Sunday, September 29, 2013

How We Coordinate Depends on What We Want To Accomplish

This post covers some "nuts and bolts" of potential social coordination, for service activities at basic levels of community. In normal circumstances of everyday life, the further up the income ladder an individual goes, the more coordinated services one tends to either buy or expect - whether in one's own environment or in other forms of high density group focused activities. Lower income individuals tends to compensate with educational materials for consumption, by utilizing broadcast (one to the many) knowledge sets to use on DIY terms. How could more coordination happen for lower income and those presently unemployed?

Here, the primary problem for lower income is that credentialing prevents further economic activity (services production) of such gained knowledge in many cases for anyone but oneself. Presently, not only does that slow both knowledge use and aggregate wealth potential, but it calls into question the value of further capacity for educational media outside the bounds of formal education. Allowing coordination of knowledge with informal methods would make the spread of  knowledge product (separate from time use) a more valuable option for both providers and consumers.

Implicit in this post example is the option of eventual monetary compensation, for focused and directed economic activities that are "unseen" in present market based terms.  Local coordination for services product could provide a more beneficial  alternative to guaranteed income plans, which would simply reimburse long term unemployed for survival needs with nothing expected from them. Another similar option in guaranteed income terms is the creation of auction settings for lower end economic activities i.e. on present day "odd job work for others" terms. That is, the primary coordination involved in the latter setting, would be the normal circumstance of boss and employee.

Whereas the system suggested here involves multiple coordination and time arbitration sets in groups of entrepreneurs (free markets in skills use), and it also utilizes a base monetary income. Another important difference is that base income would be targeted to localized services to production choices on the part of the population, reflected in regulatory options. Those choice sets would depend in large part on the degree to which communities opt for innovative habitat technology. By bringing down the costs and burdens of housing, a base income for services coordination would go much further than if housing was defined in high maintenance and heavy resource use terms. By bringing services time use into accordance with (global) tradable production norms, it would be possible to measure individual income to consumption standards that local economies would elect to use - standards that would also define base income.

Why would "outsiders" elect to be a part of skills based communities such as this? Pre existing sets of credentials would not be necessary. However, those who desire to participate would need to take the time to understand of how the local economic system actually works, in order to take part in its benefits and expectations. The primary element for local participants is that of being entrepreneur of one's skills sets. As an adult, committing to some combination of the more basic skills sets (a certain weekly amount dependent on ability and community need) would qualify individuals for local property permits (holdings).  From there, one could also participate in the local 3D technology in some capacity. One element here might be recyclable "jigsaw puzzle" building components with plastics, for instance. While recyclables could provide a local option for direct skills match potential (less money needed), other building material components (local resources or otherwise) could also come into play for business ventures in tradable product beyond one's actual community.

What are we coordinating for? Real growth in services product...yes - but in social terms which relate to more than just pragmatic aspirations. It helps to stress this because as people continue to plan for the  privatization of services, the same restraints remain which have been an issue in public formations. Presently, people would not be able to pay for more services in the aggregate than they have been able to provide from a tax base. What's more, service product in many instances is so unlike the product which is separate from our time, that it is hard to compare the two in traditional economic terms. However, our time limitations are not unlike a strict gold standard in terms of availability. What provides true choice is our ability to overcome those limits, by making time the constant across the entire services spectrum.

Otherwise there would be no way to optimize knowledge use as applied to populations in any aggregate sense. For instance, when health services participation is allowed to overcome other service needs in terms of valuation, the effect is the same as a diminished quantity of "time gold" at a society's disposal. One reason this perspective is important: as Ezra Klein points out, 5 percent of people presently account for about 50 percent of the health system's spending. And healthcare spending is presently about 1/5 of actual GDP in the U.S.

When we consider possibilities for community coordination, what is the product we wish to arrive at? Social product exists in many forms, and it helps to consider the kinds of resource based dimensions which services actually exist within. That makes it far easier to coordinate what actually needs to be accomplished, and also to recognize that such product - while existing within measured time, is nonetheless capable of being layered into a number of capacities at once. In the past, groups engaged in multiple responsibilities carried out as simultaneous activities. Before most of those activities were labeled as economic, they became separated from one another. What was separated and why? Which separations are actually beneficial and completely necessary?

Some of the activities we elect to take on affects the degree to which corresponding sets of activities even take place. For instance, if most of society was economically engaged, how much of a system would we actually need to address criminal activity? Right now there's simply no way to know. Plus, some of the most basic coordination challenges include supplementing and replacing those which public funding no longer covers. How do we accomplish this in terms that are non-hierarchical, decentralized and open? Multiple use environments with movable infrastructure allow us to move around the mental and physical components to see what actually works. How much of a flexible legal system would actually be needed in such circumstance?

Each community would create different settings for knowledge use that come to resemble snowflake patterns, all of which start from a common base of recognized need. First, decisions regarding infrastructure have to be made, and from here, outlines for educational possibilities and beginnings for healthcare options. Other coordination sets would involve combinations of travel settings for both locals to other places, and visiting knowledge use providers from other areas. Markets in services would become the domain not just of a handful of universities and high profile businesses, but every community which aspires to distinguish itself in some capacity.

Saturday, September 28, 2013

Preserve Democracy - Make Knowledge Use Primary

There is no shortage of articles which tell of representative democracy being called into question, as nations find - sometimes unexpectedly - they will not be able to accommodate the demands of their all too recent middle classes. Two recent articles from Project Syndicate focus on this, and also here. Closer to home, (here in the U.S.) some of that same sentiment can be found, and the direction this is all headed...mmm, not encouraging. While there are ways to overcome the quagmire of impossible budgets and expectations, what to do in the meantime? Therein lies the problem. While reactions to political mismanagement continue to grow, political results become more about emotion - even punishment - than about focus or determination to overcome the problems of the present.

Representative democracy could in fact still work, especially in terms of the scarce resources and product which are separate from the use of our own time (services as time use skills need direct democracy). But increasingly, policymakers and the voting public try to use representative democracy for the wrong purposes, which only creates further gridlock and makes all governments increasingly  unpopular. What's more, many of the ways government integrated economic activities with their citizenry in the 20th century, are no longer workable for the needs of the 21st.

Lost amongst ongoing efforts to scale back services is the fact that changes in government function need more input from the populace, not less. How might this possibly be achieved, outside the limited purpose of voting for individual representatives? In order to be effective, voting needs to become a mechanism that signals ongoing possibilities for direct production and creation of knowledge product. Instead, voting has become a constant scramble to make certain every one gets their share of government mandated knowledge product. Special interests and policymakers have turned that product into something which no longer aligns with individual participation in economic life. Even as some speak of a future where less people are needed in the workplace, there is no escaping the fact that such a future is not realistic at all.

Governments - in their present form - came of age in times incredibly different from the present. When product was mostly something primarily associated with commodities shipped from elsewhere, government functions worked reasonably well. After all, governments were able to assist with transportation and related infrastructure needs for movable product - and if necessary, armies to protect what was transported. But today, not only has the definition of product shifted from these basic economic functions, the places such commodities come from only represent a fraction of the kinds of economic activities local economies actually need to take part in in production based terms.

Today, local economies need to be able to manage their own services for all of their citizens, instead of relying on state or national governments to help with such services for only a (fortunate) portion of local citizens. In other words, governments and local economies need to allow all of their citizens to use knowledge to help one another. This becomes all the more important, when local economies have only a limited quantity of other product separate from knowledge which they can rely upon for sustainability. When services are not generated internally in terms of both production and consumption, local economies over time also become threatened by the budget issues of larger governments. By making knowledge use primary instead of dependent on funding from governments or other forms of production, local economies can have a much greater chance at economic stability.

Even though education became a much greater part of life in the 20th century, the means for including proactive elements of education in our daily lives has yet to evolve. In fact, by turning education into a consumption good which in many cases was never intended for individual production capacity, the aggregate role of knowledge use in the citizenry which had initially seemed so promising, was slowly undermined. The education process was akin to teaching a farmer how to farm, all the while knowing he would not have his own acreage (ownership of knowledge time use hours) which was his to personally manage.

Over time, the lack of a self credentialing (entrepreneurial) capacity also created a loss of understanding how one might be able to coordinate time use with others in terms of natural limitations and scarcity. What's more, this loss was exacerbated by the growing role of finance. For those fortunate enough to gain a career (credentialed from without) the loss of time management potential was not quite so critical in that they could still pay for the time of others. But many of the "hired hands" of knowledge and skills use would never really be able to make up the difference. When they could not pay others for the jobs they didn't have time to do, often the outside jobs they needed for their personal circumstance just didn't happen.

The estates of the fortunate few (highly valued knowledge use time) literally ate the less valued time plots of the others so that they were left with one acre knowledge use plots for sustenance. As economic activities shifted from the self sufficiency of farms to the "hired hands" of the workplace, people slowly lost their means of interacting with one another in a managerial capacity for their own skills sets. As a result, knowledge use reimbursement came to resemble a limited number of large estates existing amongst mostly single acre plots.

Like the entrepreneur, the actual farmer had been responsible for maintaining resource sets so as to gain residual choices (profit) afterward. But one acre plots didn't leave much room for residuals or further choice sets. The move to defined compensation (salary or hourly by much of the populace) not only diminished individual ability to understand the power of the residual choice for further economic action, it also upset time use recognition as vital to monetary processes.

It's not about taking government functions away, as many policymakers are actively trying to do in the present. It's about transforming government functions so as to make real coordination once again the role of the citizen, who needs to be an integral part of the process of knowledge product. The hours we actually have are sacred, for they are the allotments of land we try to produce from, to gain residual choice or profit in our lives. When we tolerate tremendous holdings in knowledge estates, over time they reduce all other knowledge land holdings so that less highly valued components are relegated to the dustbins of history.

Those who would destroy government do not seek to safeguard our knowledge, they seek a world in which much of government and knowledge is deemed unnecessary: a world in which the most "valuable" knowledge can be used "efficiently" on behalf of the few. As long as we tolerate heavy credentialing (knowledge estates) the rest of us will try to scrape out a living on our single acre and hope that the powers that be will once again take full advantage of our skills expertise. But over time they will simply have less reason to do so, and we continue to lose our means to help one another when they don't.

Once there was a time it did not bother me so much that leaders of nations increasingly seemed to be stumbling around in the dark. But now it does, and world events are rapidly unfolding in circumstance where present day institutional formations simply are not equipped to cope. Leaders of nations do not even really understand yet that they need help from their own citizens, just to find a better way forward. In future posts, I will explore some of the ways knowledge use could be made primary in both a social and monetary sense.  Coordination could evolve into a variety of forms, depending on the kinds of product people actually seek to bring about.

Thursday, September 26, 2013

Just Say No To Austerity - Multiple Environment and Knowledge Use

Some thoughts regarding potential choices in knowledge and environment use didn't make it into yesterday's post, and I want to stress why they matter for economic stability. So, "just say no to environment dogmatists" is one way to express this, and there are numerous aspects. In "You can't buy authenticity", Ryan Long noted that certain Austrians practically came across as though everyone should rent a room and buy a used car (not to mention drop out of college). Another good rant re notions how people should live, comes from Britmouse, who reacted to a claim that because London houses were sold to foreigners, they were supposedly not a part of Britain's housing stock! Horrors of horrors, a house might sit empty for part of a year. Or, buying a nice house for oneself, supposedly a waste of productive capital. And the high road to integrity is...? Why can't we just be friends?

Refusing to impose our belief systems on others isn't just a civility matter - it's important for continued economic growth and stability as well. Anytime we find ourselves pressured to make environments purely about one particular use or the other, such decisions go well beyond impractical, and it's not just our external surroundings which are at stake. Often, the same processes which limit our surroundings, further compartmentalize our thinking and compromise decision making, as well. In boom times, such differentiation between groups grows happily, multiply and divides - which is fine. The good times are when we can explore our differences and takes on life. But when austerity threatens, sometimes the most rational way back to economic sustainability and growth, is to allow differentiation of economic activity to once again exist alongside and overlap the other.

Take a relatively simple economy - one that runs on certain limited resources and then begins the process of expansion through knowledge and skills, you get the idea. Such an economy would move away over time from a gold standard to a standard that considers economic diversity and human ability as well. Except...argh, it becomes tempting to fall back on the earlier standard as some of the more recent means of growing/supporting and skills diversity start to bite the dust. A good way to keep that from happing is to return to multiple forms of infrastructure use, which could also provide the capacity to integrate important aspects of knowledge use. Some of the same density structures which cities rely on for knowledge use, can be recreated in smaller town settings as well.

While mixed retail and office space is coming back to a degree, that's not even close to the multiple forms of economic activities people were once able to take on in closer approximation to one another. Multiple environment settings for knowledge use are particularly needed now in terms of services for the old and the young where they can be interspersed with other settings. When governments even start to worry about the costs of pre school child care for lower income, intervention has gone too far. It's time to free up the restrictions which separated so many environments in the first place.

By making our environments multi use, the idea of repairs and maintenance to infrastructure would no longer seem as overwhelming as it does now. What's more, by taking healthcare and education to the places they are actually needed, instead of insisting they take place within specific buildings and separated time settings, the costs associated with both can be greatly decreased. Also, to return these skills to local settings would ease the burdens on those who have difficulty traveling to the centralized settings that became increasingly important in recent decades.

In terms of skills use, knowledge integration at individual levels could go much further than job sharing, for instance. How so? Services today only utilize a fraction of knowledge use potential that people actually need and are willing to provide, and the level of challenge would really be dependent on what people desire to take on. The same differentiation of skills sets which parents or entrepreneurs take for granted, could also be possible for divisions of skills sets which could be shared in community. The problems for us today are not so much about infrastructure and services as simply the arbitrary limitations we have placed on them. And those limitations can be overcome.

Wednesday, September 25, 2013

Multiple Choices Can Defeat Austerity

It seemed fitting to return to a more positive take for a post title, after giving "everyone" a hard time in the recent "Mad at the Fed" post! What exactly is meant by multiple choice? Nope, no tests involved. Rather, multiple choice is about multiple life options which - if actively and deliberately pursued - could do wonders to raise spirits for those who often don't feel they don't measure up to the winner take all lifestyle options of the present. True choice extends well beyond the political options of "pay or don't pay" for certain particular consumption baskets (healthcare), but Washington is increasingly defined in those terms just the same.

The idea of winners and losers would not be near as burdensome, were it not for the fact that lifestyle and product options mostly end up designed for the ways the "winners" intend to utilize them. Why exactly is that necessary? Who is really aware that government has limited the choices in production to the winner's designations - and then turns itself inside out trying to accommodate others from a standpoint of "fairness"? What if the only reason we have austerity is the fact that people cannot produce, buy, arbitrage, negotiate or create resource use within their income capacities?

What's more those limitations negate - at the very least - three decision making processes one might actually use to opt out of the winners lifestyle take: spiritual, pragmatic, and need based. The fact that societies have not quite figured out how to adjust living circumstances for true valuation in choice, also results in unnecessary extremes in social polarization which are sometimes completely unnecessary. Most importantly, artificial limitation takes away the means and abilities which people actually have to help one another, through the course of their lives. It makes people appear weak, who might actually be strong, were they allowed to be. We used to say someone was resourceful just for this very reason, when they were able to rise above the difficulties of adversity. But today some creative potentialities for resource use have been indadvertantly ruled out.

Bryan Caplan mused in a recent post that, for libertarians, it is odd just how indirect government coercion actually is. How often does government actually tell us to do anything, besides pay taxes? It's what government expects us not to do, in production based terms for ourselves or others, that is the real issue. The coercion that takes place appears to be outside of our own purview, but it really is not. These hidden directives are indirect in the sense of our trading partners (or businesses) appearing to be ones with imposed limits, instead of us. Some of Bryan's commenters pointed out how the rules are kept at the level of the unseen. How would we know we are being deprived, if we're clueless what other economic or social options might be?

Also, because product offering possibilities aren't well understood, governments end up trying to "help" in ways that end up increasing the costs of the (favored) particular product, instead of allowing other proffered offerings to compete with the product which escapes the bounds of actual income ranges. Unfortunately this is not well understood at a basic level of potential knowledge use, which allows some companies to further skew healthcare costs: add to that the fact of healthcare not existing as a free market to begin with. Because most people aren't used to thinking in terms of being the producer of one's own skills sets (which we are) some may miss that this trade limitation is more direct than it seems, for knowledge use.

Government coercion in this regard is particularly hidden because it occurs at a very base level of daily existence. For instance, societal structures today don't utilize knowledge well in that important decisions of all kinds can only be made in institutions which don't capture a wide range of consumer value or preference. However, it helps to remember the reason why this is still the case: our institutions evolved at a time when books scarcely existed in any quantity, in most homes. Aggregate knowledge on the part of the populace grew at the very moment when governments ceased to be able to integrate variances in opinion by truly cooperative means.

By the same token, existing limitations on housing options once were not so problematic, in that many populations once had greater mobility options to seek out environments with fewer restrictions on housing and living arrangements in general. Those greater mobility options also made family formation a continuing possibility even in times when one had to move away from areas with inadequate economic access, in order for that to happen.

Today people continue to look around for places to start anew and build families, but find both local economies and nations already stretched for what they are actually able to accommodate in terms of economic access. In other words, earlier limitations in knowledge use and livability options were not nearly as problematic for economic stability, as they are today. Creating multiple choice sets in knowledge and livability options would make numerous localities once again open to economic access and greater family formation.

Such limitations in consumer choice might have been understandable in the past, when it was not possible to utilize vast resources to the degree that is possible now. What's more, the fact that this issue is often addressed in terms of poverty amongst plenty, can make it difficult to envision how different sets of resource use can be adopted for circumstance depending on income. What seems like hard and fast rules may just be unnecessary restraints. That is particularly so, when lower income individuals still have health and youth on their side and could be given the chance to work out long term solutions in incremental ways.

What if it turned out that governments were just as responsible as marketplaces for creating economic and social polarization? Sounds crazy, but do a thought experiment ten or fifteen years out, where individuals could access consumption and production options on their own terms and utilize digital media through local education to do so. What might be the result? It might not look as haphazard and unprofessional as people think. In fact, the results might be as inspiring as anything of the present, just... um, perhaps a bit more sustainable. It's worth trying, even if austerity is the only aggravating thing that really gets defeated.

Midweek Market Monetarist Links and Summaries - 9/25/13

Earlier in the week, Nick Rowe provided this well thought out (and lengthy) post:
Teaching Notes on Banks and Money
Also, what happened in 2008? Why didn't the cut in interest rates prevent aggregate demand from falling?
http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/09/interest-rates-and-aggregate-demand.html
A lesson on comparative advantage:http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/09/teaching-comparative-advantage-barter-vs-money.html

Two market monetarists finally get to meet each other - Scott Sumner and Lars Christensen. Of course Lars can really make a person smile by being his hyper enthusiastic self:
http://marketmonetarist.com/2013/09/21/visiting-scott-in-boston/
And they "agree to disagree" about the taper:
http://marketmonetarist.com/2013/09/18/no-tapering-but-no-rule-either-net-net-that-is-bad/
As for central bankers who think they can "beat the market":
http://marketmonetarist.com/2013/09/24/macroprudential-follies-and-procyclical-central-bankers/

Speaking of taper, that's the question Scott Sumner asked in his first article for The Week. Why do it?
http://theweek.com/article/index/249697/we-need-easier-money-so-why-taper#
Scott explores some confusions in the relationship between interest rates and money, in this post: Interest rates and the face/vase problem
Some explanation regarding John Cochrane and liquidity traps:
http://www.themoneyillusion.com/?p=23739&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Themoneyillusion+%28TheMoneyIllusion%29
The Fed non-taper turned out to be a pretty big deal. And when Tyler Cowen questioned why emerging markets would react so, Scott reminds him that Monetary policy is a really big deal.

Bill Woolsey also notes the continuance in QE:
http://monetaryfreedom-billwoolsey.blogspot.com/2013/09/qe-continues.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MonetaryFreedom+%28Monetary+Freedom%29
He highlights a post by Ryan Avent, "Missing the forest for the QEs":
http://www.economist.com/blogs/freeexchange/2013/09/monetary-policy-1
and also adds clarification for Nick Rowe's discussion regarding interest rates, linked above.

Marcus Nunes shows - in graphs - the factors that the Fed chose to overlook in a fateful meeting, five years ago: http://thefaintofheart.wordpress.com/2013/09/18/5-year-anniversary-of-a-fateful-decision/
The Fed keeps pulling new tricks out of its hat as growth slows...
http://thefaintofheart.wordpress.com/2013/09/18/a-queer-policy-indeed/
Aaand, what we have here is a failure to communicate:
http://thefaintofheart.wordpress.com/2013/09/20/forward-guidance-is-like-a-primitive-gps/
http://thefaintofheart.wordpress.com/2013/09/23/best-kind-of-forward-guidance-keep-mum/
http://thefaintofheart.wordpress.com/2013/09/23/monetary-policy-used-to-be-a-serious-matter/
http://thefaintofheart.wordpress.com/2013/09/24/no-matter-the-eloquence-behind-the-defense-forward-guidance-is-still-a-convoluted-manner-to-do-monetary-policy/

Justin Irving runs simulations for NGDPLT with measurement error, and in the process, notes that the simulations suggest price level targeting would be a poor substitute:
http://economicsophisms.com/2013/09/23/simulating-ngdplt-with-measurement-error/

David Beckworth provides evidence that monetary policy can still be quite effective at the zero bound: http://macromarketmusings.blogspot.com/2013/09/monetary-policy-at-zlb-three-quasi_25.html
David also shares an exchange he had with Miles Kimball re the Fed's new fixed rate:
http://macromarketmusings.blogspot.com/2013/09/further-ossification-of-zero-lower-bound.html

James Pethokoukis of AEI has a 5 questions for five days series this week, regarding market monetarism and quantitative easing. Here is the first post (September 23rd):
http://www.aei-ideas.org/2013/09/market-monetarism-and-quantitative-easing-5-questions-in-5-days-part-1/
Also, in his article for The National Review, Pethokoukis stresses that QE is working:
http://www.nationalreview.com/article/359216/right-quantitative-easing-james-pethokoukis

George Selgin gave a talk on Free Banking recently, in which he asked: what is the counterfactual for central banks? http://cafehayek.com/2013/09/george-selgin-on-free-banking-and-the-free-society.html

David Glasner provides the second installment on Hawtrey's Good and Bad Trade:
http://uneasymoney.com/2013/09/24/hawtreys-good-and-bad-trade-part-ii/

Britmouse reminds us that government attempts to control prices are not the way to a better marketplace: http://uneconomical.wordpress.com/2013/09/25/relative-price-changes-are-a-good-thing-price-controls-are-not/

The Browser picked up this story about Janet Yellen recently:
http://www.businessweek.com/articles/2013-09-19/who-is-janet-yellen-a-look-at-the-front-runner-for-the-next-fed-chairman#p1

And just for fun, I thought some of my readers might enjoy an illustrated brief history of U.S. government misadventures with tax dollars, from Business Pundit:
http://www.businesspundit.com/american-tax-dollars-your-hard-earned-money-at-work/

Monday, September 23, 2013

Mad At The Fed? It Still Takes Two To Tango

..Or, "mad" at government, for that matter! Given the fact that nominal level targeting is not yet in place, economics news of the day still carries stories full of complaints about QE which "should" be stopped - as in yesterday perhaps. Oh yeah? Mmmm I feel somewhat combative today so beware - could take a swing at anybody! At the very least this blog post would make me unwelcome in certain company...

Michael Schuman (Time) tells how the global economy has become addicted to Fed money, and explains how sooner or later every smoker is going to have to quit. If only the "taper already" problem were as simple as a smoking addiction. Unfortunately, we are not just talking about random and controllable addictions here, but the ways in which people are expected to live and carry out their lives through monetary activity in general. That's where the real problem lies.

While the punchbowl is still on the table, it would be one thing if everyone just enjoyed it while it was there. But afterwards, all those tables and chairs tend to remain set up (new regulations and further restrictions of economic access as gifts to special interests) as though the punch would never be taken away. Then, no one is willing to remove any of the extra tables or chairs afterward.

By no means can anyone expect to get back to sane and frugal living after QE tapers, under those still existing conditions. Consumers are generally treated as though they were the only ones who were profligate in the good times as a matter of course. Plus, sticky wages alone are hardly responsible for numerous costs which remain obstinate, no matter the resultant austerity and lost jobs. Even now it remains too easy for some to blame the Fed, government, the one percent, whatever - than to look at the areas in our lives where hidden costs continue to accumulate - as services, productivity and jobs continue to be sacrificed.

To be sure, the Fed was too accommodative in the past. But that was decades earlier, and today's accommodations are simply attempts to continue following the economic "marching orders" of  life as defined by governments large and small, along with their favored business constituents. In a recent lecture, George Selgin pointed out the fact that every financial crisis becomes an excuse for governments to take a larger role in the economy, from which there is no return.

But the fact that we still end up with too big to fail banks and unreasonable expectations for small incomes often comes down to a failure of imagination. It would be one thing if larger governments actually made a substantial difference in people's lives. Governments grow because it is far too easy for them to foster the illusion that they solve the problems of their constituents. Instead, they make existing problems worse by magnifying the effects of needless complexities by special interests. In other words, we are often too ready to blame government for something that populations are already - unwittingly - doing to themselves.

There has been too little incentive on anyone's part to coordinate economic activity in more amenable, simple and affordable terms. Not only are our governments ready to oblige whenever we have trouble working things out between ourselves, but they benefit from our own crisis of imagination. The reason it takes so much money just to get anything done is that too many people want it that way, and so the Fed goes along with the program.  Yes, nations do have reason to be concerned about the coming taper. Because, even though central banks are obligated to take their foot away from the accelerator, no one else feels obligated to in the areas that really matter, and nothing about daily life has adjusted to account for the necessary shift.

Even to talk about a return to normalcy is misleading, for there are few structural shifts in the economy to acknowledge a return to normal output. The fact that some banks are still considered too big to fail and that the major drivers of economic activity have not structurally changed at all, simply means that cutting back on money printing means austerity conditions and a gradual reduction in services over time.

Perhaps the recent efforts on the part of the Fed to communicate better have backfired somewhat, because if there was hope that the marketplace would react with structural adjustments to match the reality of scaling back, it just hasn't happened. Indeed, while monetary printing remains substantial, too many on Main Street feel that more money printing is just unwarranted. However, Main Street is also unaware of its own part in the role of Fed uncertainties or the fact that much excess begins at their doorstep. It's time for everyone to acknowledge their own role in the coming taper, difficult though the task may be.

Sunday, September 22, 2013

Wealth as a Product of Coordination Sets - Outdoors Edition

Contrast two people, who are already decades into their (normal by U.S. standards) retirement years. Both are active and love the outdoors, but their incomes took a different trajectory. One of the individuals had a relatively high income during the years he worked, while the income of the other declined in later decades from a midrange level. Still, the second individual was able to build a home and business with accumulated cash from that midrange income.

What has been different in terms of choice sets between the two? While their lifestyles are quite different, both have been quite happy with their options for travel from home - near or far. Good health has played a major role in both circumstance. One of these individuals continues to travel extensively - indeed retirement could be likened to a permanent "vacation". The other still enjoys outdoor activities regularly but within a close range to home. However, he never felt limited with his choices of outdoor experiences, in that publicly provided options provided meaning for him, much the same as the private provisions which higher income made possible for the other.

Given the fact that both individuals are consumers of certain kinds of outdoor experience and travel, how might we compare the way those offerings are presented? The biggest difference between the destination sets really comes down to public outdoor offerings with limited need for service or maintenance, versus private travel offerings with a larger range of service, maintenance and atmospheric definition to add to the experience. Often the higher income traveler will choose the latter, but the main difference between public or private outdoor experiences is that scheduling, greater investment in capital and focused time commitments are more important for the private offerings.

Both options provide tremendous value, not to mention additional wealth creation options for all concerned. Not only do additional economic opportunities exist along travel routes, but the very fact of travel compels many kinds of consumer activities which otherwise would not take place, when people simply stay at home. However, these settings involve a certain degree of mobility that is not only taken for granted but provides an important element of the experience itself. Unfortunately, the transportation required for the lower income version of such outdoor choices is jeopardized in the present, and needs to be addressed in future coordination of the outdoor setting experience.

What I would suggest in this regard is instead of simply imposing carbon taxes, give people a choice that would have one of the most positive impacts of the 21st century: contribution to a fund that would create walkable communities and their associated pathways across the U.S. Such a project would raise the spirits and hopes of countless individuals who need to find common purpose and means to overcome their present isolation.

A walkable project of national scope would have an immense payoff. Not only would this reduce the carbon footprint over time, it would maintain a floor of life and choice options for untold numbers of people who now are so restricted to limited spaces that they have few real options for living and working in a normal sense. Lest anyone think other transportation options for low incomes can be taken for granted in the near future - i.e. that frugality and careful spending habits are enough - it just isn't so.  Wealth happens when we create environments which allow resources to take on additional value, because they become usable and productive by coordinated social efforts.

In short, a  foundation of walkable communities and connecting pathways across the U.S would create entire dimensions of added wealth, social and cultural formation: options which are otherwise not possible with today's limitations in transportation options for lower incomes. Just as the automobile once created its own environment, culture, and added wealth potential, a walkable dimension for living and working in the U.S. is fully capable of doing the same.

Saturday, September 21, 2013

Market Monetarism Matters

Every now and then it helps to step back and paint in broad strokes, and this post is just to highlight some of the reasons why I'm so partial to market monetarism. Over time, different aspects of MM have become more apparent to me - but I've still got much to learn about macroeconomics even as I try to make better sense of my own thought processes through writing.

One thing that is so encouraging in times which still feel recessionary: people who think in market monetarist terms refuse to be bound by the seeming economic limitations of the past. The MM discipline is forward looking in terms of market expectations, even as it would draw upon recent monetary activity to maintain stability. Through level targeting, this potential measuring rule would continue to reflect ongoing circumstance as closely as possible, in terms of actual spending capacity. What's more, all of this is possible to achieve without the grandstanding and drama which continue to accompany monetary activity now.

Instead of being bound by bank lending capacity, nominal targeting responds to spending capacity on the part of all economic actors, through incremental means. Many who grew up in times when people frequently went into business or bought properties with cash instead of bank loans, can appreciate the not so subtle difference in focus. What's more nominal targeting provides an apt starting point, for a citizen's dialogue to redefine the purpose of wealth in the 21st century. Even though policy makers in Washington still seek ways to make homeowners of us all, MM helps to shift the discussion away from passive wealth holdings towards more active forms of wealth.

It is especially freeing to be able to step away from the idea of bank loans as primary for economic activity. At best, loans are a complement to ongoing activities and at worst, a detractor from human potential. Just the same, making a clean break with finance is no easy task, for it remains integrated in the same sets of circumstance which caused so much grief for governments in the first place. Adopting a nominal targeting rule is an important first step to find a way out of the present day finance quagmire.

Market monetarism is in some ways a plea for governments to stop the cycles of overreaction to market conditions and the destabilization which follows. To a degree, governments and their citizens created a protracted business cycle with housing, because of a lack of consensus as to what future wealth creation might actually consist of. While such dialogue may have been a matter for government responsibility in the 20th century, it is a responsibility for everyone in the 21st. Today, the future can be shaped by knowledge and skill, much as it was once shaped by fossil fuels and the automobile.

Market monetarists are nothing if not optimistic. And, it is good to know that the most important components of GDP measure and nominal targeting are just as applicable for dynamic wealth formation in the 21st century, as they were for the 20th - if not more so. To be sure there is still a lot of confusion how to move forward in the present, but this is something that no follower of MM is going to shy away from, and there are plenty of perspectives to be had all around.

In spite of all this, the biggest argument for nominal targeting is somewhat hidden in the background, which is why some may not readily recognize it. When spending capacity is accurately portrayed, it makes other economic elements a lot easier to tend to, than they would be otherwise. That's no small matter, at all.

Friday, September 20, 2013

Needed: Marketplaces that Match Income Potential

One of the main economic problems for the U.S. is a persistent blind spot, in terms of marketplace solutions for variance in income capabilities. As this NYT article illustrates, higher income positions are not those which are actually increasing in the present. Yet, far too much of the supply side at local levels is structured as though higher income positions were the continuing reality for most individuals. Prior to the Great Recession, wide variances in income were already more pronounced here than in other developed nations, and they only continue to grow.

Part of what exacerbates this problem is a prevalence of high maintenance single housing units in the U.S., and too little organized effort thus far for structural and innovative building reforms. When jobs were easier to come by, individuals and families were better able to support one another if incomes fell short of one's actual responsibilities. When family members were better able to help one another, that also made it easier to overcome the lack of offerings and living options in the marketplace for those on the lower end of the income spectrum.

Now it is not just a matter of families on reduced incomes unable to tend to their own, they are also fighting increases in local tax bases. However, such increases are frequently still needed to maintain earlier formulations of resource heavy infrastructure. Because people have fewer resources to provide for themselves than before, sometimes they vote down much needed services amongst the continuing needs of their own municipalities.

As it has become more difficult for families to find livability options, more creativity is now needed from the supply side in terms of solutions, on the part of both municipalities and businesses. Otherwise, the national demand for "livable" wages will ultimately result in laws that not only greatly increase wages at the lower end, but also speed up the adoption of technological adaptation which means fewer jobs in the parts of the economy where they are actually being created in greater abundance. More than anything, a loss of labor force participation is a direct result of too little adaptation to present realities, and new forms of product could go a long way to address what individuals now have difficulty tending to on their own.

Another aspect of this issue: if local municipalities don't work with portable building and infrastructure component start ups for supply side solutions, national government will try to force solutions that don't work for anyone. To be sure, not every municipality is equipped to move its regulatory environment towards greater economic inclusiveness, especially when real estate valuations are at stake. Just the same, municipalities need to recognize that they are the ones who presently hold the key to allowing greater innovation - innovation that could provide a tremendous restart for economies everywhere. In the meantime, why would anyone be willing to go to the trouble to produce efficient and affordable product for a market which is not even allowed?

When everyone collectively decides to do nothing for real supply side structural solutions (as has long been the case), sometimes a national government seeks to come in and make the necessary zoning adjustments in highly arbitrary ways, with the rationale that restrictive zoning amounts to economic discrimination. No one needs yet another housing project mistake plopped down in the middle of existing neighborhoods, and no one needs to be the unfortunate recipient of such misguided efforts either. Didn't we learn that difficult lesson already? If municipalities and the marketplace had sought incremental ownership solutions for lower income all along, such a lousy non solution would not have presented itself again.

Ownership of resources and lifestyle options is important, especially in the U.S. where those who own homes and businesses can be vulnerable to predation by those who don't in some areas. What's more, there is a sizable segment of any population which - given a chance to thrive on the limited ownership terms which are actually possible for their income potential, would no longer be a threat to others in their midst. This is the leap of faith and trust that many municipalities need to take, in order to secure a better economic future which everyone can live with. Many an individual - given a real chance to survive - is able to display positive aspects of personality which others scarcely knew existed.

Not every municipality would elect to include others of low income potential and some are in no realistic position to do so. Just the same, there needs to be organized efforts across the nation to find out what communities are willing to start anew with their own infrastructure and building code requirements, to allow both living and working on more livable terms. What's more such efforts would be far better than more laws to "force" solutions. Coordinated efforts across the nation would help overcome first mover problems in zoning and regulation. And, such efforts would also allow each community to decide the degree to which it is willing to reconsider their own zoning and regulatory environment, to reflect the needs of their own citizens.

Thursday, September 19, 2013

Lateral Time Use and the Knowledge Prior

How do we think about the differences between what we call work, what we actually consider work, and the work which many often go out of their way to avoid? To a degree that may seem apparent, but average retirement age structures from the last century make true differentials far less obvious, for instance. It matters not whether our jobs are really tedious, difficult or a fortunate blessing in disguise, for the retirement age speaks of a sameness in health approximations over time which nonetheless varies wildly, according to the work we actually do.

In other words, the work we actually want, we don't really consider work at all. Not only does it tend to keep us healthy much longer, the pay is mostly a bonus. What's more, the work people most enjoy is sometimes reminiscent of the play which inadvertently disappears from the schedules of too many children of the present. Increasingly, even the knowledge environments of adults don't always allow the spontaneity that was once possible. What if the process were inverted and work could recapture knowledge as prior instead of subordinate - to monetary rules which sometimes circumvent freer aspects of knowledge?

This post is not exactly linear thinking in term of work or pay structure approximations, so I'll try my best to explain. What's more this is not "change the world" stuff - it's just a mind stretch to see how people might actually include in their lives, the knowledge which became so important in the 20th century - knowledge which our institutions increasingly don't have room to use on an ongoing basis. While this line of thought underlies many of my suggestions, the idea of communities making knowledge wealth a first priority can feel a bit counterintuitive at first.

There are ways to recognize the knowledge prior in action when one sees it. In most any time frame, this is the work which people (with some mechanism of support) take on, even though it doesn't "pay" to do so. Much innovation and research stemmed from the knowledge prior before institutions took a goodly portion of this work behind their walls in the 20th century. For the sake of contrast, there are some simple ways to think about the knowledge prior.

Earlier societies utilized the knowledge prior mostly as an unpaid element alongside other activities, (especially whenever fortuitous circumstance freed up time) and it slowly contributed to the kinds of advances which made the Industrial Revolution possible. More recent adaptations of the knowledge prior were made possible, when wealth holdings once again made it possible to free up time for the greater challenges of the mind. In any circumstance, particularly valuable knowledge spreads because of its lateral use - i.e. when it is not strictly contained within institutional settings but works alongside them.

It often becomes difficult for knowledge to continue its spread in lateral terms, at historical junctures when people are paid for what they know instead of other vital components of economic activity. Sometimes education backfires for instance, because it may not view knowledge as usable or relevant outside of institutional walls. In such settings, the free use of knowledge may become questioned in other capacities. What's more, it becomes difficult for communities to harness skills wealth in terms that benefit entire groups. How then might communities make each member a miniature wealth holder to a degree that all might support one another in the free use of knowledge, so that production is not forced to create limited settings for its continued use? Part of the process depends on how supply side factors are considered as a whole.

So when I speak of lateral time use, this applies to the time we set aside in our lives for knowledge based work and decisions which are most important to us. Granted, how each individual views such time valuations is different for many reasons. What's more, the fact that we have the chance to tend to internal valuations ourselves, means we are less likely to burn out on knowledge challenges in the sense that monetary priors say it is "necessary" to do so.

Lateral time is equal time in the sense that it is our participation point of economic entry and access. Rather than an arbitrary designation of "low income" individual match with, say, low skill healthcare provider, a community has a chance to see how many want to participate over a lifetime in the actual experience of healthcare matching provisions. That's a better option than having such an important facet of life left up to chance in artificial designations of choice, through both limited provisions and societally "justified" coverage. Where a range of choice exists, most individuals would not see their options through the same lens as income level potentialities for services offerings.

People can have the option to use knowledge priors to create a greater degree of knowledge wealth, based simply on the agreement to support one another in the endeavor to make it possible. By continuing to associate resource use and (separate) product with the random scarcities they represent, skills use in time sequence can be seen as a constant in relation to other more random resource factors. Lateral time participation becomes an anchor both in a monetary and an internal time based sense as well. Even as the agreement (to use time as an equal point of entry) allows a form of internal Say's Law at local levels, the social arrangement continues to have a direct link to the external (non Say's Law) and random arrangement of scarce resources which work in normal monetary terms.

There is an instinctive aspect to matched knowledge use, in terms of what people might elect to use and benefit from. Because time is such a scarce commodity, people often choose time with others which has focused activity. Even children's play of the fifties and sixties (above link) had focus - albeit a more random sort. As a child of the fifties, the times I remember most about those years (when one could just knock on doors to ask neighbors to "come out and play") were the adult versions of life that we reenacted as children. Any present day skills sets calendars (education and work) would allow communities to put together such forms of focused "play", whether in the form of important research or community games.

One of the challenges of spontaneous work/education/play is knowing the difference between what people consider challenges or simply life responsibilities, onerous though some aspects of the work may feel at times. In terms of healthcare in particular, these elements frequently overlap, and any community would have to tease out the differences to understand the work challenges they desire and the work that is simply ongoing and necessary. The reason this is important is the fact that many low skill aspects of healthcare do not belong in a lateral time use setting, but absolutely require normal monetary reimbursement (non lateral terms) in order to take place through normal incentives.

Or, at the very least, some ongoing responsibilities could become part of a local "taxation" system - i.e. skills taxes which would also ensure a much needed skills base for participating citizens to rely upon. Also, and this is important: work which we enjoy for a period of time can quickly become onerous when we have to push beyond a set threshold for that work - a threshold that only our own physical and mental capacity can truly address. Everything about personal choice changes after certain thresholds are repeatedly crossed.

Local economies have incentive to create a supportive base for encouraging challenging work, for only a fraction of this work is actually generated today in any broad sense - whilst maintenance and tedious work is supported by absolute necessity. Fortunately, work which so often engages the knowledge prior runs the gamut to all aspects of life, and often there are opportunities to match such interests with the time of others. For local economies this can also translate into spontaneous forms of work and educational opportunity.

How do we know this is needed in the present? Many institutions - especially at local levels, are only able to offer increasingly truncated versions of the knowledge that was once available in actual product form to the public. While the internet has certainly made a difference in this regard, one problem now lies in the fact that society has yet to utilize this tool for full local knowledge integration. What that means is that local knowledge tends to be like a tree with too few branches and leaves, in that its energy is caught up in its primary trunks. By encouraging and fully developing lateral time use for knowledge, numerous local economies have the capacity to develop knowledge use in much the same manner as any desirable city location.

One important aspect of this potential is that the use of the knowledge prior allows a merge of what has been perceived as separate economies. Consider some recent arguments (per link) that broad innovation carries "too much risk" now for private industry! My readers know that I believe this to be a task for domestic summits, not for the scattered energies of government...no mercantilism necessary. Going forward, it may be the case that developed and developing nations adopt an approach which combines innovative and maintenance elements (earlier aspects of innovation that still apply) to greater effect, and lateral time use with the knowledge prior makes that possible.

Knowledge is like a wildflower. When anyone "pulls it up out of the ground" just to transplant it elsewhere, a couple of things can happen. Some knowledge flowers will do just fine - in hothouses, greenhouses (static or permanent team settings), special landscaped settings (institutions). In fact, some of those flowers will happily bloom and rapidly spread. But other flowers don't do so well. In fact, they may even die out if they are expected to live on a property where they are just not compatible with the soil or perhaps the lay of the land, and so need to be able to grow where seeds would carry them on the wind.  When we honor the place that is the time of the individual as true private property, the knowledge wildflowers of the world can once again bloom.

Wednesday, September 18, 2013

Unemployment: What About the Present Day 80%?

Recently in comments at The Money Illusion, Scott Sumner estimated that tight money (insufficient NGDP) could have been responsible for at least 40% of unemployment in October of 2009. While he acknowledges that nominal targeting can't account for such a significant amount in the present, he estimates that it could still remedy about 20% of present unemployment - if in fact level nominal targeting were the monetary rule for the Fed. Of course, there are other unknowns as to whether expectations for level targeting would close the gap further, but much also depends on supply side efforts. However, Scott's remarks indicate that even with continued efforts to make NGDP the monetary policy rule for the Fed, all of us need to be thinking about that other 80 percent.

What really concerns this blogger is the fact that supply side efforts have practically no coordinated response amongst different regions which share similar problems in structural issues. There is so much which could be done that would benefit both free markets and the problems of unemployment. It is hard to see how expectations can be improved for future growth and managed demand on the part of the Fed, as long as some on the supply side find it too convenient to use the Fed as a whipping post for past irrational exuberance. A managed and coordinated supply side response for further wealth creation and economic inclusion, would stop some of the nonsense in that regard.

Government solutions for unemployment have always been a bit ad hoc, but in a sense that's not quite the fault of this institution. Unemployment is not an easy issue to respond to, because it involves many facets of our economic lives and lifestyles. Governments would likely coordinate wealth creation strategies with their citizens if in fact people knew what they wanted to accomplish and were willing to work on it together. At the larger level, unemployment depends on not just supply and demand side factors but also the ways in which property usage gets configured and acted upon in the marketplace. While economists understandably look to government for potential supply side efforts (taxation, etc.) as a former business person I tend to look towards Main Street for solutions, if only because of the extensive degree that economic breakdown is observable here.

There are numerous possibilities for coordination strategies which cut across broad swathes of interests. Possibly the best strategy of all to address unemployment is that of making livability easier in general for all members of society, many of whom would respond by creating new businesses and hiring again. While it is second nature for systems to turn to greater complexity over time, sometimes complexity takes the wrong forms and unravels the primary advantages of the systems themselves. A lack of small business formation was just one of the problems of unnecessary complexity.

The primary reason coordinated efforts are needed is the fact that numerous first mover problems exist across the board. Those first mover problems only thwart individual efforts to gain greater simplicity and access. Main Street needs to reinvent the ways it thinks about both wealth and knowledge use, especially for the benefit of younger generations. While the thought of doing so remains daunting, many local economies realistically have little choice, as a prevalence of lower income occupations in the future means that both infrastructure and services provision need to be planned and acted upon in new ways. Once coordinated systems are in place for greater economic access, not only will expectations for growth resume but broad employment levels can also return.

Yes...but what about those problematic lower income levels? For one thing, the present stagnation remains somewhat misleading, in that it represents static formations of wealth definition. In linear terms for instance, one thinks of job share as a way to better inclusion. However, a better way to think about economic inclusion is to tap hidden supply and demand in more extensive terms. Once this happens, and true innovation in building environments is also allowed to take place, income potentialities can be reassessed. In non linear terms, there is a good chance that what appears as low income presently does not have to be so, at all.

Midweek Market Monetarist Links and Summaries - 9/18/13

It's good to finally be online again, after days of technical difficulties with my computer which I was unable to satisfactorily resolve. Yesterday I brought home a small Lenovo laptop and am quite happy with it - so far! Perhaps the real quest for me is just to get better about taking such interruptions in stride. At any rate, my forays online recently have been quite limited, but hopefully enough to at least provide some helpful links today:

Yichuan Wang says that - like engineering - economics is a broad discipline that covers many fields. This good defense of economics was also noted by The Browser - I believe the second time they've picked up on Yichuan's posts this year.

Britmouse provides UK examples as to why real wages are not real incomes:
http://uneconomical.wordpress.com/2013/09/12/british-living-standards-are-rising-because-real-wages-are-falling/
aaand, why a creditism scheme wasn't such a good idea:
http://uneconomical.wordpress.com/2013/09/13/the-special-liquidity-scheme-and-the-failure-of-creditism/

Ashok Rao made an argument which really needed to be made, and one that also weighed on my mind - why bother with negative interest rates when you can have NGDPLT?
http://ashokarao.com/2013/09/11/the-economys-not-a-rock-and-paper-isnt-killing-it/

Josh Hendrickson (The Everyday Economist) explains that it's not enough to rely on inductive reasoning to support one's theories.
http://everydayecon.wordpress.com/2013/09/12/monetarism-debt-and-observational-equivalence/

Nick Rowe reminds us that...sorry finance, macro roolz!
http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/09/thoughts-on-teaching-the-time-value-of-money.html
More MOA versus MOE in the Battle of the Paintings:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/09/moe-vs-moa.html
Bertrand, Cournot and the Simple Money Game
http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/09/bertrand-cournot-and-the-simple-money-game.html

Scott Sumner has lots of posts this week, here are some:
My Mercatus paper on monetary offset
Cash is getting more important as bank deposits become less important
My final attempt to explain the MOA
A note on currency depreciation and liquidity traps

Monetary policy should not be dependent on a single personality, as Lars Christensen notes in a post which includes the link for his latest article at City AM.
http://marketmonetarist.com/2013/09/17/rules-vs-central-bank-superheros/

Some reflections. Scott Sumner marks the day he became a Market Monetarist, five years ago:
September 16, 2008
Also, Bonnie Carr (dajeeps) notes when she became a Market Monetarist, five months later:
http://dajeeps.wordpress.com/2013/09/17/nostalgia-post-february-2009-and-now-im-a-copycat-today/

Wednesday, September 11, 2013

Did No One Notice Timothy Taylor Stress This?

Doubtless there are some who did, but I'm just not aware of anyone who linked to a post I can only "chew on" for now - and discussed it in terms of excess wealth defined as housing. The problem for me is that a seemingly primary point which Timothy Taylor made about housing was dodged, in recent articles which noted his post, ("Breaking Down the Falling Labor Share of Income") While Taylor also addresses these issues in a linked video (from last year? I watched some of it again), his post does a better job of getting at the pertinent issues quickly and also has helpful graphs.

Jared Bernstein once again reminds us of the "usual suspects" in what appears as an unsolvable mystery, "Why Labor's Share of Income Is Falling". He referred to a related article by Robert Samuelson, and they both cited Taylor's post. Unfortunately I didn't glean much from the articles which Bernstein or Samuelson wrote, which is what made me appreciate Taylor's post all the more. At the very least - even though in a sense what he covers is nothing new, Taylor looks at components of housing and the rising role they play in capital holdings.

Certainly, corporate profits are a part of the picture, as something which "takes" from labor share in always debatable fashion. But not even corporate profits have risen in the way that capital holdings have in recent decades. What's more, our considerable holdings of this easily forgotten capital are not productive in the sense of corporate profit holdings, because corporate holdings can take advantage of efficiencies and innovations that are not available in our own housing holdings. That is very much a hidden aspect of lower productivity in the present, as more productive (higher income to product) endeavor is now a smaller part of aggregate wealth.

Taylor summarizes:
Some of the fall in labor's share of income is due, in a statistical sense, to less-discussed factors affecting capital income like a rise in recent decades in the value of living in a home that you own, and the fact that capital investment in informational technology has a shorter life and depreciates faster than past capital investment.
What is interesting about this is the fact that government treats owner occupied houses as rental businesses. A lot of income is generated from home ownership, with multiple effects that just are not well understood. While all of this can be considered extractive enterprise in terms of government purpose, it's not easy to look at the receipts of these interrelated institutions to figure out societal cost. Even though it's not always easy to look at receipts which pass between governments and their institutions in less developed countries in Africa for instance (Acemoglu and Robinson)...at the very least, one might actually find receipts that make sense.

Midweek Market Monetarist Links and Summaries - 9/11/13

And quite a week it has been, with lots of discussion in the blogosphere. A debate between Scott Sumner and David Andolfatto started things off, and Marcus Nunes follows the primary points while providing pertinent links for readers as well. Thanks, Marcus!
http://thefaintofheart.wordpress.com/2013/09/04/trend-hustle/
http://thefaintofheart.wordpress.com/2013/09/05/more-trend-hustle/
http://thefaintofheart.wordpress.com/2013/09/05/the-magic-wand-in-action/
http://thefaintofheart.wordpress.com/2013/09/05/three-dogs-two-didnt-bark/

Bill Woolsey also posted a response to the Andolfatto debate:
Andolfatto on Nominal GDP Targeting
And earlier in the week, he posted some further thoughts on the Pigou effect:

Even as the prior discussion was just "heating up" another started, with a post from Steve Randy Waldman re the inflation of the seventies. He wanted to know - was it really monetary? Oh my...
http://www.interfluidity.com/v2/4561.html
Scott Sumner replies,
Yes, expansionary monetary policy really did cause the 1970s inflation
Steve's response to Scott (agreeing in different languages):
http://www.interfluidity.com/v2/4583.html
Second response from Scott:
Why causality matters
Whereby Waldman updates international graphs with a bit of help from Mark Sadoswki:
http://www.interfluidity.com/v2/4624.html
Here's his latest update:
http://www.interfluidity.com/v2/4706.html
Waldman provides plenty of summary in the update and more links than many people have the time in a day to chase down. Therefore I'll link to some that readers here may find most helpful. First this response from Even Soltas, which is also covered in the followup post:
http://esoltas.blogspot.com/2013/09/were-crowded-discos-inflationary.html
There are two responses from Karl Smith, who also links to and discusses the Robert Hetzel paper on Arthur Burns and Inflation in his first post. (he continued in a follow up)
The first response from Marcus Nunes was a repost - The Origins of the Great Inflation:
http://thefaintofheart.wordpress.com/2012/08/25/the-origins-of-the-great-inflation/ Second response here: eureka-the-great-inflation-was-the-result-of-demographic-trends/

Okay - now where was I? Oh yes, there were other noteworthy posts as well. Lars Christensen provides an AS-AD analysis as to why there is no fiscal cliff in Japan:
http://marketmonetarist.com/2013/09/05/there-is-no-fiscal-cliff-in-japan-a-simple-as-ad-analysis/
About rising bond yields, Lars says:
http://marketmonetarist.com/2013/09/10/it-is-time-to-let-bygones-be-bygones/
Lars has a piece in City AM: http://marketmonetarist.com/2013/09/11/it-is-time-to-stop-worrying-about-austerity-also-in-the-uk/

And from Nick Rowe, here's where he responded to David Andolfatto earlier in the week:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/09/for-david-andolfatto-why-i-switched-from-it-to-ngdplt.html
Is NGDPLT a perfect "guard dog?"
http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/09/is-ngdplt-a-perfect-guard-dog-a-challenge.html
Also, Old and New Keynesians and Self-equilibration
And: http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/09/new-keynesians-just-assume-full-employment-without-even-realising-it.html

From Marcus Nunes, a reminder to Robert Higgs not to reason from a GDP component change:
http://thefaintofheart.wordpress.com/2013/09/06/regime-uncertainty-or-monetary-policy-misjudgments/
Highlights from a Bloomberg article:http://thefaintofheart.wordpress.com/2013/09/09/recent-developments-in-monetary-thought/

Several responses to a misleading quote from Robert Hall about nominal targeting, which also had John Taylor's "approval" (Scott Sumner, Marcus Nunes, Bill Woolsey):
Comments on Taylor and Cochrane
http://thefaintofheart.wordpress.com/2013/09/09/john-taylor-bob-hall-get-it-backward/
Taylor and Hall on Nominal GDP Targeting

Scott Sumner asks, What would Milton Friedman have thought about Market Monetarism?

Britmouse puts together a follow up post from the previous month:
http://uneconomical.wordpress.com/2013/09/10/real-hourly-wages-in-europe/

David Glasner presents an overview of Hawtrey's "Good and Bad Trade":
http://uneasymoney.com/2013/09/10/uneasy-money-marks-the-centenary-of-hawtreys-good-and-bad-trade/

Also, a good quote which Jonathan Finegold highlights from an essay by Leland Yeager in "The Fluttering Veil": http://www.economicthought.net/blog/?p=5023

Monday, September 9, 2013

Local Platforms for Skills Use - Some Basic Points

What if economic (social) platforms allowed greater use of skills of all kinds? One can imagine something as simple as seasonal calendars for local economies, in which at various times of the year, potential skills sets can be presented as active offers. At specified follow up times, match offers can be made for the initial active offers and then the process repeats itself on down the line for aspects of community activity that may not exist in continuous formats. Such a scenario could allow skills sets (and their associated educational needs) to take place in what would be recognized as internalized direct use platforms, unlike the indirect use platforms of - say - time banks or some forms of social online media, which both require external organization.

Unfortunately, a growing number of skills sets have become a limited aspect of indirect platforms. And yet, those indirect platforms are the primary means we have to access existing institutions. Presently, a tremendous amount of skills capacity exists outside of what our institutions actually need. Hidden wealth exists in the potential of skills sets which can be harnessed through entrepreneurial means. Or...there's a lot of unclaimed possibilities, just lying on the sidewalk. What new forms might such knowledge and skills use actually take?

For the reader who is new to this blog, I suggest local economic platforms as a dynamic alternative to a general income base for those with little economic access. While guaranteed income remains a possibility and continues to be discussed in the blogosphere, it would tend to rely on finding low skilled work for most participants, or perhaps provide reimbursement where no economic engagement is even expected. Both solutions would become more problematic as one grows older and in need of out of reach services. Whereas local platforms for organized services options could go a long way to address the growing inability of services to thrive, in economies which rely first on capital, technology and hard assets for monetary activity.

Knowledge based platforms could also allow a merge between routine economic maintenance and innovative or creative functions. Not only would this help people to alternate numerous skills sets at various times of the year - they would find it easier to coordinate those sets in a manner similar to what entrepreneurs are able to achieve on a regular basis. The fact that transactions can be internalized by sets of coordinated offer and match dates, means that a maximum amount of spontaneous, yet group planned activity becomes possible.

The greatest immediate potential lies in everyday economic functions which institutions are not presently set up to accomplish, except to a limited degree. To be sure, monetary compensation would not be possible on the same scale as institutional offerings. However, the platform would be shared across the entire spectrum of local economies in such a way that living and working arrangements and costs can be coordinated throughout existing structures. Any necessary zoning and regulation would be undertaken with economic inclusion in mind, and sustainability of the system in terms of economic access as primary. In many instances, the nature of the infrastructure would reflect different sets of circumstances and expectations on the part of those who participate.

More importantly, knowledge use and skills sets would be central to economic processes of all kinds. In other words: knowledge use as primary, could stop the ever present concern of robots taking over the most important work of humans. However - and this is important - should anyone try to reverse the process and have production pay for knowledge use asymmetrically as it does now (which makes knowledge use secondary and marginal), the whole process unravels. It would be quite difficult for this kind of social platform to function well and remain inclusive, unless a broad majority of participants take part in and learn about the monetary aspects which underlie their circumstances, for instance.

Coordination processes are somewhat simpler than they sound, in that no one has incentives for needless complexities when the base pay on the part of the system encourages the work that has meaning - instead of the work which encourages excess complexity for personal gain or exclusion. Not only could taxation be replaced in many instances by coordinated services and group investment, but by simpler forms of conflict resolution, such as Elinor Ostrom documented in her lifetime.

There is tremendous wealth possibility for those who seek to run the race to the finish, yet are not among the ones who finish first. These are also the ones who can offer production potential to others of similar capacity, at a pace which both are comfortable with. What's more, the fact that service entrepreneurs can do so on their own terms, just means there's more stamina left for the next race.

Sunday, September 8, 2013

A Year For Eudaimonia

Eudaimonia...nope, spellcheck didn't recognize it but Wikipedia shows what it represents to a degree. What's more this is a very old term with lots of interpretations, and one I wasn't familiar with until a philosophy class several years ago. My professor stressed a definition which also made sense to me: living is not always easy - especially on the terms society recently came to expect, let alone the search for happiness which became such a part of the 20th century. Another aspect of the word involves virtue in what one chooses and while that is certainly important, a part of me wants to downplay it because of the association with morality. Morality is an odd thing...of course it's important, but I'm not sure if I can pin down how, because each of us has our own interpretation.

For a lot of people over the course of time, eudaimonia may not have been associated with happiness so much as simply living out one's life - in the long run - according to the purpose which makes the most sense. It does seem that living beyond a certain point means making a grudging peace with one's "destiny", even for staunch believers in free will such as myself. However there is a reason the word eudaimonia applies now, in that I let life get in the way of committing to my own primary purpose, many times over. The fact that I finally found myself in a "do or die" corner, makes the versions of happiness I once pursued, somewhat irrelevant.

As my birthday approaches (59 on the 24th) I reflect on a year of considerable change. No, not easy to see changes as in earlier decades, just continued transitioning on the inside. Perhaps I'm doing better with those "inevitable" parts of life that we often fear or otherwise wish we could just keep running from as quickly as possible - who knows. However one aspect of the present is something I didn't really expect: a growing ability to recall elements of the past which seemed long forgotten.

What's more, remembering the past can be a really good thing as indicated in this recent post by Scott Sumner. I used to chide others about "reliving the good old days" when there were good days to be "made" now. In a performing context as a musician, that mindset also meant adding as many current songs as possible to the band's playlist. When it came to others my own age, something about reliving the past once felt as though someone's personal star wasn't set high enough in the sky. And yet, Scott's thoughts on reminiscing are actually encouraging for me now, for they remind me of so many earlier efforts I'd made to get the most out of life - all along.

Whenever we go through years which turn into a scary struggle to survive, they can steal away a lot of our better memories. I finally reached a point where it became obvious that even though I would be okay, I would not be able to continue the kind of work I did in the past. What's more, the (long overdue) cataract surgery on both eyes meant regaining my vision. I must have started reading (everything in sight) again the next day, prior to taking on the project of this past decade. Even then, once I was able to "catch my breath", I was startled at the recall of past events which would matter for the studies of the present.

In the months since starting this blog, ongoing efforts to turn notes into recognizable thought processes are starting to bring that ability of recall into sharper focus. The nice part about it: not everything was hardship and difficulty. When one focuses on "driving ahead" for new realities as I did for so long, it can be too easy to forget about the good times. In other words, I wasn't really very sentimental or nostalgic! At the very least, giving in to the occasional bout of nostalgia now seems to have some side benefits as well.

Of course all too often I was the one who "moved on", because it's just what so many of my generation did when they were young. While work was often responsible for the move, there were other reasons too. The seventies and eighties were a time when investment often meant buying into new forms of experience, and real estate just a part of that. Especially in the eighties: if something about one's environment was annoying, frightening, dangerous or otherwise aggravating, the common reaction was to be proactive, even if that meant leaving the premises and starting anew. Unfortunately in some cases that was as true for relationships (not to mention the advice of counselors) as well as the workplace.

Indeed, the need to start over (too many times) still exists for individuals in lower income work, even as those with higher incomes and also younger generations are less inclined to such a high degree of change in their lives now. Perhaps telling as to just how different our economic environment really is in the present: it has become a point of integrity for people to maintain their relationship circumstances in particular, by whatever means. No question - when there is adequate income, relationships are a tremendous part of that stability. This is something I've observed in my own extended family over the years as well.

How might eudaimonia apply in the present, for those who are still young? I like to think it is possible to find versions of happiness which revolve around purpose in a more immediate sense. This quote (HT Farnam Street) about happiness from Mihaly Csikszentmihalyi:
...the best moments of our lives, are not the passive, receptive, relaxing times - although such experiences can also be enjoyable, if we have worked hard to attain them. The best moments usually occur when a person's body or mind is stretched to its limits in a voluntary effort to accomplish something difficult and worthwhile. Optimal experience is thus something we make happen.
I have to agree.