Monday, May 26, 2014

How Can Local Economies Harness Productivity?

Local productivity potential has been one of the most exciting challenges over the course of my project. With the designation of aggregate time use as a finite quantity - hence allowing for spontaneous coordination of the time at our disposal - services production could finally have a chance to come into sharp focus.

That would also allow services production the clear designation (and measurement capacity) it needs in economic activity, which could be developed through local experimentation. Certainly it is about time, given the large percentage of the economy which services have represented in developed nations.

Today's thoughts were triggered by a blog post from The Growth Economics Blog, which touched on productivity in ways that provide contrast for the knowledge use systems which I promote. There are important aspects of productivity gains which are not readily amenable to capture at either the firm level, or the national level, for that matter.

Local economies would be able to allow for variations and fine tuning, in activities and solution sets. Whereas state or firm dictates, constrained by budgets which only can only utilize time as residual instead of product, simply do not have the time use capacity to do so. Likewise, local economies can embrace diversity in activity sets which otherwise could not be conceived of, in the same optimizing framework. This is what gives the local economy such an advantage over national, state or firm level planning, for potential services organization.

Presently, society benefits from tremendous time saving capacity through technological and productivity gains. However, far too many of these gains in time use options have ended up being substituted out for activity sets which few are happy with, as default time use in either production or consumption. That is, unnecessary complexities arise in some knowledge use production, and sticky marketplace definitions tend to constrain consumption choices for time use. As a result, not only is too much time use lost to these rigidities, but time use often ends up in all or nothing scenarios as well.

Productivity gains often end up compromised, in that individuals don't always have a chance to substitute freed time from technological gain for the activities they would prefer. This is where group coordination especially comes into play, so that all participants might discover time use management preferences. One advantage of coordinating multiple services options across groups, is that rent seeking would no longer be perceived as necessary in many instances. Because skills sets would become fluid and less connected to specific individuals, many skills sets could be utilized when they are actually needed, instead of in every instance according to previous group dictates.

One way to think of potential labor market coordination for services, is along the lines of video gaming which have moved ever closer to economic scenarios, as described in this Reason interview with Yanis Varoufakis. Some aspects of social gaming also provide ways to think about productivity capture, which communities can generate through the alignment of individual and group aspirations.

From the infrastructure that can be derived through common incentive, relatively public choice aspects as to "how" (to get things done), then translate into private considerations of "what" (to get done). In that "what" changes more frequently than how, it becomes the larger part of the coordination process over time, so long as resource options do not drastically shift.

Indeed, the "how" functions of infrastructure in times of resource change, are how governments really need to assist their citizens. That is, governments need to be better facilitators for societal shifts in resource use. If in fact this were the case, local economies would be able to generate stronger effects in total factor productivity. Of course, this is a more complete understanding of productivity than productivity measures as cost per unit between capital and labor functions, within firms. Total factor productivity can be thought of as a process which scales up in knowledge use and resource coordination, to the wide set of capital and labor potential which is a local economy.

Given the variety of skills sets and asset potential which exist, optimizing these possibilities could certainly tell some interesting stories. In other words, what do individuals and community wish to capture? Specific forms of productivity are normally determined by who does the "capturing", which leaves a myriad of externalities. Local coordination is capable of bringing previous externalities into the population fold, so as to positively affect total factor productivity.

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