Tuesday, June 3, 2014

Knowledge Product and the Aggregate Demand Factor

Why do we need more growth than we presently have? And, what could be a reasonable way to achieve a revitalized economy with greater participation - if it were possible to do so? Often, discussions regarding growth get bogged down, in political spats over government preferences versus the wish lists of Main Street. Much of which boils down to: If only citizens would just allow government to take care of X or Y! Or, if government would simplify taxation and allow deregulation where needed, Main Street would prosper!

But is the gridlock between Washington and Main Street really this simple? Neither of these scenarios quite reflect the circumstance at hand. Neither "solution set" really addresses the middle skill levels which are gradually declining, or the individuals who find themselves with too little economic access. More is at stake, however. Not only is a significant portion of the population short on needed services, but the kinds of coordination people actually need from their governments, has been on short supply as well.

Knowledge use systems could provide ways to work with these issues, and in the process allow individuals to find greater meaning in their lives. What's more: decentralized options are needed in service capacities, which have yet to evolve from narrowly conceived definitions. I like that Megan McArdle looked at services potential in this recent EconTalk episode on the future of work. However, a framework for greater economic inclusion was still somewhat missing in the podcast. In order for knowledge and skills product to achieve liftoff, they need broader applications than what are allowed in the present.

And even though digital means exist to augment knowledge use capacity, digital potential is still somewhat in the position of the steam engine before it gained broad societal application. To be sure, digital technology has found its way into some production measures, but it has yet to be harnessed for activities which still rely on earlier and far more expensive channels of operation. As a result, digital has not really been allowed to contribute to the good deflation which can result from well organized production. Equal time use for services in local community, allows just that kind of organizational possibility.

Today's lack of societal coordination, has some bearing on the fact that central bankers are dragging their feet. They remain unconvinced that aggregate demand needs to be thought of in terms of the growth trajectory of the twentieth century - including the years of the Great Depression. Even now, inflation targeting focuses on interest rates and a consumer led economy, in what has become an incomplete marketplace in terms of both services and living provisions.

Herein also lies a great source of confusion, as to the practicality of GDP - let alone the fact this confusion makes it more difficult to envision the economy in monetary terms. Who (supposedly, anyway) needs a growing GDP if people don't want a lot of "stuff" - and after all - said stuff is transforming into digital realities?  However, it is the ways in which we relate to one another and work to find coordination as a society, which need greater representation in GDP.

Presently these functions are not only too indirectly represented, they are captured and patronized by special interests. People need knowledge use as a direct resource component, which counts in a monetary sense. Because our services are viewed in fiscal terms, intense struggles take place over the norms of what should have been ordinary human interaction, capable of arbitrage at individual levels.

By applying time use equally with matched participation, knowledge use becomes a product in its own right. This is important, because formerly limited services provisions which were available on fiscal terms (reallocation and debt) become possible in a direct, hence monetary sense. This allows individuals to become a direct part of the coordination processes governments struggle to provide, but often fail miserably in the knowledge based economy of the present.

With more services provision on the positive or monetary side of the ledger, knowledge use systems would become a recognizable production norm, capable of accurate measure and evolution over time. By including everyone in services capacity, good deflation becomes possible for the first time on service based terms. The fact that services become easier to monitor and generate, also allows people to engage in innovative production of goods and product which they actually want, rather than the asset formations previously thought necessary to secure a tax base for services.

This frees governments and communities to create housing based on consumer desires, because they no longer have to rely on resource intensive forms of housing to generate a service base. Because knowledge use would be matched directly through monetary means, people would be free to consume product that matches their income potential. That is, instead of being forced to rely on government subsidies, for the high degree of regulation a services tax base so often requires.

True, individuals do not have knowledge and skills capacity to the same degree. Just the same: automation, algorithms, group flexibility and a diverse knowledge option base are capable of assisting group formations at community levels. What's more, in decentralized services provisions, the recipient would play a much larger role in knowledge use options than is presently allowed.

Only remember how many of us don't want advice, so much as we desire corroboration. Just the fact of creating economic access through knowledge use, changes everything. It also allows the aggregate demand factor to be conceived in mutual production and consumption terms, for knowledge use in a monetary framework.

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