Thursday, October 31, 2013

Nominal Income and the Knowledge Prior

This post serves as an (initial) argument for monetary support of knowledge use arbitrage at local levels: both to assist employment and bring much needed services to economies which presently can't support them in full income capacities. Even though this is a basic income, sequenced matching options allow individual aspiration to play a large role in the ultimate results. While such a knowledge based system may seem complicated initially, it would actually be quite simple to carry out and use, in that it is internally organized. Thus no further external taxation structures are needed. Plus, why create needless complexity by taxing a basic income for services time arbitrage?

These structures would be based on coordination of skills use time which people elect to take on outside the perimeters of specific institutional missions. Might some skills use time seem "flimsy?" No more than any of countless product offerings over countless years might seem flimsy by comparison. That is, beauty - or value in this case - is in the eye of the beholder.

Even though some knowledge use time clearly has more "value" than others, quality in this regard is not as easy to pin down as that of a separate (physical) product. In both healthcare and education, the knowledge based processes involved are almost always a two way street. In some circumstance, "ultimate" knowledge (years of experience) is of course not needed, such as the ordinary healthcare checkup. In other cases, problem solving, research or innovation do not necessarily meet the timetables that institutions have to assign to them. The fact that people cannot know beforehand the time needed  - especially with other budget priorities - means that much knowledge use does not get tapped under the normal circumstances of the institutional monetary prior.

One can think of the knowledge prior (what we are compelled to do even without money) as a rich vein of wealth running through rock formations. Those formations don't readily yield to capital intensive operations at a profit, but nonetheless create profits for individual miners who are willing to spend all the time necessary to get at the wealth they hold. The point is not to take out the institutional (or monetary prior) perspective but simply to pursue the multiple areas that are left behind by them, in valid and quantifiable ways.

Basic income support for knowledge use, also provides means to meet long term work challenges which otherwise have no setting to accommodate them. In other words, if something fascinates us, it may not matter if we take on sparse accommodation (i.e. set up camp) in order to pursue it. Communities can provide this option as a means of integrating higher education at local levels and as part of local knowledge based infrastructures. In a knowledge prior scenario, each individual would represent knowledge facets of their community. Purposeful use of the knowledge prior would allow greater societal integration and problem solving of all kinds, which normally wouldn't fit into a want ads help wanted section.

Most services thus far have came to us pre packaged, judged and defined on institutional terms. What's more they have severely limited the prospects of many a community which is then forced to compete with everyone else on those same terms. If we are willing to take a chance on individual offerings in flexible settings, potential services provisions will finally have a chance to be fully explored, and local knowledge holdings could eventually come to represent regional variations in skills sets. One could say that services would finally get their chance to compete in the "satisfaction Olympics" - not unlike many product offerings separate from our actual time use.

What matters is whether individuals elect to use their scarce time in this focused manner, and all parties agree that going further is not a time drain or otherwise unnecessary. If so the next knowledge prior hour simply gets used and arbitraged differently, instead of someone hiring a lawyer to settle any disappointment. Social calendaring would leave space for such (normal) changes in agreed upon time sets, along with the usual considerations of one time needs, ongoing needs or emergency needs.

Unlike the nominal income which depends on endogenous and exogenous factors (finite time as opposed to random quantity resources), base income for local knowledge use settings would be completely endogenous. In other words, it only represents finite time use for skills arbitrage, which is separate from investment in random quantity resources. Whereas income as measurable by the monetary prior (production residuals and dividends) also reflects (or includes) exogenous and random elements of resources separate from time use.

Another way to express this is that the local services base (what exists outside of institutional definitions) retains an internal monetary equilibrium for skills wealth capture. Unique skills imprints are created which are both measured and archived locally. Plus, the more unique adaptations of skills and knowledge use would be archived at national levels in an open knowledge commons. Wealth potential (of the near future) resides with municipalities which learn to transform skills capacity utilization. The critical factor here, is that countless towns and individuals exist outside the domain of institutions which have thrived by skewing wealth valuations across the spectrum, according to their influence in Washington.

Even though these activities would exist as basic income formations in a monetary sense, they would generate additional wealth that would be included at all levels of the existing economy, thereby paying many times over for the additional commitment on the part of populations. There is little doubt that a community would have far more confidence to utilize resources, commodities and knowledge from the global realm with local adaptations, than they would otherwise in the limited mission sets of specific institutions.

One benefit of knowledge prior systems would be the stabilization of skills time, as capable of monetary value in a societal perspective. Inclusion of the knowledge prior allows the income debate to shift away from compensation for being "left out" to a real and valuable means of inclusion. This approach could also strengthen the status of nominal measures and give citizens a representative image of the role nominal income plays in spending aggregates.

Presently, it remains difficult for many to grasp the idea of the individual as a vital part of economic life. That's true, even though the management to labor story is not as representative of economic realities as before. We need for more economic stories to be told as people experience them in places large and small. Bringing real economic systems to local economies could help to make that possible.

Wednesday, October 30, 2013

Competition? Setting the Stage Still Matters

Why has competition basically come down to competing for favors in Washington, instead of for customers on Main Street? After all, Washington should not be the stage where anything (not directly government related) needs to be "sold". What's more, if the product has already been negotiated and endlessly strategized, there's a growing chance the consumer would just as soon pass on it. When real options exist for both production and consumption - attractive, diverse and easy to negotiate options which consumers actually want to buy: they don't have to be coerced or compelled to do so. What's more, if people really want what others desire to produce, innovation has a chance to flourish. This should be a given, right? I never thought I'd live to see the day that the biggest part of consumption feels like a dreary chore.

Small wonder that even as some question the value of a "free" market, others question whether any freedom is actually left. In part because producers and suppliers are competing with one another through governments - instead of directly appealing to customers - the economic stage is no longer set up to be accessible or relevant. When it appears that markets become "rigged" or otherwise captured by special interests, people lose interest in consumption.Thus much of the sustaining capacity of consumption is lost, as it becomes more of a necessity than enjoyment or at least social connectivity to others. Perhaps one exception exists: does "signaling" consumption feel good or just provide status? I scarcely knew what signaling was, in the most significant years of my shopping excursions.

To be sure, some continue to visit the better retail stores regularly, and have the discretionary income to be able to do so. But the product diversity which once existed in the U.S. is now shifting towards regions where mid to high range incomes are prevalent. Here the stage can still be found in tempting formations. Others? Not so much. Where efficiency meets budget consciousness, consumption becomes necessity. People buy in order to accommodate the needs of their lives. Once that is accomplished, purchases vary according to how local economies interpret staging elements - let alone whether they even consider such presentations important enough to preserve.

The degree to which people once enjoyed shopping in many regions of the country, must be something of a mystery to younger generations. Certainly it was my mother's favorite activity, and the one I shared most in common with her, besides our mutual love for non fiction books. Even one of my cousins recounted stories about my mother's love of shopping recently, at her passing. To be sure, a lot about those years when homes were filled with sought after treasures, may appear "overdone" by present day terms. But the very act of shopping generated a lot of positive social interaction, of a kind which hasn't quite been replaced in the present.

Today we say that competition "wins" the game for whatever people want the most, so we go with whoever or whatever wins. But how true is that? Yes the winners continue to power their way through the game. But some on the sidelines have wearied of even watching the primary economic action, as it becomes ever more limited - in spite of untapped worlds of possibility. There is still money to be made on the offerings societies consider necessary, but certainly not in every quarter. And much of the consumption that remains is not only "non-discretionary" in a developed nation sense: it is fiercely fought over in settings that scarcely resemble the marketplace that was born of spontaneity and dynamism.

Whatever one thinks of the more "discretionary" consumerism of the past: at least it provided shared experiences and commonalities for family and friends, which otherwise didn't always have a place to happen after the decline of agricultural life. Today those earlier downtown squares and even malls are being replaced by sports arenas, mega church multi environments and of course the digital realm, but none of these "replacement" stages are capable of providing settings where individuals can find their primary economic interconnectivity. All of these partial stages have a valuable purpose. But the main arena of economic interaction  - that mythical place where we're supposedly able to fulfill our identities and purpose - remains curiously absent.

Another odd aspect of today's "necessity" economy  is that a lot of us are no longer particularly inclined to dress up for it. In agricultural times, one looked forward to wearing their Sunday best, and in the heyday of office life, many of us looked forward to wearing our weekday best. To say that the marketplace is not "fun" the way it once was, must sound like a strange complaint for those who never really had a chance to experience it as such. Today's contrast to what the marketplace once offered in the U.S., is stark indeed.

Plus, when marketplaces of any kind are no longer enjoyable, this is just more "fuel for the fire" and the shouting begins: "markets don't work". Sometimes people insist that markets don't work because it appears that they were ruined by finance. But here the causation is backwards. Finance only took its "golden opportunity" when special interests - alongside governments - went too far with their constant demands as to the most basic products of our lives. In spite of the measured progress of recent decades regarding home valuations and lifestyles: in some ways this doesn't compare to the places that a "small time" discretionary income could once take you.

What might appear as discretionary high income consumption is often geared towards maintaining future economic stability - not exactly a high quality of life indicator on the Maslow pyramid. And finance products - while certainly useful, aren't exactly "bucket list" material in consumption based terms. Sometimes it seems as though finance just wants a nice long nap after the long party, so it's not interested whether the economic stage is in serious need of renovations.

If that were not enough, finance is far from ready to give up the right to host the next party invitation. Given the chance, the finance sector would keep the keys to a now locked room (tight money), so that it gets to open the door first once the marketplace has a chance to flourish again - even if that might be decades away. Someone else needs the right to hold those keys, who is more willing to consider real progress in the present.

For centuries, the marketplace was our open commons where people could gather to be collectively intrigued, entertained, challenged and inspired. While elements of this meeting place still exist in the digital realm, it remains highly problematic that no stage presently exists where all economic activities can coalesce. We need to imagine a new stage where competition works again at the individual level: where people come together for no better reason than they want to, not because they have to. After all, the product we remember fondly for the course of our lives is that which we choose freely. Much of the rest is forgotten.

Midweek Market Monetarist Links and Summaries - 10/30/13

Scott Sumner asks for MOAR! Heh, love the title. He reminds us that we've been falling short of the policy goal since 2008, let alone still falling short of that. In a similar vein, Nick Rowe, after becoming annoyed with a Bank of Canada MP report, posts this.
I especially enjoyed this insightful post from Nick:
And here, Scott responds to Nick, with Those Elusive Transmission Mechanisms
Elements of this post from JP Koning made me think of Nick's post, and JP also cites an article on Gresham's Law which George Selgin wrote.

More from Scott Sumner - is it a simple test?
How to tell if you understand monetary economics
And then, there are lifestyle illusions: Liberalism and inequality
Will wealth distribution ever make sense? On becoming  reactionary
I don't always link to the more politically oriented posts but everything about this one was spot on: Pants on Fire

Marcus Nunes takes a closer look at those "pesky bubbles":
Marcus also links to this Ambrose Evans-Pritchard article, which points out that Europe is replacing Japan as world epicenter of policy error:
Who would have imagined the same mistakes as 1938? Marcus provides illustrations as to why "animal spirits" went wild:
Because inflation is no longer a workable measure, those who continue to use it, find themselves trapped.
Scott Sumner also gives us More reasons to ignore inflation and Statements that make no sense
Both Bill Woolsey and Marcus comment on a recent lecture by Christy Romer:

Bill Woolsey explains that while the interest rate could rise on government bonds, the problem isn't significant compared to what happens when the Fed increases interest rates by restricting growth in the quantity of money: Government Default and Financial Crisis
CafĂ© Hayek responds to an earlier David Henderson post re monopsony, the minimum wage and unskilled labor markets, and Bill Woolsey responds to Don Boudreaux in Monopsonistic Competition

This Nick Rowe post from earlier in the week (re house prices) includes lots of thoughtful commentary:
Why aren't mutual funds or pension plans considered depository institutions?
"Bubble" is just another word for...Ponzi schemes? And will it be robots, or retirement?

Interesting perspective from Yichuan Wang, (Quartz article) as to moving children and elderly into the cities:

Just as Marcus Nunes told David, I'm not sure this even qualifies as a post! David Glasner spent nearly a week putting it together, well worth the read:

James Pethokoukis provides video of the recent Alan Greenspan interview on The Kudlow Report, where Greenspan "forgot" the role of NGDP. Other quite useful links in this post as well.

Also of interest:
From the Economist - A Natural Long Term Rate
A good article from Maria Konnikova about online commenting. (She is the author of Mastermind: How to Think Like Sherlock Holmes)

Tuesday, October 29, 2013

From Country to City - The Broken Equilibrium

This is a subject that's hard to do justice in any single post, but I have to keep trying. Recent blog posts around the Internet remind me what a substantial problem it really is. From the days I began my economic studies in earnest, the growing urban rural divide was one of my top concerns. Some readers may recall that I have always been "torn" to a degree between the heart of the city, and of rural places. Even though being "torn" has been personally frustrating at times, it reminds me how much country and city need to be able to reflect elements that are vital, in the other.

Perhaps a good place to begin is a recent Yichuan Wang post (part of an article for Quartz), as he takes on the problem in a somewhat unusual manner. While Yichuan considers options from a consumption or aggregate demand perspective, what he suggest goes well beyond this particular measure of economic activity. My question of course: does moving everyone into the city alleviate the actual problem of disequilibrium?

Moving children and elderly into cities to increase the value of services there (instead of attempting "stellar" service provisions in the countryside) has the potential to serve a linear economic problem with an equally linear solution - draconian though it may seem to some. How do I feel, about what would be a tremendous effort? It doesn't matter what I feel about it, but what the rural citizens of these multiple areas think about the overall situation. Hopefully their voices would be heard, for their opinions are the most important part of any set of ideas. Readers who have kept up with my posts also know I prefer the non linear options of bringing good services into rural areas, through wide knowledge use rights and completely flexible infrastructure.

While I would be interested in knowing how rural folk in China feel about these matters, there's a good chance I wouldn't have access to such information. After all, their voices and opinions may not be present in a larger media format, any more than those of citizens in multiple rural regions of the U.S. And of course the big difference for the latter, is that little to no public discussion has taken place re their lack of economic access to the nation's economic agenda as a whole. Who really knows what the marginalized, the low income or the rural of this country think? That's why I have such an appreciation of the fact that China is not afraid to express publicly, the plight of their own rural citizens.

Another aspect of the country to city problem - which is common to many nations - was highlighted in a recent article by The Economist. South Korea has prospered, by what has been referred to as a "deep but not wide" success. Not only have occupational structures been more restricted than those of the U.S. but also Japan. Most importantly, almost half of the work to be found, was in Seoul. Efforts to create a government taskforce for "500 promising occupations" generated plenty of  discussion on the recent Marginal Revolution post (Tyler Cowen) which highlighted the article. In a follow up post Tyler took note of the declining gains for education in South Korea. It needs to be stressed again that even though the U.S. has a far greater range of work possibilities, most real choice in workplace activity remains limited to the cities.

In spite of all of the success nations have found, unfortunately it tends to be defined in terms of city life as a necessary requirement for economic access. Any time economic progress is defined as possible only in special instances or specific locales, real growth will eventually be subjected to limits. While I have known authors to present eloquent snapshots of these realities (books too numerous to count), there has been precious little written that I'm aware of in the U.S., which even considers how this situation might be dealt with in economic terms.

While many rural areas have some resources and commodities that they trade both nationally and internationally, more often than not, this form of wealth alone is not enough for sustainability. These places also need to be able to tap into the wealth potential of their own citizens. Otherwise their citizens exist in a sort of perpetual backwater, unnecessarily dependent on the skills sets of people who live far from their own domain. Also in the U.S. it is becoming more difficult for people of rural areas to be able to access the skills sets of distant cities, in the years following the Great Recession.

Because too few in the U.S. have considered the plight of rural areas, over time these places are slipping into economic patterns which are only making things worse. This is the environment which the war on drugs has especially thrived in. Plus, the war on drugs encourages confiscation of private properties by local governments, privatization of prison systems and a general breakdown of societal trust.

Even if everyone wanted to live in the city, it just is not possible to do so. No one who lives in rural areas or small towns should be consigned to a substandard life, just because they did not have the good fortune to be where the "action" is. In a century when we have incredible ability to bring knowledge and resources to people through digital and alternative transportation means, one hopes that the opportunity will not be squandered. Otherwise, it will only become more difficult for those not in cities, to aspire to the kinds of choices and options that urban living makes possible.

Monday, October 28, 2013

Economics and Human Welfare - Do These Two Actually Go Together?

The title makes me smile, plus this post serves as a mental break from the "serious" track I've taken lately. For those of us who enjoy economic thought and discourse: of course we believe that economics and human welfare go together. In fact we can be quite emphatic about our "obsession", even if some of our most relevant topics are like the tree falling  in a forest...does anybody really hear it fall? We want to believe that spending our time with these matters can actually have some effect on the ultimate outcomes of populations. But a good portion of the public is not so easily swayed by the endless arguments and battles of ideas.

Thus, do others relate or "connect the dots" in their lives, to what the economically minded speak of? Is much of the discussion really just academic discourse for people with nothing better to do? Surprisingly enough, there is real concern for the human condition under all the posturing and stubborn stances - even if that concern is wrapped in language that sounds like any significant emotion has "left the building". To be sure, a good deal of what economics enthusiasts fight over, is not in a layperson's language. Still, all that logic and reasoning is anchored by...feelings (don't tell the guys I said that). Strongly held feelings, I might add.

Sometimes a social situation may seem a bit iffy, and the enthusiast may have to start "small" to get things rolling. At the very least, a microeconomic discussion can focus on something quite specific if the "big picture" turns out to be too "threatening" at first. Then perhaps the enthusiast will have a chance to progress from there...Engage people in thinking about a very definable something and it might not be too obvious that other economic concepts are "lurking" for their chance at the light of day, in the background.  How does one approach matters delicately when it comes to macroeconomics, for instance, if the political divide in the house resembles the Grand Canyon?

One may find themselves challenged to explain how macroeconomic stability has something to do with whatever is happening in this room: in this very moment I might add. For the individual who has discussed economics long enough, doubtless there are stock answers at the ready. But for some of us, we don't necessarily have the "right" generic answer for any group - that is, we might not be able to explain to just anyone how economics, let alone Market Monetarism can make a noticeable difference in people's lives.  Of course in the meantime, that usually wouldn't stop us from trying.

What's more, the entire realm of economic discussion goes well beyond what some of our friends and acquaintances may think is actually possible! Just thirty minutes spent online with different blogs tells that story. Some conversations have a decidedly philosophical turn, while others may be somewhat financially oriented in their outlook. Perhaps others see things in a somewhat behavioral perspective. Or discussions may take a monetary turn, and that's where it could be a bit "dry" to the layperson. What to do about that?

It would be interesting indeed if people really spoke from the core of why they believe money should be capable of one thing or the other. In fact, if those core positions were used as starter material, things might get really interesting in a hurry - perhaps too interesting for polite company. I remember a few online conversations after holiday meals where it seemed commenters were particularly grouchy. Maybe those face to face encounters earlier in the day - with people seen once or twice a year - were too exciting all around, for all concerned.

In that case, keeping things a bit abstract may not be such a bad idea after all. If  money serves as a cloak of logic to obscure one's underlying beliefs, civilization may be the better for it at least until the Thanksgiving leftovers have been put away. While arguments have been won and lost on lesser merits, chances are a few skirmishes have to take place first. And just think, the holidays will be here before we know it, for those who haven't had the chance to socialize in a while. There's still time to work on ideas for civil discourse that hopefully won't clear the room out. When the time comes, good luck everyone, and try not to eat too much pie this year.

Sunday, October 27, 2013

"Inflation", Nominal Income and the "Crowding Out" Effect

...Interesting to see Ken Rogoff (Binyamin Appelbaum, NYT) coming out in favor of more money printing. But, the way he goes about it serves up the usual dose of monetary policy confusion for all concerned, unfortunately. More inflation needed! As opposed to...what? In response, Marcus Nunes reminds us that inflation targeting only leaves the Fed vulnerable to more supply shocks, and Scott Sumner mostly wants to pull his hair out: "6% inflation is a horrible idea. If we had targeted NGDP growth at 5% over the past 4 years we'd be out of recession by now". In spite of some stats and numbers proclaiming we've somehow "arrived", many feel as though we haven't gotten anywhere yet and small wonder, for we haven't even used the right map.

When we think about the Fed "holding" down (i.e. capping) inflation as a desirable target, all one really gets is an overall surface effect, like looking at the ocean from a distance with no clue what it holds. Inflation targeting in all reality was never a good tool to use. Plus it became utterly useless, once services became relatively more important than tradable good production in developed economies. That in turn made employment potential more of a "mystery" than it ever should have been. For instance, excess emphasis on income levels were a part of the same problem, with the money illusion of surface observations.

In a sense, one could even argue that inflation targeting proved more useful to obscure actual income to consumption relationships than anything else. The same mechanism which made it easy to add excessive finance structures to asset creation, also made their availability easy to subtract at will. Of course, economic destabilization was inevitable whenever the latter happened. Unfortunately, the whole process tended to leave other assets - and capital - hostage to finance activities in ways which scarcely made sense to the average observer.

This strategy - if what the Fed "bumbled" into with inflation targeting could be thought of as such a thing - also made it easier to incorporate government relationships into the economy. Such integration might be beneficial in some contexts, but unfortunately the workings of finance (overreliance on credit use) is not among them. What's more, inflation of the sixties and seventies became problematic in large part because of the growth of finance, as building and construction elements began to contribute heavily to wealth redistribution in services.

Once reliance on finance became linked with governments and non tradable service settings, the crowding out effect against what had been more effective production residuals in the aggregate, slowly became more pronounced over time. Unfortunately, the reliance on inflation targeting also served to obscure the imbalances in marketplace conditions. What might employment possibilities look like today, had nominal spending had been stabilized with a level target all along?

For instance, consider production's so called "race to the bottom" in some quality respects, a common complaint amongst progressives. How much of that devolution in quality (to the degree it felt or seemed real) was brought on by market crowding? Already, there were existing demands on the pocketbooks of all income levels from rigid, non tradable product definitions. Crowding out effects from tight (sticky) markets, made it more difficult for many tradable good operations to compete on sustainable terms - for themselves and their employees. Disinflation of the desirable sort never even had a chance. It's too easy to blame oil for a lack of disinflation overall, for no one has to even think twice what could have happened instead (sorry, snark intended).

I looked at an example of both price and wage deflation over time in yesterday's post, for tradable goods in a retail environment. Still, the disinflation one would expect to see from these kinds of examples, is more than counterbalanced by the relative inflation which exists in non tradable services employment and asset structures. Lowered price levels in tradable goods competition, can also mean less left over for employee benefits and services expectations on the part of consumers.

In part because of the years I spent in retail and related services (both as an employee and self employed), and also non profit employment, those combined experiences make it difficult for me to take some concepts of employment and inflation at face value - thus the "oddball" claims in this post. Employment compensation processes just work in very different ways, depending on whether the employment takes place in tradable or non tradable product environments.

With non tradable services employment compensation - one doesn't always have the production residuals which suggest an appropriate or sustainable amount, given other existing variables in monetary flows. Because there may be fewer binding constraints (especially short term), increased valuations in local wealth designations may appear to have little or possibly no downside, especially for a community which is already successful. And the greater the valuations in non tradable asset holdings overall (by whatever means), the greater the compensation possible for non tradable services.

Binyamin Appelbaum  (linked above) inadvertently captured a part of the crowding out dynamic perfectly, in the last part of his article. In the process of negotiating wages with a low inflation environment, an Anchorage school board froze wages - rather than cutting them - for a number of years. Whereas Caterpillar attempted to freeze wages in a similar negotiation setting, but ended up letting almost half of their workers go, instead. While these are but two stories, plenty of variations exist on this theme, and they are heard quite often. More often than not, it is the tradable good production activity which is lost, when money is not immediately available to make it happen.

Saturday, October 26, 2013

Services: The Weakest Link? (Sears Appliance Revisited)

Earlier in the week I posted a brief "consumer alert" because of an ongoing gas leak with a recently installed "built in" gas oven. While I would still suggest heightened awareness if anyone is getting ready to replace an older built in gas oven, I've had a chance to think about some of the issues involved, now that all is taken care of. And, one of the appliance repairmen in particular was quite helpful in response to my (numerous) questions and concerns. When everything was finally resolved, he suggested, "bake something simple at first" (to try out the repaired connections) and the meatloaf turned out fine!

What stands out most is the fact that not just Sears, but also other appliance retailers are no longer able to cover many contingencies after appliances purchases, as they once were. For the sake of contrast to those Maytag repairman commercials, think of computer repair people and the "fires" they routinely put out, i.e. a bit of everything. Bottom line: what this means is considerable additional costs might be incurred, besides the initial purchase and installation of the appliance.

Apparently a lack of service availability is a fairly recent development, else the local Sears might have been more honest how to deal with the matter. A once reliable retailer who has been around all my life, this company probably didn't want to tell me, "Call an appliance repairman". Which of course turned out to be the solution, because - after all - Sears and appliance repairmen were practically the same image in the public's imagination, for at least fifty years.

That might explain why every time someone tried to resolve the matter, we were repeatedly told to contact a plumber. While I don't know about elsewhere, the local plumbers don't deal with gas related issues. Or, perhaps it is just this particular retail outlet, whose management has a "failure to communicate". At any rate, some readers doubtless know better than I did, to be prepared for the possibility of hiring other appliance repair people, besides those that help with the initial installation.

How might one think about this in a larger sense? Services don't necessarily have to be a weak link, but it depends on the product in question, the price range and distribution, even the way a product fits into the lives of a population. For instance, even though it can be frustrating for new car owners to not be able to maintain their own cars in the present, cars and related repair costs are relatively expensive compared to many tradable goods - which consumers already accept as a given. So there are generally auto service options at the ready, which for the right price are willing to the do the job - properly, one hopes. Local knowledge for appliance repair? Not so much.

The other serviceman was more to the point: "You're lucky it didn't blow", he said. Hmm, likely I'll never know how true that might have been. But if a significant chance of blowing up the house actually existed, why did the Sears store which sold the appliance, tell us numerous times that there was nothing they could do about their own faulty installation? As it turned out, there were two problems, and more significantly: neither really originated within the retail outlet - a factor which doubtless matters, legally.

First, a wrong part was used when the oven was assembled in the factory, i.e. a valve connecting to an electric starter (in place of a pilot light), and so a new one had to be special ordered (yep, from Sears) before repairs could take place. In other words, that was a service mistake which originated on the part of the company that sold Sears the oven.

The other service mistake stemmed from the installation itself, after the oven left the store premises. In this case, the contracted installers did not have a pipe thread fitting on hand to hook up to the gas line, so they used a flared fitting instead. In our small town there is no longer a hardware store. Of course, who knows whether the initial installers would have bothered checking out a local retailer, if they indeed were cognizant of the problem. Luckily when the oven was finally taken care of, a local auto store had the proper pipe thread fitting, and actually gave it to the appliance repairmen at no charge.

I "get" that some people would say, this should have been both Sear's problem and responsibility! For a long time that was likely the case. But present day contract work (which is a part of so many lives) for repairs, is nothing like the earlier circumstance when companies were able to hire employees directly - in any number of ways.  Retailers who remain in business, are competing with product pricing strategies which don't leave a lot of room left over to pay for standard employment. As one repairman said, "Lowes may order 1000 ovens at a time, with very little profit on each oven."

And who knows? This particular form of services deficits may be a temporary strategy as well. At least one of the mistakes with the oven never should have happened at all - in that the need for a pipe thread fitting seemed quite obvious. I'm just glad it's taken care of, and hope that none of my readers have to deal with anything on the scale of ka-boom possibilities.

Friday, October 25, 2013

Behind Some "Abstracts", There are Personal Stories

In this case, the "abstract" refers to my advocacy of walkable communities as a central component of reimagined wealth, on terms that are accessible and doable by all citizens - not to mention desirable for some who would just prefer new density and lifestyle configurations. Inquiring minds want to know: why are walkable communities such an important concept for me? Yep, personal reasons are also involved. Sometimes, when an abstract concept doesn't really do a subject justice, it just helps to provide a bit of background, re why the concept feels so important in the first place. As a blogger, it's not always easy for me to delve into reasoning from personal factors, regarding economic perspectives!

Presently a bit of confusion exists for some who know me: why don't I drive anymore (at least in the present)? So in this blog post, I need to examine what can also be a rather binding decision, if one lives in small towns of the southern U.S. Specifically, lots of "alone" time is involved, which can nonetheless be a good thing when major projects - let alone familial responsibilities - are at stake.

Ah, but some days a person does feel rebellious...Like anything else in life, there are tradeoffs and in this instance, the primary ones I had to consider were 1) limited time for important activities, 2) limited money options, and 3) the desire to maintain my health - for the long run - as best as possible. In other words, while it would be great to be driving right now: at best, interesting forays (to places I don't see every day) would serve as a pleasant distraction which isn't really necessary - a distraction that would require other needed resources as well.

Should circumstances permit, certainly I would drive once more: perhaps even some of those blue highways all around the country (again) which I enjoyed so, in my thirties. That is, with a reliable vehicle. Cars can create scary moments when they're not trustworthy - and that concerns me more than it once did. Wow, for the most part I was quite fortunate over the years. There really weren't very many road mishaps, especially over the majority of the time when I drove alone. Even in my forties I took plenty of chances on daily working routines with old vehicles, when I didn't have friends around to help out if a car broke down. Not until several years ago did auto problems get to a point, that I actually had to hitchhike to and from college classes a number of times (and home an hour away). So now, I would not want to be stuck on the roadside with no one around that I could call for help!

Thankfully the nearby grocery keeps a couple bags of single point of origin whole bean coffee - one of my last true consumer "holdouts" from city days. And sometimes I can make a good bottle of single malt scotch last for years. So for the most part I'm still able to tend to many of life's important elements close to home, for the time being. Just the same - if I were younger - the personal limits this decision places on my life would be quite an aggravation to say the least. At a younger age, finding myself without transportation would have meant a quick return (from the family home place) back to a city or region where paying work could be readily had - car or no car. And in many rural regions of the U.S., life has long since been structured so that people need cars for work, before they begin the job.

At any rate, I'm in good company with my recent "miserly" ways of not driving. Car ownership is by no means as automatic for many, as it was prior to the Great Recession. Back in 2008, I still remember how eerily quiet the nearby highway became, practically overnight.  One only wonders how much Internet traffic is a direct result of people with close ties not being able to live - or work - as close to one another as they'd like. While some in the cities have been able to live without autos all along, more of the younger generation are also opting out of car ownership for any number of reasons.

However, where young individuals hope to live well without auto transportation, so also do those who can afford such transportation and simply prefer more walkable and livable densities. That means the first truly walkable areas around the U.S. will be in more exclusive areas, especially as a result of special interests. Whereas, it will be necessary for people with multiple interests, goals and infrastructure ideas to come together, in order to make alternative transportation possible in low to middle income areas, as well.

As long as most of us were able to own cars, drive, provide insurance and car maintenance, there generally wasn't a lot of personal need to consider alternative forms of transportation as important, unless we were already sympathetic to the cause of alternative transportation advocates. Even now, there is a tendency to think of the younger generation's lack of enthusiasm for autos as mostly a matter of lifestyle choice, particularly for those who prefer life in the city. What's more, those who do opt for car ownership, quickly discover that maintenance is no longer the province of the individual. This morning, a young appliance repairman - who owns a new car - explained to me, how he inadvertently ruined the vehicle's computer system, just by removing the car battery!

In some parts of the U.S. automobiles are likely to be the main source of transportation well into the future. Just the same, the regions which choose to rely on this form of infrastructure, will doubtless have significant cultural adaptations from these decisions. Already, mobility for work, career and related opportunities has decreased, and extended families in auto primary areas are likely to remain closer to one another than in the past.

Some areas will likely see a return to many one car households in the near future, alongside the kinds of decision making processes such consumption patterns would make necessary. That's especially true in places (such as here) where no bus services to other towns exists, let alone the local passenger trains I still remember from my childhood. Now it's just freight trains running through town all night! While none of this is necessarily bad, it just feels different. What's more, it is different in ways unlike what many had expected life to become, and has implications for increased social isolation. Rethinking transportation infrastructure across the U.S. - even in low capital, high skills use terms - could go a long way, to prevent such needless social isolation.

Thursday, October 24, 2013

Which of These Has Greater Aggregate Value?

  • The work of the "best"
  • The work of the "best" alongside everyone else, i.e. "the rest"
Say what? Is this some kind of a trick question? After all people generally depend on the work and active engagement of both, don't they...First, in what sense are we posing the wealth capacity of the best and everyone else? For one thing, it's not clear whether we should pose the matter from a societal point of view, or rely on the viewpoints of, mmm, specific institutions - government included because of today's growing "disability" environment.

Plus, if we take the normative institutional point of view as a given, who or what could represent "the rest" realistically? That is, how might representation of "the rest" occur in non-institutional but well understood and practical terms? It seems the answer to this is all but forgotten, thus a major responsibility of the present would be to redefine the answer. For when society neglects to do this, "the rest" once again become enslaved in countless ways, or at the very least, consigned to solitude.

And when governments act like other institutions which (of necessity) have only limited interests, viewpoints and missions, they cannot assist in coordinating or smoothing the goal sets between institutional and individual aspirations. In other words, people need to find cohesiveness between societal obligations and production capacities that their governments have refused to consider. Otherwise, only the best will ever be able to contribute collective wealth value, and without the contribution of the rest, the contribution of the best is gradually worn down.

But presently this remains difficult to think about. Even in an ordinary economic sense, quite a few people might agree with the first answer: the work of the best would be adequate now, thank you. There's only so much time in a day to think or worry about the rest and supposedly that time has run out (or so it seems, monetarily speaking). Consequently, do we all agree that the first answer is correct and that the second point is moot? (snark intended) That is, if "everyone else" doesn't have the same income producing capacity for the access they "require", then the work that counts will be portioned to the best. 

Perhaps one of the least appealing aspects of advanced civilization is when people begin to reason that others should not be allowed to "fend" for themselves, in that no real existing economic "space" is left for them to do so. And yet, they are chastised when they don't find means to fend for themselves anyway! More importantly though, a lack of economic space is not just an abstract matter. For not only does the lack of space also imply a lack of economic access. It also means not having a true capacity to meaningfully reciprocate with others as a friend or fellow human being, to the degree that human nature desires. Even though we need for others to be able to "hear" us: we are reluctant to "go there" if the status is somehow different - which it invariably is in an age of economic polarization on consumption based terms.

When it is reasoned that only the work of the best is needed, we are left in a world which tends to be very busy or oddly, scarcely busy at all. That in turn creates circumstances where those who are already busy, understandably doesn't have time to listen or otherwise engage with those who are not. What's more, the person who is not busy may not have a similar set of circumstances with others around him, that could make him an effective listener.

And yet, a similar set of circumstances for being (like others) should not have to be so important in the first place. The problem is that when living environments go unexamined for too long in terms of their restrictions, entire sets of decisions or choice possibilities fall away from the individuals who can no longer uphold those unexamined societal expectations. Which means that as a listener, he cannot participate in the choice sets he might hear, therefore he may not be able to relate to them.

When people had multiple economic roles and purposes which went beyond money, workforce participation numbers were - fortunately - not the same vital element of economic access that they present in the present. But in recent memory, most anything anyone does in society now involves the use of money, even if not directly. Small wonder - just the same - that what appears to be reasonable requests on the part of economists for sufficient aggregate demand (as a monetary stabilizer), may not make sense to those who already believe the work of the best is all that really matters. Some policymakers and central bankers are remembering a world where it was not necessary for everyone to have access to money (in order to have a life that made sense), but that world is gone.

The problem for us as a society is not that institutions do not tend to our each and every need, for they are organizationally in a position where it is quite impossible for them to do so - even if they wanted to. No, it is up to society to determine how to fill in the multiple gaps where the economic life of institutions leaves off, and where the economic and social life of everyone else can begin anew. What's more, earlier forms of government are no longer sufficient for this challenge, and in reality have not been since people left the farms in the twentieth century, for the towns and the cities.

When governments become about little more than special interests, retirement pensions, military and surveillance operations, they no longer serve the purpose to society that they once did, and the work of creating new social networks between our institutions needs to be reimagined. What's more, governments need to get out of the way of their own people, so that their own people can rescue themselves. Otherwise, we have little means of tapping into the immense wealth potential which could otherwise be lost, beyond the realm of "the best".

Wednesday, October 23, 2013

Midweek Market Monetarist Links and Summaries - 10-23-13

David Beckworth speculates about supply side influences and policy implications for the output gap:
Among other things, David encourages us not to "be derpy"- also don't be afraid of the very strange world of the ZLB that Krugman sees:
James Pethokoukis of AEI interviews David Beckworth in this podcast, and a transcript is included:
If you do X and there is no measurable change...

Lots from Scott Sumner, recently. First, he reminds us that The stock market cares a lot about the budget fiasco.
Just one of the benefits of monetary policy - it doesn't add to the national debt:
Miles Kimball on the good, the bad, and the ugly
Was Daniel Thornton discussing instrument rules, or targeting rules?
It's better to "not target" NGDP (level targeting) than to "not target" inflation
Low rates - easy money or weak business investment? Greenspan vs. Taylor
In reply to this post by Arnold Kling, Scott explains that
Big government is not Keynesianism (and vice versa)
It's hard to be a "real" developed nation when infrastructure of any kind gets delegated to the back burner (or simply turned off): Choices, Choices
Does money illusion contribute to "housing bubbles"? Perhaps, when 30 year mortgages are involved: Did tight money cause the 2006 housing bubble?
What did Yi Wen mean? A puzzling paper from the St. Louis Fed
Also, A note on exchange rate regimes and macro outcomes

Marcus Nunes "wins the Internetz" this week for plenty of posts!
One size fits all monetary policy has not been kind to nominal spending, in graphs:
Some central banks are better at following specific rules, than the Fed (re Daniel Thornton)
In graphs - only after nominal income collapsed, the real economy tanked:
Some of us remember that house prices began their rise in the nineties:
In graphs - comparisons for three crashes
What to think, of the "demonization" of Greenspan?
Some variations in government spending at local levels:

Nick Rowe puts on his "first year" teacher hat, for students:

Like Lars Christensen, sometimes I am concerned that it is hard for the public to tell the difference between the serious Austrian academic, and - in this case, the Facebook version:

Justin Irving links to and recommends Eugene Fama's "My Life in Finance"

David Glasner (part VII):

From Britmouse - not quite what Bernanke would have expected!

More interesting links this week:
I enjoyed this post by Bonnie Carr. Rebel lock, indeed!
from Tim Harford, re unemployment:
Where is the innovation in healthcare? Miles Kimball links to Robert Graboyes
Certainly a unique video:

Tuesday, October 22, 2013

Confidence Depends on What We Want Money To Accomplish

The symbolism of money is part and parcel of our own economic lives. In other words, money stands for far more than abstract concepts of power struggles and capitalist (or socialist) fantasies which stand in the way of what we really want...oh wait. How exactly does that keep happening? Why do we constantly try to separate ourselves from vital parts of our own economic realities?

Political parties try to isolate themselves into partial economic elements, and then wonder why those other "separate" elements engage in contradictory activities which were never ascribed to them. As a self proclaimed Marxist, Chris Dillow (Stumbling and Mumbling) wonders in this post what has happened to the self preservation instincts of capitalism. Why - for instance - would finance have "allowed" itself to get into a position of negative interest rates? Isn't that a bit like shooting oneself in the foot? What happened to the ideal of economic progress, and why do so few uphold it in the present?

Both sides of the political aisle are dysfunctional to the degree that they ascribe absolute qualities to one another. Not only do those qualities reflect victim and aggressor roles, but assumptions are made which don't really apply to either side in many respects. The reality is we all need to both produce and consume throughout the course of our lives. What's more, monetary systems need to reflect these roles as closely as possible, through both production residuals and lateral time arbitrage.

Yet many no longer have an adequate way to express these basic human instincts in either personal terms, or understandable social terms with other members of community. All too often, a nation's history - as told to the general population - can become overly simplified in production and consumption terms, which only makes political agreement even more difficult to come by. Underneath it all, a lack of agreement or understanding regarding monetary processes permeates the dialogue.

In a diverse society such as the present, entire new dimensions of product categories are needed, in both spatial and knowledge based terms. Vast skills potential remains untapped, but much of it needs environments that are easy to move and change about, depending on the always changing projects of the moment. In the same way that economies were previously able to create solid structures by virtue of far flung markets, they now need balance with less solid components for nearby economic activities, commodities and services possibilities. Just the same, that dynamic potential remains held back by the structural dictates of earlier centuries in both knowledge based and environment based terms. When people lose the ability to make sense of their greater aspirations amongst one another, the stability of their most basic representations also comes into play.

Hence the stability of money aptly represents our own social stability, and whether or not we can find agreement to coordinate societal needs. Money is all about the intersection of our time, our purpose, what we create, and how we validate what we create. But sometimes we forget the true purpose for money as representative of our own economic activities. That's when opposing factions try to impose their own interpretations, as to what they believe money is meant to accomplish.

What's more - opposing factions with their growing insistence and extremism share a commonality: a lack of confidence about the monetary representations of the present. For those who consider themselves today's "makers" of production, inability on the part of populations to meet their defined specifications, supposedly means that money must be "held back". But all that really means is that some prefer no growth at all, if it can't take place on specifically defined high income terms. What's more, the consensus of holding back on growth is expressed in authoritarian terms, and both sides of the political aisle tend to agree with one another in this regard. Even so, the agreement between these factions as to product definition, tends to be missed by populists on the right who continue to be misled in budget discussions.

For some on the left, the issue is that money must be "loosed", if the demands and expectations of the "makers" are to be met. While this reasoning takes many forms (from living wages to endless money printing potential on the part of government) the problem is that it does not equate the use of money with the actuality of economic time capacity. Some who also advocate for a basic income nonetheless see compensation of today's unemployed as a non productive if necessary solution. What is not considered on either side is the untapped potential of the unemployed, which simply needs to be accessed through different monetary and skills based means.

A significant problem for the "makers" interpretations of money, is that of sticky markets. Many would see to it that product remains defined so as to be exclusively accessed. However they may feel about the attributes or mechanisms of aggregate demand, restraint is often viewed in moral or pragmatic terms. In other words, too little recognition exists re product inflexibility - which is by far the greatest problem for income of any static or sticky definition. The inability to reimagine production capacity as the true fulcrum for economic stability, is indeed the main blind spot on the part of both left and right.

No one can afford to assume that money has little meaning beyond the power of political will, for it is just not that simple. Even though it's too easy to dismiss money as a product of power, the trajectory of a long term economic equilibrium never lies, and in the end all definitions of power bite the dust. And long term trajectories depend on the degree of confidence on the part of every economic participant, as to the feasibility of carrying out one's stated intentions and desired actions.  What do we want money to accomplish? Is it really about human potential and aspiration, or instead making certain that some people don't have the means to realize potential because they are perceived as threats?

In the course of our lifetimes, resources come and resources go. Sometimes society looks at them and reasons: see, these are the drivers of economies. This is "supposed" to be what provides true wealth. And with some degree of knowledge and skill, these initial gifts of economic serendipity-into-product transform into mansions and appearances of abundant living all around. But then we get stuck. We start to think that the mansions and the apparent abundance are the drivers of wealth and that all other capacity on the part of human beings must get in line for its chance to take part in what was already imagined.

But the human imagination never gets a break, and well it shouldn't. Today there are many, who seek to keep the human imagination harnessed to mostly the desires of a few visions. Even those that complain about this aspect of wealth creation are still too quick to acquiesce to its demands, instead of taking initiative to bring knowledge use and skills wealth back into balance with the wealth of hard assets. All who keep their eyes on balance sheets as the prime mover of futures, acquiesce to the status quo.

Don't assume someone or something else has all the responsibility for the outcomes of the near future. For even if others wear the "appearance" of responsibility with some title or privilege, that only goes so far. Likewise, some are willing to step up to the plate to take the reins of power if nothing else positive happens, but by no means does that mean they are the ones with the best answers. It just means that we didn't suggest our own potential answers in time to provide any real choices. With a little luck, confidence does not yet have to exit the stage.

Monday, October 21, 2013

Consumer Alert - Sears Appliance

Believe me, this is something I wish could have been resolved quietly. But it's been going on a year unresolved and so I want to warn anyone who would purchase a built in gas oven, that the process could be problematic if the installation isn't done correctly. There is a slight gas leak in the new Sears Kenmore oven. After several attempts to get the problem resolved with Sears, they sent a repairman out, who said there was nothing he could do and to call a plumber. After more complaints by visitors recently about the gas smell, we tried again. Another repairman came from Sears, checked the oven, and said the same thing. But several plumbers have already been contacted, who said they are not qualified to do the work, nor were they able to refer us to anyone who could.

Someone is bound to be qualified to do the work and eventually it will be taken care of - in the meantime the gas to the oven has been turned off. Of course, this is a specific example of the kinds of institutional problems I frequently complain about: our institutions no longer have adequate resources, time or initiative to coordinate infrastructural issues amongst themselves, which we all share. That only makes life more difficult for everyone. In the meantime I would advise consumers to be cautious about purchasing built in ovens that require gas.

Sunday, October 20, 2013

Production Reform Beats Political "Magic", Hands Down

These days I try to be careful about adding yet more blog labels - too many already! But production reform certainly deserves a spot on the right side of the page, in that for me it is the very heart of supply side possibility. What's that you say, completely unreasonable? Even boring? I feel a bit feisty today, even if some eyes are already glazing over. And, I "get" that one reason people don't always relate to my work is the fact that it doesn't translate easily into political interpretation.

My readers know that thus far, production reform has already covered a fair amount lot of territory in earlier posts, even if it wasn't previously named as such. Not only do I think of it in terms of untapped potential for service offerings, but also environment production capacity to benefit especially those without the resources for today's choices. Some have had to live under the same roofs of others who would prefer autonomy - or even worse - found themselves sleeping under overpasses. Too much innovation in production capacity has been ruled out for all who desire economic access, because of hard market definitions in both services and environment categories.

The health services aspect of production, as reflected in the ongoing problem of Obamacare, needs to be completely rethought for those in the U.S. who would not qualify for the program itself. It was a MR post and also NYT article by Tyler Cowen, which prompted this post. About his proposals (for political "repairs") in the article, Tyler adds, at MR:
I view my proposal as a third- or fourth-best exercise, it is neither first nor second best. It may be the best we can do from where we stand...
What might those first suggestions have been, had Tyler actually voiced them? Oftentimes, first or second choice solutions are missing from negotiation proceedings, in spite of their greater applicability and efficacy. Admittedly, employment by any number of institutions is enough to rule out some dynamic options! There was lots of debate in the comments of the Marginal Revolution post, and a fair amount of agreement centered around Tyler's suggestions to make the states more responsible for the healthcare they wanted.

However, sending healthcare back to the states can only accomplish so much, in that the U.S. and its states adhere to quite similar product definitions, which create outsized costs and requirements across the board. What's more, sending problem solving back to the states in this instance is mostly "magical" shape shifting. Many budget realities likely would not change - unless the result becomes less healthcare overall - just because responsibility changes hands. I am reminded of the old magic trick, in which the magician moves Styrofoam cups around, and asks the participant to guess which cup holds the object. In fact, that "magic" image frequently comes to mind, when I hear political or taxation arguments addressed in what amounts to "just move it around" terms. Here's commenter Rahul at MR:
I think it's a rather sad part of the American healthcare debates that supply-side reforms (more physicians and nurses...) almost always get relegated to a footnote...juggling costs and expenses around or finessing entitlements, premiums or coverage are only stop-gap measures. The only real progress will be through supply side reforms. Unfortunately supply-side reforms don't have any strong lobby behind them and sadly aren't fashionable because those are ideology-agnostic therefore not particularly enticing to neither liberals nor conservatives.
Hmm, production reform sounds like a project for domestic summits, another "obsession" on the part of this blog! Seriously, that could be a way to also keep the agendas of such summits from being hijacked by special interests or political parties for that matter.  What I like about thinking in production reform terms is that this presents a concrete image what people would actually want to accomplish. With the help of domestic summits, people can help themselves and one another by creating new product of all kinds with supporting infrastructural components. Plus, all income categories could readily access these innovations if they desired.

What does this mean in practical terms? For one thing, production innovation would mean greater economic growth and employment, without having to define either with more credit or finance (banks have grown "tired" of lending anyway). Numerous people would seek out the chance to innovate services and (former) hard assets in formations that scarcely resemble present day offerings - just think about the transformation in electronics in recent decades. Plus, direct use of time in the same hourly settings, opens up an entire universe of skills time that is not really available on present institutional terms. That would allow more incremental steps toward progress - instead of the either/or product definitions which say win or lose for consumer options, right out the gate.

If it's that easy - one might logically wonder - then why aren't people trying this kind of approach already? After all, plenty of people are already looking for solutions that have less to do with politics and more to do with results. The real issue here is one of asking people in control of the marketplace, to allow those who have fallen by the wayside in some respect, to be given the right to get back on their feet and help their own means rather than the designated means of others which proved inadequate for success.

Herein lies the problem. It's supposed to be possible to do this, i.e. help oneself within the system - hence celebrations and special recognitions when people "beat the odds". And the fact that people have a harder time of succeeding with present constraints, makes people of all political inclinations a bit uneasy. The effect is a subtle "putdown" of the system that people try their utmost to rely on, even if creative and focused efforts to overcome failure are not intended to make someone or something else look "bad". That's the real problem people have with production reform. It's not even the same game board which everyone else is already playing on - let alone the same game.

So it may take a while to convince the political establishment to give the unemployed, the underemployed, and otherwise marginalized a real chance to overcome their difficulties. In the meantime, however, no one can afford to forget them, because the longer they wait to be able to participate in economic life, the harder it becomes for everyone in the process. How many are being left behind, economically? What then, could be done in the meantime?

At least give those who are marginalized the benefit of the doubt, and try to talk to them occasionally even if it's only small talk. Do they appear lazy, stupid, irresponsible, angry, even evil? How do we know for sure? What would it be like for us if circumstances were different, and good fortune of some sort had not been on our side? Do we discern patterns in the complexities of social confusion that can somehow be remedied? Can we tend to those possibilities instead of assigning blame, judgment or simply turning our backs on the whole situation? Talk to people in government, about allowing people to help themselves, which our governments can no longer help. It's worth a try.

Saturday, October 19, 2013

Meritocracy = Hierarchy, Not Equality

Why should it matter? Ultimately, because of the ways skills and knowledge have been utilized - or not - in the aggregate and over the long run. Suppose meritocracy were in operation in a primitive small village. Certain individuals were given the capacity to use their minds to a greater degree than others, but others remained responsible for their keep. Somehow, the ones free to use their minds had to make sure everyone else remained engaged in ways that contributed to their own survival. That's the problem with meritocracy now, in that it hasn't been easy as of late to keep everyone else productively engaged. Hierarchies can be easy to maintain, so long as extra resources continue to flow. What happens to the more valuable skills, when that is not the case? Is it still possible to maintain valuable knowledge with equality in time use?

As long as skills use and expertise are capable of contributing to the bigger picture for societal goals, populations remain perfectly happy to exonerate and otherwise pay homage to knowledge as a component of wealth. But when knowledge as a whole starts to seem superfluous in certain important aspects - or worse, problematic for the "powers that be", look out. One historical example suggests itself in Napoleon's demise. Are we are drifting towards a rationale - on the part of nations - of charting out the near future in Napoleonic terms?

Perhaps it wouldn't be too far off the mark to imagine we've forgotten Napoleon's mistakes. Like Shane Parrish (Farnam Street), I'd never read a book about Napoleon before, but some books really need to be read . In this post about the book "Napoleon: A Life" he speaks of Napoleon's fatal mistake, and in a follow up summary, adds:
He promoted people for their ability to carry out orders with precision. When things changed, as they tend to, these men were left waiting for instructions, having long forgotten how to think for themselves.
While Shane emphasized the correlation for organizations, I have to also consider the comparison for society in general. Today, as greater efficiencies are sought for stretched budgets, less thinking for individual circumstance or need will apparently be required. That in turn means more "following the rules" and of course additional laws and surveillance state. Plus, whatever remaining meritocracy needs to be rewarded, the more that efficiencies (cutbacks in skills use) come into play elsewhere, to account for the budgets to cover everyone who still seeks government defined product. Mmm, can we really do that?

How did we move so quickly from the perception of knowledge use as wealth, to knowledge use as negative? What's more, how does meritocracy fit into this picture? As long as knowledge use readily contributes to the valuations of hard assets and commodities, it gets incorporated into other ongoing economic realities, and there's plenty of room for meritocratic reward. Before the Great Recession this was indeed still the case. Meritocracy remains lulled by linear reasoning that assumes "it will always be this way", which of course makes sense for long stretches of time...

However as an old boss used to tell me, "Don't assume anything!" and - argh - I've learned my lesson well. What's more, Tyler Cowen "had" to make space for Tyrone in a post this morning. Once upon a time I didn't "get" Tyrone, but he makes a bit more sense now. It does seem that the earlier admonishment on the part of my old boss, is also behind a Marginal Revolution post that could only make me smile, scary though it might be in its implications. Arnold Kling also made the point earlier in the week that the Tea Party, in spite of what one may think about the "crazies", involves a greater number of well educated and monied than one might imagine.

Yep, we may think that Washington is eventually going to come to its senses, but we would certainly be remiss if we don't diligently prepare for the distinct possibility that it does not (not much of that preparation going on yet, by the way). What's more, the "crazies" are counting on our not figuring out a better way of survival than the options they would eventually leave us with. That means they can be just about as silly as they want in the meantime - and possibly get away with it, a la Tyrone. Clearly, some members of the meritocracy remained convinced that they will continue to have the work of their minds "safeguarded" even if many among the masses don't get that option...

Even as meritocracy is supposedly about "the best of the best", sometimes it is simply a present to the privileged, all nicely wrapped up and tied with a bow. When this is the case, the compensation (or societal valuation) becomes more important than the capacity of mind which lead to excellence in knowledge use. In a spirit reminiscent of the above paragraphs, Chris Dillow in a post titled "Managerialism and the Culture War", is concerned that effectiveness is gradually winning out over excellence. What is especially interesting to me, however, is the fact he realizes some balance is actually needed in this regard.
There is a grain of justification for the imposition of managerial values. Without them, we might get a futile perfectionism in which nothing gets finished. Leonardo da Vinci might have benefited from a bit of management. And the pursuit of excellence can be a mask for self indulgence or even idleness.
When Dillow wrapped up his post, stressing how professions have a tendency to exaggerate their value systems, his thoughts (below) reminded me of what Shane Parrish emphasized about Napoleon:
This can be aggravated by a selection effect; managers recruit people in their own image, which causes managerialism's "punitive quantification" to spread...If we're being less kind, we could call this a form of totalitarianism - the attempt to impose a single value system or ideology upon society, to the exclusion of alternative cultures. 
Resource use in the best of possible worlds, provides a balance for the knowledge use that any society can reasonably back in monetary terms. Sometimes when resource use is especially abundant, this is reflected in the knowledge that a society is also willing to support. If resource use appears less certain, potential knowledge use may become less certain as well. But then, we run into the danger of a society which has forgotten how to think for itself, as efficiency seeks to dictate reliance on previous measures of knowledge use which served society well, earlier on. At this point, meritocracy faces the risk of becoming simply a changing of the guard.

Consider for a moment what the use of meritocracy means at the most basic level. We are underlining the capacity of certain individuals and maximizing their return to society (or at least institutional sustainability) at the same time. However, in order to do this, the time use of others needs to be diminished in some capacity in order for that to happen.  When excess resource capacity can no longer make up the difference in time valuation, the best option we have for continued growth is to reconsider the unequal time element for knowledge use, which caused so much redistribution in outside resources to begin with.

No "living wage" will ever provide adequate time use measure, in relation to those granted the additional time value which markets consequently structured product to represent. Where the Tea Party utterly fails in their logic, is their own complicity in the ways so many of these markets were structured. Much of today's wealth remains defined in terms which are neither accessible to the lower income levels or government redistribution, for that matter. Yet, no one has made headway in Washington with realistic alternatives for product redefinition, in vital areas.

The government hand which feeds a rich healthcare establishment, nonetheless pulls back a bloody stump from the bites it has received from many in that same establishment. Seriously, how can conservatives not know that the healthcare they would stop government in its tracks to prevent, is a plan which reflects many of their own core beliefs how healthcare should be carried out? Have they really thought through, what they seek to take away?

It would be great if people could be rational and logical, when they see that a much needed commodity or product is not as widely available as before. But I've been watching an excess of squirrels (bumper crop of pecans last year) and they are not being rational at all about the puny pecan crop which has developed this year. They are getting scared and destroying this year's pecans before the crop is even ready. Somehow that seems oddly familiar...

Our time scarcity - were we allowed to manage it on our own - has the capacity to be the best balance between excellence and efficiency. But before we can find that out, we have to be able to use time equally, coming out the starting gate to economic access and production potential. There are countless resources apart from ourselves that can be used as additional reward for our own initiative. But there are only so many hours in the day that we can work to compensate anyone else, for the work that they might elect - or not - to provide for us.

Some hierarchies work quite well, for the management of multiple resources which are actually separate from ourselves and the use of our time. But when we deny one another the value of our own limited time sets, others will ultimately clamor to limit the knowledge we would use to help ourselves and one another, by whatever means possible (yesterday's wars, today's robots). That's why it's so hard to use meritocracy in the long run to take time value away from one another, because no institution can fill the holes that are left by the unequal division left between us, even if they want to. No institution should have to. But before extremists take away the ability for government to fill the holes representing our collective time, they need to get real about to the part they invariably play, in what those holes are all about.