities that once created greater societal trust and reciprocation? What settings in our daily lives are actually geared towards "mutually agreed upon" needs in any real sense of the word? Sure, we continue to "vote with our money". Often what gets voted out, however, is not necessarily replaced with environments that provide better choices for our participation - let alone how we might negotiate or reason for the desired product. We just assume that our institutions can carry on where individuals seemingly leave off in negotiation processes, and that civilization can carry on as normal.

As a result, people lose the ability to reason with one another in their daily lives, wherever institutions take on too much of the role for them. Laws and regulations are designed to take as much of the reasoning role out as possible, which also provides gains for special interests. Sometimes of course, pre existing and clear cut guidelines facilitate transactions even better than before. But mostly, the cumulative effect of too many rules serves to bog down negotiation processes. Decisions handed down in court, for instance, sometimes tend towards the absurd and inhumane where precepts are followed which have too little to do with the actual case at hand.

Tempting though it has been for institutions and governments to take over in our stead, the result today is a relatively well educated populace which now has too little real purpose for the educations they have gained. Learning has become less about potential economic activity and has defaulted instead into a competition for the signals of inclusion. The worse case scenario has become younger people who experience long term unemployment early on, which compromises reasoning and negotiation skills even further.

How might this lack of economic participation affect dialogue in a larger sense? To be sure, some remain fortunate that they are able to learn negotiation and reasoning skills through familial and social settings, but for others the workplace environment was the primary means by which to improve such skills for the long run, when in fact they may have been deficient in one's personal life. Education is sometimes able to help in terms of logic and rational thought, but again it still depends on where one is able to gain education, as some schools have also pared back on these offerings.

Even though logic, reasoning and negotiation skills can eventually be broken free from the limitations of institutions, they need real components for daily economic life as well. That also means no community can simply graduate one's students and then assume they have done everything necessary for their youth. Right now, high school graduation is too often the end of the line for those who can't find a job, which is something that far too few communities have been able to face up to. Who moves first in the gridlock that was yesterday's expectations of what life was supposed to be? What institutions might actually be holding back the process, and what rules or regulations stand in the way? One's own home turf is sometimes the best place to start anew.

Saturday, August 24, 2013

When Was "Teach A Person To Fish" Discarded?

Or...more to the point, perhaps too few really believed in the veracity of the phrase to begin with. Just the same, the fact that hardly anyone (in the developed world, at least) actually has the desire to do this, i.e. teach the poor to help themselves (gotta make sure someone gets paid well to "help" them), is the biggest problem by far that I have with anyone insisting that the poor are lazy. How the hell do we really know? They may look lazy, but anyone who is busy or otherwise secure can dream lazily and certainly get away with it so long as no one needs to support them.

To be sure, someone who complains about lazy bums can raise the ire of others, and they might seem quite obnoxious by doing so. But the person who complains is the foil - to a degree - for the even bigger problem: the ones that don't complain. Chances are, the person who complains might believe (taking nothing for granted here) that time is money. And - if that is the case - really has cause to believe that responsibility and integrity are within reach if one tries hard enough. Hence the person who complains, believes that jobs can be had if one just makes the effort, and any discussion re cost of living pales beside the "main point". The person who doesn't complain about the lazy bum, may instead rationalize as to whether the bum can pay the rent.

As the reader may have guessed, I'm more concerned about the non-complainers in monetary (or macroeconomic) terms. When pressed for solutions, fallback positions tend to be along the lines of some amorphous wage which somehow emerges full blown out of the ether just in the nick of time, even though we don't want economic input from the losers in any realistic sense.

What's more, these elite are often convinced in their heart of hearts that time use has little if anything significant to do with money. After all, "didn't you get the memo?" that time as economic value was sold to the highest ("deserving") bidders a long time ago (upon which Say's Law died an excruciating death at the stake). As a result, the proceeds which could have represented a vast potential pool of skills wealth, were siphoned off to the most obvious default points of moneymakers - wealth signals and the effort to stay alive.

Slowly but surely, the full approximation of the lowest common denominators possible (in our "favored" skills silos) nixed the rich potential of our skills universe: potential that could have allowed low income to actually use the things they spent so much time at a young age trying to learn. What once seemed possible in terms of life experiences, turned mostly into work for hard assets. Meanwhile, the biggest part of skills wealth continues to fritter away on legally piggilys and keeping the chronically ill on Medicare alive at all costs. Even if said ill are really quite tired, in the aggregate they're the ones with the pocketbook, and also tend to be the ones without their own voice in the matter.

The fact that skills use has come to this sad state of affairs is also why I don't agree with - not even one iota - the ways which society portions out different valuations of skills sets today. Yes, some of these skills sets take the equivalent of ten years to learn how to do really well, which only makes sense. People can figure out ways for one another to gain surgical experience - for instance - without extreme economic disequilibrium, and they need to be allowed to do so. No one is asking to bring chickens to the doctor anymore, but neither can anyone be expected to fill these skills deficit sinkholes with their houses, either.

Meritocracy does not make it possible to maintain a society which miraculously "makes up the difference" for the losers. When some are not given a stake in the game, no amount of redistribution over the long run can provide access in their stead. When anyone speaks of money as not necessarily tied to time use, ultimately a lot of wishful thinking is involved - whether by redistribution or other creative financial arrangements. When money is divorced too long from the idea of time or nominal targeting, we are left with the illusion that a lot of people don't have to be responsible at all when society does not have room for them to be so. For the progressive - one hopes to keep a job while the bum gets a check at home. For the conservative, one hopes to keep a job while the bum languishes in prison, perhaps.

Now when a person buys a piece of property which has a pond or two on it, she can fish to her heart's content and no one is going to complain because she paid for that property, fair and square. Why should it be any different when we "buy" the property of knowledge use with our time and other resources? Presently, however, even when we commit to knowledge gain as a concept, it still resides in an open commons and is not thought of in the same way as a titled property with fish or other resources that people use as needed.

Well - that should be a good thing, right? It just so happens that representatives of other countries, er, I mean institutions, came and staked out rights to the knowledge commons and their kings - er, I mean governments claimed the bounty for themselves and their representatives. Sure, we can invest $50,000 in a degree if we want, but all too often, that still doesn't give us the right to use it without the permission of the institution that hires us or licenses us. The odd thing is, if we actually had the right to use the knowledge we might not have to spend $50,000 in the first place...

So we can move about freely in said country if the king that got first dibs on our domain, gives us permission - I mean if they find us employable (good luck with that). This might not be so bad if in fact the king had not already promised the bulk of his riches to some very special beneficiaries. So long as populations are growing and resources flowing accordingly, the discrepancies re bounty are not so obvious. But all good things must come to an end: that time has come, and the knowledge commons - such as it still exists - is largely theirs.

Isn't this problem manageable? Yes and no. Yes, in the sense that multiple sources off worthwhile knowledge exist, many of which are as suitable a product offering as any ever manufactured in the 20th century. No, in the sense that staying alive and legally piggily are now so overwhelming that it is all we can do as a society to turn consumption to hard assets just to support the valuations these areas now require. In other words, this kingdom sees little if any purpose in teaching anyone else to fish, let alone the lower incomes who have little or no access to the skills sets that would allow them to help themselves.

Why does any of this matter? First, many of us were raised in the 20th century to believe that life made a bit more sense... Second, the very formulations of these private usages of knowledge are not capable of transmission or preservation for future generations. When my dad goes fishing for trout at the gulf: if he catches any, he does one of three things. He often brings the trout back home to clean and cook, or he gives it away to other fishermen, or he lets the fish off the hook back into the water. What he does not do is maim the fish and leave it to die on the shore. Neither should our knowledge overlords with the "teaser" educations of our public school years which encouraged us to believe we were a part of the world we were born into.

Friday, August 23, 2013

The Next Logical Question

Without a doubt, it must have lingered in the minds of some readers after my most recent post: "The Question"...that is, How? Sure, it's nice to think about making our constructive time use primary in monetary terms, whether or not it is recognized as such in present day institutional settings. Unfortunately, we live in a world which continues to demand more of us as consumers and yet - in the aggregate - attempts to reduce our role as producers (of anything), at the same time.

Turning that scenario around will take some thought, to say the least. We need to try though, because as a general rule: when too many of us reach a point where we don't actually produce anything, we're not inclined to be very nice to one another! Too many people are ready to pull their hair out over the fact that the human factor is missing from a lot of monetary equations.

Even as we contemplate the kinds of services others could benefit from, such offerings still need to really count for all involved. So it is worth stumbling about in the dark for a while - if need be - in the attempt to find those possibilities. In the same way that no one really knew which products would take off in the twentieth century, no one knows what services will be called for in the 21st, and we all need to take our turn at services entrepreneurship. The fact that people are fickle and ever changing about the products they go for, only tells us the sky is the limit in terms of what we would seek to provide and learn for ourselves along the way.

Still, the short answer to "How?" is that it's going to take time to remedy the problem of inadequate economic participation. Even now, some who previously backed nominal targeting - for instance - have since become convinced that liquidity traps are real and there is little more that can be done. Waiting for "economic winter" to blow over is not just impractical. It is also foolish to just "wait things out", when doing nothing has the potential  to make matters even worse. Many policymakers see the present trajectory of unemployment and remain unconvinced that it can be substantially improved. Much of what we consider vital in the realm of work - and economic life in general - needs to be kept front and center in the years ahead.

In order to climb out of the collective stalemate that is the present, we also need to reassess the asset structures we utilize to create monetary flows for knowledge and skills use. It helps to remember that intent and purpose not only come before structure, but they also serve to maintain the structures that we create. We have to know what we want to accomplish in the world around us, before the rationale and ability to maintain what we already have is truly possible. No resource is truly a resource, or for that matter can remain so, until the mind and imagination remain ready to make that happen.

No society has the luxury to just rest on its laurels. When people forget the purpose for what they build, sometimes the purpose is lost. The benefits of past asset and wealth formations are not enough to sustain the patterns now necessary to maintain even the most basic of societal functions. Increasingly, the assets that are able to keep their value are those which remain close to areas of high knowledge use. If such vital knowledge use is not made available to more Main Streets in the years ahead, many asset formations remain in danger of greater instability.

Knowledge use and asset formation are simultaneously occurring structures which need one another, and neither will readily adapt to the separations and limitations people seek to impose on them now. Even though there is little about economic expectations which people presently agree on, that's no reason for anyone to feel smug about asserting it is irrational for us to expect continued progress. While yes, there could possibly be an element of  truth in such an assertion - just the same - that's nothing to feel proud about. Let's prove it wrong.

Thursday, August 22, 2013

Keep Time Use Commensurate With Money

What is it that makes our time use important, in monetary terms? The actual limitations and capacities of time use seem so basic, that one would think such a logical consideration would be part of any monetary policy in the present. After all, many individuals in society are now expected to carry their own weight in economic terms, as they go through the course of their lives. In recent decades we've increasingly accepted and even welcomed that role. What's more, in terms of societal expectations of the developed world, the reality of total economic participation is practically a cultural "given" which - with a little luck - will eventually play a greater role in legal definitions as well.

However, the reality of (expected) total economic participation in monetary terms still "feels" new, which could explain the reluctance of policymakers and central bankers to come to terms with its true significance. Certainly it explains the knee jerk response in the U.S. of throwing entirely too many people into prison, instead of seeking out more rational economic environments for them to survive in. That very "newness" of expected economic participation may lie behind some of the confusions surrounding representative anchors for money in the present. It is particularly unsettling to see how nominal targeting could assist economic stability, and yet know that policymakers at the highest levels remain adamantly opposed to the value of our own time use as an anchor for monetary policy.

Prior to the 20th century, only a small portion of individuals in society were expected to be responsible for both oneself and family, in what we would consider today's economic terms. Certainly, the limitations of gold standards made sense, when it was primarily governments and wealthy citizens doing the majority of the buying and recorded economic activity. Even the reality of income tax is but 100 years old in the U.S., and our government did not really discourage citizens from utilizing barter or other non monetary forms of sustenance until after the system was put into place.

While there were certainly no 100 year celebrations in 2013, the income tax was nonetheless an acknowledgement of the growing importance of every citizen in economic life. It would seem we all "got the memo" in the 20th century, and agreed with government that our time and skills were really starting to matter, in monetary terms. And every time central bankers considered our time use and its incremental value in nominal targeting, it appeared as though governments might actually keep what appeared as though a reciprocal monetary promise with their citizens. After all, the economic use of our time was the most reliable indicator for economic stability, of all the resource options available. More people than ever were starting to agree: time is money.

Even so, not everyone has been sold on the idea of our ability to participate in the economy as the "new" gold standard. How does anyone know if jobs remain available? What's more - so the reasoning goes - there's more money and gain to be had "at the top", for the not so incremental requirements of both higher education and "bigger is better" definitions for environment use. For one thing, the incremental nature of what our time can actually accomplish is too transparent, too indicative of where rational thought and action might lead, for some who gain from hijacking the value of our future time for their own ends.

People in power have multiple reasons for their desire to keep credit appropriations and balance sheets as primary - even going so far as to insist they belong in definitions of macroeconomics - which is certainly not the case. Alongside the bastions of credit and finance, go the unnecessary coercions of living and knowledge use standards, for those who can ill afford or scarcely need today's superflous signals of "wealth" with their actual incomes.

Because governments refuse almost all innovation and efficiencies in building and construction requirements, a hidden feudal system exists for lower to middle classes such as what once existed in the Old World, and is slowly destroying the middle classes as it continues. For the lower classes it is apparently not enough to work all day, as they also have to take on additional jobs just to be able to live in housing as it has been mandated as necessary for all, by government. One's time is increasingly given over to the mortgages and rents which are a prime means of governments everywhere for their own wealth appropriations. Landlords - for all the blame they get - are but a foil for the real "action".

As long as monetary policy is thought of primarily in credit based terms, and wealth in terms of inefficient housing, the time to money link which is so vital for economic prosperity, will struggle to materialize in a rules based sense. Even though nominal targeting corresponded with other policy instruments in the years of the Great Moderation, in retrospect it may not have even happened for the right reasons in terms of monetary stability. We are in danger of governments continuing to turn their backs on the time to money perspective they once encouraged in the 20th century, as knowledge and skills use continue to be pared back for budgetary balance.

Why so? Because in the last 100 years of income taxes, the things people used to do that provided value outside of monetary terms no longer exist as true possibilities. Even though some may think of farmland as a "hedge" for the future, the idea is silly in any aggregate sense. The family farm, for the bulk of populations, is no longer a true option short of complete breakdown of monetary systems - which a Market Monetarist such as myself seeks to avoid in any circumstance. We cannot afford for governments to give up on the skills of their populations at the very historical moment when populations have never been so dependent on said skills for their very survival.

By the same token, women cannot just automatically resume the homemaker role as in past days, in that many of the jobs of the 21st century demand two incomes for housing, especially as it is presently defined by governments. Or, if someone needs to stay home because there's not enough jobs, then allow innovative thus affordable housing, for Pete's sake. More realistically - and more ominously - the continued call of the left for "living" wages is a pipe dream in terms of real government objectives, which in the present are all about capping off inflation so that it doesn't "froth" or "bubble" too much!

The real issues for our economic futures go well beyond the realm of politics, which is now mostly about fighting over the pie of static wealth that governments and their financial advisors have already envisioned. We know why monetary ideas evolved away from the use of the gold standard in the 20th century, for as populations became more involved in the economic life of nations, fiat money became ever more important for their actual representation. What perhaps was not so obvious? The degree to which finance and credit use, with tight definitions of wealth all around, could completely hijack the entire process.

Governments in particular need to let up with the silly staged hissy fits every time finance "gets out of control". Just allow affordable living and working conditions so that people don't invariably have to rely on credit use in the first place. What's more, if governments would get real about their special relationship with finance instead of pretending it's some kind of monster when the *** hits the fan... people might actually start to believe - once again - that it pays to be responsible in life...that it pays to be accountable and trustworthy.

If we can only convince our governments to keep time use commensurate with the true capacity of money, the mysteries of the "disappearing" middle class will finally be a thing of the past. And - by so doing - a thousand other confusions can also be laid to rest.

Wednesday, August 21, 2013

"Fresh Starts" - Some Takeaways

Recently, Paul Graham was highlighted (HT Newmark's Door), and while he routinely writes great essays, in this particular one his main subject matter was...essays so I'll link it again here. One of the elements which stood out: people want to be surprised, and so they naturally seek out the things which surprise them. That line of thought also applies here, in terms of my not being sure where this little sequence of posts would take me, for in some ways they were a pleasant side trip down memory lane. But - and much more importantly - the element of surprise is what our institutions unfortunately tend to process out of their goals and missions.

People aren't convinced that growth and progress are still desirable, in part because too many institutions are invested in their self preservation above all else - something that doesn't mix well with surprises of any kind. It is tempting to believe that remaining "in place" by way of total predictability is both feasible and desirable. But, just as a plane needs momentum in order to stay airborne, people need continual momentum and new elements in their lives. In the same manner, their economies also need continual momentum so as not to fall back. That is the prime problem with excessive focus on credit in the present. Those who are invested in credit as primary, attempt to preserve already defined wealth by paring back the very momentum which makes it possible for economies to continue thriving.

The ways we envision our institutions at local levels, also affect how economies play out at larger levels. When our local institutions become insular and exclusive, the larger institutions of nations which reflect those local institutions, do the same. If all this were simply about the loss of new experiences and surprises, that would be one thing.  But it doesn't take long for people to rebel, to lose hope, to become angry and seek justice through their own interpretations as to what justice actually looks like.

How does a stalling economy play out in real life? For one thing, the pulling back on the part of institutions to protect themselves means reduced porosity between all of them, and consequently less interaction between all of us. At local levels, that tends to manifest in fewer observable areas of general public activity, something I especially thought of after a recent Yglesias post about outdoor areas (also a part of the inspiration for this little group of posts). However some nations are concerned about a growing tendency for their youth to remain behind closed doors, and indeed, being outdoors was once the way most of us met new friends and started new chapters in our lives.

Not so long ago, less insularity between institutions meant that people didn't think twice about sharing open spaces with one another. That, in turn, generally meant less need to be concerned about who would be standing or walking nearby. Automobiles, unfortunately, provided  means for institutions to become more closed off, for one could readily avoid interacting with other groups if they so desired. In real life that translated into mostly empty streets or heavily trafficked areas. What's more, those who continue to walk along streets without the benefit of transportation create uncertainly on the part of others, as to why they are actually there. Particularly in many areas of the southern U.S., people will drive even to designated walking paths, as being on foot in other areas sends out the "wrong" signal.

Before anyone can realistically hope for the mixed use settings and open environments which are once again being debated in some circles, greater openness between institutions also needs to be a part of the mix. Both the opera house and the macrobiotic center were - in any number of ways - open to all comers. Just as the opera house was a place where people from most any institution could come together, the center was a place where patients also freely mingled with those who were primarily health oriented or otherwise interested in alternative healing. What's more the center also emphasized a coming together of eastern and western cultures as well. The broadly representative nature of these groups, meant that those who participated were free to pursue other opportunities for connecting points and experiences.

The future communities we build need to give us real choices as to whether we want to strive for the signals of wealth, or whether we want respect and dignity in settings that see a small income with the same impartial glance as the large income. People need communities which encourage the skills and  knowledge use which actually matters - not just for consumption purposes or in hopes of catching the elusive job, but in everyday use with one another. In other words, we structure our environments so that people are encouraged to reach across their institutions, instead of hiding behind artificially imposed barriers.

We can create meeting places - outdoors and indoors, where multiple missions and cross fertilization of ideas are not just possible but everyday occurrences. Fewer mandates in life, more surprises. More spontaneous and planned time with one another so that we remember faces, names and what others actually enjoy doing. More "work" that feels like play. More broad smiles on the faces of those who take part in what have been overly solemn or serious rituals, and yet still choose to partake in them just because it feels good to do so. More "skipping" on the meandering sidewalk, to the next board meeting.

Tuesday, August 20, 2013

"Fresh Starts" and Coordination - Part Three

This next example is from the early eighties, and involves a fair degree of spontaneous coordination amongst (approximately) 80 to 100 individuals close to the inner city. The directors provided a location and platform for sets of related skills (classes), along with a kitchen which prepared lunches (for 40 to 50 individuals) three days a week. I participated for about half a year (previous example over two years). Those of us who lived on the premises for any amount of time, made on premises activities primary, and scheduled other work around those primary time frames.

Unlike the first example which provided inter-institutional cooperation and less frequent monetary budget needs, these social activities - despite their casual and informal nature - had a greater element of financial transactions involved. A wide variety of related economic activities took place which had ties back to the single institution, especially in that those who visited the center occasionally hired staffers for outside work.

As to the time frame, people were just rediscovering aspects of healthcare which had been downplayed in the U.S. through much of the twentieth century, and it was therefore an advantageous time for centers such as this to establish themselves. The group had a chance to experiment with various formats which (over time) eventually either formalized into distinct (single) offerings in for profit settings, or were possibly discarded due to various rules and regulations which crystallized later on.

Several things impressed me about this particular group formation. First of course: the voluntary nature of the overall structure and varying presentations of the ideas themselves, and the directors of the center were completely immersed in the daily operations. Also interesting were the spin off individual to individual coordinated settings these ideas made possible. What's more there was a great appreciation for value in use structures which traditional medicine in the U.S. simply does not have time for. In this instance, value in use means the enthusiasm both providers and patients (or clients) had for the methods, in spite of the considerable time required to practice them.

Briefly, I'll back up as to why I was able to fully engage in the activities. Two years prior I'd begun studying aspects of what was known as a macrobiotic diet. Those studies included new methods of food preparation, the philosophy behind the diet, and related disciplines of alternative healing methods. When this center opened, it provided an opportunity to take what I had learned and utilize it for what was reminiscent of a restaurant and school, combined in one. While I took part in grocery shopping, meal preparations and general assistance, I also attended as many of the classes as I could.

Here's the interesting part about this little story. Even the staunchest of free marketers and libertarians may read it and...cringe ever so slightly. Cults! Old wives tales and who knows what else! The fact that such a reaction on the part of the reader suggests itself, only serves to highlight why traditional healthcare has managed to keep such an unfree stranglehold on the marketplace for so long. Only, that tight grip of "do it this way or else", now threatens the budgets of nations.

In spite of the way it has been compartmentalized into silos and isolated, I have tremendous respect for knowledge as scientific endeavor. Except healthcare - unlike other disciplines - has gotten away with pretending it had little to gain from methods and remedies of the past, and society has had to pay the high cost of that illusion for decades. Healthcare has especially suffered from the inability of individuals to help one another directly, based on their own skills sets and particular needs. That is even more true, as the effort to bring down healthcare costs in the near future only means less personal healing time amongst individuals than before.

Midweek Market Monetarist Links and Summaries - 8/21/13

Yep, it's been one of those weeks where the reality of throttling back on growth around the world is settling in - with any number of takes on national turmoil to tell the story. Unfortunately it seems a crisis was a "perfectly good thing to waste" after all, in that far too many people remain convinced the best thing to do is just sit on one's hands. Apparently, some "lucky duckies" even get paid for doing so! Here in the U.S., few are encouraged by the fact that whoever follows Bernanke will likely not be as well versed in Great Depression studies, among other pertinent monetary policy issues. Anyway, here goes...

Yichuan Wang provided a thoughtful post this week:
"A Practitioner's Thoughts on Market Monetarism"
In comments at The Money Illusion, Scott Sumner pointed to an older post which dealt with this same topic, and also noted that it was more timely than ever:
"Fiscal multipliers are zero with inflation targeting central banks"

I agree wholeheartedly with Nick Rowe, that models which don't include money can portray a mixed up view of the world. In this post, Nick Rowe explains how New Keynesians really need the Pigou effect:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/08/new-keynesians-really-really-need-the-pigou-effect.html

Bruegel.org provides a wrap of the recent discussion around the web, regarding the intellectual legacy of Milton Friedman, of which David Glasner has contributed further posts recently as well:
http://www.bruegel.org/nc/blog/detail/article/1139-blogs-review-the-intellectual-legacy-of-milton-friedman/

Market Monetarism - strictly speaking - is not about measuring the activity of banking, and yet banking activities greatly affect multiple aspects of economic activity in ways not even close to reconciliation or structural change. Here's two takes from the week which consider banking aspects. The post by Lars Christensen includes links for papers re banking and financial reform:
http://marketmonetarist.com/2013/08/19/property-rights-and-banking-crisis-toward-a-financial-constitution/
http://jpkoning.blogspot.com/2013/08/scott-sumner-ignores-banks-so-what.html
Also, this apt quote from Koning: "Whether there is a banking system or not in the picture will interfere in no way with a central banker's Archimedean lever."

Regarding the second link above, JPKoning was responding to this post in which Scott Sumner (also) explained to Cullen Roche in comments that banking is not a part of monetary policy: http://www.themoneyillusion.com/?p=23072&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Themoneyillusion+%28TheMoneyIllusion%29

Marcus Nunes takes note of the fact that Paul Krugman believes interest rates to be a good indicator of the stance of monetary policy:
http://thefaintofheart.wordpress.com/2013/08/18/paul-krugman-thinks-interest-rates-is-a-good-indicator-of-the-stance-of-monetary-policy/
In this post, Scott Sumner responds, and also lists ten possible indicators for monetary policy:
http://www.themoneyillusion.com/?p=23083&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Themoneyillusion+%28TheMoneyIllusion%29

Update: Pardon the date glitch! I had a couple of issues yesterday with the Blogger format (or it had issues with me),  and at one point when I tried to back up, the program thought I'd given the command to publish an unfinished post. Also, I wanted to link to Ryan Avent this week, and this is one of those times when The Economist thinks I've hit my page view limit for the month.

Monday, August 19, 2013

"Fresh Starts" and Coordination - Part Two

Just one of the reasons we are encountering a growing desire for "fresh starts" (see start up cities per last post): many areas have reached a point of regulatory gridlock. NIMBY positions leave little room for further definition, and municipalities struggle to provide economic inclusion in terms of business, employment and livability options. In the last post I considered how future start ups might also try more sustainable approaches in services, which could do a better job of aligning incentives with aspiration and initiative. What informal settings of social coordination from recent decades could provide examples in this regard, and what environmental settings make such potential possible? This post looks at some of the ways that relationships can play out between institutions in community.

For Baby Boomers in general, the eighties were a time of exploration, and that often meant a new look at towns and small cities which were in the vicinity of larger and prosperous locations. Some of us had already gone the suburbia route in the seventies along with those early jobs, and largely because of the long commutes (towards the end in my case, three hours a day) were casting about for different interpretations of daily life in general.

The small town in my circumstance was situated close to a state capital. An added influx of (mostly) thirty somethings to earlier residents, also meant remodels of Victorians and other earlier housing stock along the tree lined streets. Most significant, however, was the complete remodel of a turn of the century opera house in the heart of downtown and its walkable neighborhoods. The renovated opera house, in all of its carefully restored splendor, was a big reason for renewed social and related business connections in the town. What's more, it was a tremendous boost for musicians of all kinds in the surrounding area.

But something as fortuitous as an opera house was of course significant in a larger sense as well, because it provided a public stage capable of bringing together multiple aspects of community. Indeed, any town able to renew a valuable asset such as this was also capable - to a degree - of reversing the loss of social capital which Robert Putnam wrote about, in "Bowling Alone" (2000). More people moving in, meant local institutions in that time frame had a good chance of attracting grants for further programs and renovations which could continue the process of growth.

What institutions of the town were able to do for their own gain, often translated into social gains in a broader sense. The local library, nearby churches and non profits and of course the opera house all had leaders who were more than willing to work together and put in the extra time to make their combined efforts count. In each instance, these community leaders were willing to look beyond the missions of their own institutions to see how they might help one another and the town that they also cared about.The library where I worked also benefited from the literacy grants which Barbara Bush made possible with her advocacy. Literacy workshops were just a part of new offerings in my workplace, as our director was also busy installing the new computers that would matter so much for its future programs.

To the degree that so called economic multipliers may actually exist, I'm convinced it's because of circumstances where otherwise rational adults are actively encouraged to play with the freedom of children in newly envisioned environments. Not just in the visions of work that they take on, but the ways in which such work can relate to the work of others. There really was a fine line between what anyone would actually consider work then, and what just felt right to do.

In the time I lived in this little "bedroom community" as it was often called, the opera house became a symbol of the combined efforts of many local institutions and non profits. It just seemed a time for inspiration. One could also set about on foot if they desired (sidewalks everywhere) to attend nearby board meetings and get things done. Eventually, many of the friends I made moved on to new jobs, new cities and challenges. But I have little doubt they remember this special place as fondly as I do.

Today, of course, many forms of social coordination are not so spontaneous, for I've not seen any repeats of the circumstances of that time, but does that mean it's impossible to recreate them? To be sure, mega churches create their own experiential settings within the groups which participate, but something just isn't quite the same. What I miss is the desire of a community to make itself better by including all of its parts, in as many ways as possible. The leaders I recall who were able to take part in what amounted to a community rebirth, doubtless feel the same way.

Sunday, August 18, 2013

"Fresh Starts" and Coordination Potential - Intro

While the economics blogosphere is still slow with a new semester about to begin, it's a good time to do a small series of posts on informal social coordination in knowledge and skills use. A couple of decades earlier, I was lucky enough to be a part of some really great forms of spontaneous group coordination efforts. In a couple of follow ups to this post I'll draw especially from two examples (which unfolded quite differently) to explore some variations in social intent and coordination results, in both small town and inner city settings. In both instances they involved social integration between people who were a part of "place" in a permanent sense, and then those like myself, who moved through these settings in ways which proved more transitional over time, in part because of the knowledge use and skills sets involved.

What makes for positive and often unexpected community experiences? It's always helpful to contrast how various elements of space, time, population density and demographics relate to one another, not to mention their effects on goal sets in already existing (localized) institutional settings. What's more, informal incentive structures can dramatically affect "start up" settings which exist beyond institutional levels. I've been thinking about explaining some examples for a while, and this interesting video on the present state of thought re start up cities, encouraged me to do so.

When it comes to a "fresh start": some forms of governmental organization can utilize specific and clear mandates. That's especially the case, when agreed upon directives involve reliable price points for specific resources and commodities with perimeters that all citizens support. However, mandates can break down in a hurry when they are applied to services provision and knowledge utilization for desired social ends. That's not to say individual needs and aspirations can't be aligned with institutional goals and incentives, for they can. However in order for it to happen, everyone participating needs to be able to take subjective realities of time, work and knowledge use value into account. Hmmm...

Institutions - in and of themselves, are not generally set up to do any such thing. Sometimes - of course - institutions are lucky enough to have individuals in their midst who are keenly aware of the subjective values people hold. This also allows such individuals to be able to combine sets of skills and aspirations to positive effect. By so doing, they not only paint beautiful pictures through the results, but make many people happy in the process. When this happens, it is as though something previously unseen or acknowledged is set free and an entire community can blossom. What was it we once called such people? Oh yes...leaders. One still finds plenty of good studies about them, but nothing compares - no book even comes close to being right there, able to observe the effect these individuals have on the world around them.

Might one reasonably hope to capture subjective experiences such as this, if in fact there is no motivational leader (or sufficient budget to pay said leader) to make that happen...who is actually willing to take the time to find what matters to people? After all, no amount of mandates can force the kinds of incentives which actually encourage people to achieve common goals amongst one another, if the inspiration is in fact not there. For example, much about healthcare and education (that a start up city may designate as part of a self sufficiency mandate for instance) are actually subjective experiences on the part of provider and recipient. There always needs to be a supportive realm where knowledge and skills use can remain in the least formalized structures possible, for maximum effect and individual gain.

A couple more thoughts on the above linked video: what exactly does it mean to suggest that start up cities may be the best options for libertarians in any practical sense? It really depends on the societal goal one has in mind. If one is thinking in terms of immediate need, i.e. greater sources of employment than are presently available: yes, start up cities could certainly help with the diminished state of employment in the present. What's more, the legal work to clear regulatory hurdles for such new starts will definitely assist other start up formations which a nation elects to encourage, however they may further evolve. As many of my readers are aware, I would like to see start ups capable of utilizing knowledge as a vantage point for further wealth creation.

Just the same, the vision of start up city with slightly scaled back versions of government (less regulations) as the primary driver of economic growth is mostly a simplified version of the present linear economic plane. Meaning, knowledge use in such a setting is still envisioned as - yes, mmmm - extractive, and skills use as a limited part of production processes. Or - the same hierarchy of production allowing labor, skills and knowledge use "where possible" still applies. To be sure, this doesn't mean such settings aren't desirable or helpful. It just means they may be a great start but still remain partial solutions.

Spontaneous forms of social coordination are a good place to look, for what institutions are so often not able to provide. How we think about terms of provision also depends on population densities, spatial relationships, and time structures within individual and group settings. These in turn influence the ways we actually think about what we would even consider product, and how we in turn respond to such definitions. Often, product is not at all what we think to coordinate for in ordinary economic settings and as a result, people can forget how to create experiential settings that encourage further resource use. In the next post I'll delve into some of the really good experiences which spontaneous coordinated group settings made possible.

Saturday, August 17, 2013

Macroeconomics is Real

Does this seemingly obvious element of life even need to be asserted? Apparently it does, because even as nations everywhere grapple with budgets and monetary concerns, there are those who insist that macroeconomics as a discipline is not real. Somewhat misguided in the present? Of course. Something to be done away with? Certainly not. As long as there are nations, and nations are in fact a part of the budget coordination and consideration of any group of people,  there are going to be economic issues which fall under the rubric of macroeconomics.

How could it possibly be any other way? And yet, people - quite often serious scholars who really should know better - try to insist that macroeconomics is not real. What's more, macroeconomics is monetary, as Marcus Nunes pointed out in this post as a reply to Robert Higgs. Monetarism matters now more than ever, because it continues to utilize a dynamic concept of economic thought which allows a focus on future potential.

Whereas older forms of monetarism often focused on the gold standard and other aspects of resource use which readily aligned with the standard, Market Monetarists now focus on aggregate spending as measured by the time elements of individual participants. This active conception of economic activity is presently missing from both Keynesian and Austrian thought, which both assign a greater role to credit allocation in the marketplace.

Sometimes we hear that nations are losing their "importance", a sentiment illustrated in discussion of growing state and local importance in economic affairs. However there are some serious concerns with that perspective, in that both state and local economies closely reflect the same valuations and definitions of resource use which nations have previously defined. That, in turn, continues to make local and state economies quite dependent on the national redistribution that such definitions all but made mandatory, even as states express unwillingness to go along with national programs as they are now evolving.

Protection of special interests - which make so much redistribution necessary to begin with - remains just as strong at local and state levels as it is at national levels. Keynesianism in turn is closely connected to those same redistribution patterns. Even as many on the hard right seek to deny the redistribution they rely on, they still offer practically no reflection as to what might take their place. The more that states attempt to deny federal aid because of the impositions it creates, the more class polarization they will experience from their own limitations to choice.

The point is not to negate national identity because it appears helplessly misguided, even if it presently does. Rather, the point is to find new avenues of economic intersection between local and national concerns which make sense.  Knowledge use and services need to be thought of in local terms of wealth creation, while scarce resources need to be able to utilize national coordination strategies, without the excess destruction of free markets which has been going on for so long.

How might local to national avenues of economic activity be reconstructed so that they actually work with one another, instead of fighting with and taking advantage of one another?  National and ongoing conversations in this regard are rapidly becoming necessary, and summits to make this possible really need to happen before the U.S. becomes more divided than ever. Too many people in the U.S. are invested in spreading blame, lies and even historical distortions now - activities which have to be turned around and soon, if in fact they are not going to escalate further.

What's more, macroeconomic realities need to reflect the rationale for realignment, rather than continuing to detract from the potential of realignment. If people are willing to utilize knowledge in more direct ways and establish understandable frameworks for doing so, governments can work with their own citizens to help them become more self sufficient. It would be far preferable to include such coordination strategies into monetary representation than to simply assign a bare minimum of money to people "at the bottom" who supposedly have no rational place in society. The longer government assumes it can take care of citizens when special interests are completely in the way, the more citizens become endangered as to the services they actually need.

Friday, August 16, 2013

Ten "Selfish" Reasons Why Aggregate Wealth Would Be Great

This one's just for fun, and I have thought about some of the possibilities a number of times. Aggregate wealth in this context means everyone "holds" some of it, as in the "everyone's a millionaire" possibility. Normally, selfish interests are described a bit differently, of course. Even though it's understood such interests are the "fuel" that drive the economy, somehow the idea - at least in the back of our minds - is that someone has to lose out on the deal. In other words, mmm, maybe that really is so and someone's gain is actually another's loss. So...how would anyone picture an aggregate gain if instead there is economic inclusion to go all around? Isn't it not supposed to work that way? Let's see, and sprinkle a little pixie dust. In a universe where everyone is gainfully participating in 21st century terms...
  1.  Everyone gets to use their mind to work with, at least part of the time. Sure makes for lots more interesting people to talk to at the grocery store or wherever. Old stories about the opposite aspect of this (i.e. the requisite "dolts" of society) always seemed to get bogged down, of course. Who knew what was really behind that discussion?
  2. Feeling a bit down and out? Lots of people are certainly busy, but it's not like they're so busy they don't have time to take a break and talk to you about it. Really great to have someone close by who actually has circumstances similar to one's own - instead of being so far removed from what someone else is going through that they can't even relate to it. Beats the hell out of having to pretend you're never down and out.
  3. The people who are all about signaling can still do their thing and so can everyone else. The biggest problem with environment and knowledge use definitions? Not so long ago, people were forced to follow signaling patterns for social status. Not necessary to do that if someone doesn't want to.
  4. At times it's quite easy to align your own efforts with the efforts of others. That always felt difficult before, when people were either too busy to take part in your interests, or too down and out to really be able to respond to them.
  5. Ditto to four for familial relationships. Not so many "black sheep" or losers in the family now, and it's become easier for extended families to do things together that don't cost too much for some of the lower income members.
  6. Less blame to go all around. Not just for the former castoffs of extended families, but no one around the neighborhood gets as much traction these days when they try to start up hate campaigns against someone. It's just not that interesting when people are busy and engaged with other stuff.
  7. Fewer people just sitting around in their houses watching TV either because they are exhausted from work or...because they don't have a job. Therefore more people out looking for experiences to be had, with other people.
  8. Lots of hope about the future. Lots of young people thinking about having a family some day.
  9. Not so many of those stupid conversations about how no one should major in any number of things and then everyone was always left wondering, then why gain an education in anything?
  10. Aaaaand, the number one reason why aggregate wealth is great, and this one's especially for those in their twenties. That former potential relationship pool of around ten percent or so? It's now one hundred percent.
Granted, some of these may not necessarily sound selfish and it could just be a matter of perspective on my part. But I don't deny my own selfish reasons for wanting a world that still believes in aggregate wealth.