Tuesday, September 30, 2014

Wrap Up For September '14

While this month's wrap up doesn't have any particular theme, there were plenty of links to gather over the course of the month, and I've included further observations where possible. I hope that all of my readers had an enjoyable September!

In the future, healthcare options will likely include local settings which do not always involve the compromise of expensive - and often distant - hospital stays of which family members can travel for only so often. That can only be a good thing, especially given that infection risk during hospital stays is only growing over time.

An interesting perspective with this link, but I was reminded of the "spin factor" which Kevin Erdmann attributed to article headlines in last month's wrap up! Hence the given inequality framing can be misleading. Such framing seems to suggest Piketty "solutions" which only make it more difficult to envision coordination strategies for resource needs.

Speaking of state monies...

"Labor Market Fluidity and Economic Performance" by Davis and Haltiwanger,
From the abstract:
These results suggest that the U.S. economy faced serious impediments to high employment rates well before the Great Recession, and that sustained high employment is unlikely to return without restoring labor market fluidity.
Arnold Kling noted that Davis and Haltiwanger mostly offered speculations as to why this was the case. Indeed much of what has occurred in recent decades is anecdotal and dependent on a range of circumstance which vary depending on income and region. What I have experienced in terms of economic change, is often different from that which readers have observed, for instance.

State unemployment rates for August:

As it turns out, some property rights are better than others - a thoughtful article from Eli Dourado:

It's good to see that skills sets are being emphasized for resumes now. That goes beyond some of the old definitions: The resume section that matters more than you think

Of course in terms of skills arbitrage for knowledge use systems, it would be helpful to emphasize both hard and soft skill sets. Along these same lines in coordinated community settings: expanded versions of one's resume might include personal non fiction library favorites for those who are interested in pursuing what the time arbitrageur has already explored. Good non fiction has a wealth of information that schools cannot be expected to provide. Another option for self promotion in these kinds of environments might include semester "meets" days in which varying groups can promote the kinds of skills sets they would like to utilize with others in the coming months.

Tim Ferguson of the Forbes staff called this a great step toward an "inclusive" economy.

One of the questions floating around this month came from Peter Thiel: What important truth do very few people agree with you on? Regular readers probably suspect my answer: Voluntary time use in aggregate can be tapped as a new and direct source of wealth. Because evenly matched time coordination needs no support from redistribution or production residuals, what had been fiscal activity is possible to achieve as monetary activity instead. No more austerity necessary...among other things!

I wouldn't be surprised if some aspects of local job opportunities play into this as well...

Lots of survey results in this Neil Irwin post. Not all of them what people might expect:

Tyler Cowen highlights an article from Vaclav Smil. Just think how important a scarcely thought about product like wood chips actually is. How Prominent are European renewables?

Monday, September 29, 2014

Limit Markets? Limit Longevity

Fortunately, longevity is attributable to many things besides what gets offered up in the "usual circles". Not so fortunate, are tight marketplace definitions which can limit prospects of longevity in aggregate - that is, not just the expectations of traditional healthcare by any means. Just the same, some who once aspired to a long life might be thinking twice - given that what today's healthcare marketplace has on offer is slowly shrinking. Some of my readers have probably given some thought this week, to Zeke Emmanuel's recent article regarding 75 as an optimal age.

Could we have expected any other result, than these slightly unsettling new public arguments to live and enjoy life while we can? Some baby boomers now try to hold out for what might be expensive healthcare needs while they wait for the eventual (?) Medicare coverage. Meanwhile, social security gets pushed to an "optimal" (?) age where some lower income levels can't expect to live long enough for late life "repairs". How did anyone expect to extend longevity in aggregate much further, while strict limitations on physician quantities - let alone knowledge use constraints on drugs of all kinds - continue to exist?

Plenty of folk shifted their priors somewhat, after reading Emmanuel's article. As for myself, there were lingering questions whether I was strong enough to engage in certain workplace environments were I to take the plunge and seek a city with low unemployment statistics (I know, only useful to a point). Of course the possibility of early social security exists since I just turned sixty. But...argh. Like many, I always imagined living a long and full life, which included the idea of delaying social security as long as possible.

Sure "live for now" is the kind of philosophy that can help anyone. Even so, I remain uncomfortable about experts making longevity decisions for everybody. Yes, my mother's last year was quite rough, after an extensive surgery and the ever hopeful prognosis which had gone with it. But I would not have questioned any of the decisions she made, to extend her life to the best degree she was able.

How to slowly back out of an intense end of life support paradigm without leaving a void? That's the problem, because little really exists in any organized capacity which could provide what so many of these older patients seek. Hence we'll probably get more rationale for further cutting back, with too little thought how new doors can open as old ones close. Indeed, healthcare decline "inevitability" is closely linked to today's "limits on growth" mindset . Some arguments include studies showing that while longevity gains have occurred, not necessarily so quality of life. So it's surprising - given our lousy physicians to population ratio - that decades of dialogue assumed populations would have "ever growing" longevity statistics.

What about the missing healthcare marketplace which once tended not only to the needs of the poor, but others as well? Don Boudreaux highlighted a quote by William Easterly which seems apt:
The rich have markets, the poor have bureaucrats.
For healthcare in the U.S., fortunately this has not always been the case. Before the bureaucrats became heavily involved in the 20th century, there were small town healers and other health advocates who were sought out not just by the poor, but also people from all walks of life if they believed those individuals could help them. When lines became long for these healers, it was because of the degree to which they were able to directly prove their worth to a public which responded in kind. Sure, a few charlatans were out there. But the same is true today.

A rich and diverse marketplace in health options once assisted the poor - along with everyone else - for as long as anyone could remember. Finally representatives of this marketplace were driven underground or out of business, only to have many of their knowledge and skills sets resurface in altered form - often decades later - in "exclusive" clinics and equally exclusive remedies. Lower income levels are today expected to rely on whatever the physician decides - or not - to provide for them instead. So treatment options tend to be all or nothing. All too often, earlier methods of less invasive healing are no longer available to them. As it turned out, when "real" healthcare came to town in the 20th century, that often erased the memories how locals gained good results through knowledge and resources in their own midst.

Bureaucrats not only defined what healthcare is supposed to be, they have limited the available marketplace by doing so. Think of a giant supermarket of health options which - in aggregate - has purposely turned itself into a small grocery store. Maybe it does not seem so yet, but insurance offerings see little choice. Bureaucratic healthcare was able to win the day because special interests convinced the public that entire shelves of goods are worthless, then get to decide among themselves afterward whether that is really the case. They handily won the game of "What do you know??" This Cato article about a squeezed marketplace was difficult to excerpt, as it is worth reading in its entirety:
Medicine is simply no longer the profession it one was. In 1970, the average income of general practitioners was $185,000 (in 2014 dollars) Today, even though doctors now see nearly twice as many patients as they did back then, the average physician income has fallen to just $161,000. At the same time, the average medical-school graduate now begins his career with more than $170,000 in debt...Existing government programs already reimburse physicians at rates that are often less than the actual costs of treating a patient. Estimates suggest that on average physicians are reimbursed at roughly 78 percent of costs in Medicare, and just 70 percent of costs in Medicaid.
Few aspects of life are more politically correct than what people still expect of healthcare. Politicians of all stripes have not really sought to change the basic structure, which now makes the art of healing something that can only be practiced by the few and the privileged. No one can expect populations to maintain healthcare markets for the long run, under such circumstances.

It's perfectly understandable that we gained medical schools which expected their graduates to go above and beyond, who were capable of meeting exceedingly high standards. Who would not want the work of these graduates when they are waiting on the operating table for an important surgery? There's just one problem. The United States built and continues to back an exclusive system, yet still expects every citizen to be able to take advantage of it when the time comes...

I respect the thought processes that went into this logic. However now it is time to move beyond them, and allow education for healthcare of all kinds to once again flower, for all income levels, for all places that people desire to live. It's time to quit insisting that all populations depend on extremely limited markets. These are environments which mostly burn out the ones who still attempt to provide services as if they were superhuman. Let people practice healthcare in the ways that make sense to them and to those who seek their help. If some desire to live to 100 or beyond, by all means allow them to do so.

Sunday, September 28, 2014

Money Can Become What We Want it To Be

Why is this significant? Some insist that money is incapable of representing more positive aspects of our lives, but I suggest there has only been a lack of consensus to make it that way. All too often, money gets the blame for the degrees of economic separation which people have unwittingly imposed on one another. What if populations decided it would be worthwhile, to make money capable of representing human effort as a whole? It's not impossible to do so. There would be far fewer people on disability today, if the focus was on keeping them economically engaged, instead of sending them a check because they were deemed "unsuitable" for some workplaces.

There's little progress to be had by insisting that money is mostly a tool for credit and finance, particularly when much about life should be livable without loans as a necessity. What's more, central bankers are the last ones who should be treating finance as the center of the economic universe, given the need for monetary stability. As a result, entire populations have been told that economic growth must be put on hold, indefinitely. What about the millions of people who happened to be born at the "wrong" time?

The definition of money is not set in stone, by those who continue to define present day circumstance for the public. It's hard to convey just how important this fact really is. After all, economies are supposed to be about what everyone does with a major part of their lives and in the same context, so is money.

Once, it worked relatively well to externalize monetary concepts beyond the personal level, when commodities were primary in the economy. Certainly large governments have benefited from the largess of commodities. But as services have grown with the spread of knowledge across the globe, money needs to be more closely associated with the time that we engage with others in the use of knowledge at local levels. When it comes to time use, money also needs to be recognized as an internal concept also capable of coordinating with the exogenous reality of the world's tradable goods.

This needed shift is all the more relevant, given the fact that too many services remain on the fiscal side of national ledgers - especially indirectly - as healthcare has been in the U.S. As a result, services are being blunted at the very moment when populations seek them out as primary goods. In mature economies such as Japan, the fiscal aspect of services means further attempts to spur growth can't readily percolate throughout the entire economy. Even in the midst of Japan's revitalization efforts there is now a broken labor equilibrium which is difficult to mend.

Nations may ultimately resort to some form of guaranteed income plan, for those who struggle to find gainful employment. But what would it feel like to find out early on, that one must become resigned to a minimal life? Only think about what people would choose instead at a young age if they had the chance, while it was still possible to think clearly about such things. If they were told there was no real room for the challenges they would seek through work...would they rather take money for not working, or would they rather be paid for finding ways in which to purposely engage with one another? I imagine that most would choose the latter.

It's not always easy to connect what we enjoy about life with others in meaningful ways. But I continue to believe it makes more sense to create compensated systems where individuals explore the possibilities, than it does to pay individuals to wander down lonely paths no one else can share.

Over time I hope to be able to explain my posts more plainly, for I need to become more directly engaged with everyone in what is becoming a growing search for labor participation solutions. Perhaps I need to put some outlines together, so that readers are able to review these concepts quickly. I really needed to set aside working on the book aspects of this ongoing project until at least a thousand posts were written - this coming week makes 500. Part of what makes it difficult to explain quickly of course, is that these are not corner solutions. If only that were all that was needed!

Saturday, September 27, 2014

Intentional Structure

Isn't the idea of intentional structure more "needless" planning? Bah! Sure sounds like it...and things are highly organized already. So what gives? Whether one is partial towards free markets or not, people of different political persuasions agree that too many markets have become more dysfunctional in some capacity.

Through all the layers of regulation and limitations, it's hard to imagine how this present "mess" could benefit from a fresh start or different outlook. Why add even more confusion? Especially when "good" intentions often restrict access further, instead of breaking through the logjam. Small wonder it's difficult, knowing what to add and what to take away.

So how to think about simpler structures that are also capable of maintaining the preexisting structures which matter most? Some of those earlier "intentions" worked out quite well. Coordinated intentions built perfectly good pathways for product of all kinds, before other factors began to block those once clear paths. Even so, limited access for tradable goods is only part of the problem. In some respects, pathways have scarcely existed in the 21st century for skills sets which - in spite of investment and considerable commitment - are all but non tradable in the present.

No wonder the marketplace has more than its share of confusion, as different sectors attempt to adjust and adapt within an increasingly out of date template. Is it possible to build more viable means for today's services potential? Present day services options - especially those that have treated aggregate time use as a negative externality, are not just short of spatial infrastructural equivalence. Limits to services have meant a missing marketplace which skews economic factors as a whole.

As a result, definitions of productivity are somewhat muddled. What's more, services cannot be realistically included as a true marketplace until they overcome the limitations of fiscal definitions. So long as important time use functions are defined in exclusive terms, it will be all but impossible to remove the fiscal stigma. Fiscal definitions in services do more than prevent individual choice and aggregate participation. They also prevent the active use of knowledge from spreading through all parts of the economy.

There are other spatial aspects of intentional structure, which still make it difficult for populations to organize in coherent fashion. One reason it was possible to move so far from the ideal of optimal time aggregates was the substitution of fossil fuels for human time components in the 20th century. While fossil fuels add to productivity in terms of single institutions (expanded ability to pick and choose among populations), they detracted from the productivity potential of spontaneous local coordination.

Communities need to be able to tap into those earlier coordination abilities, in order to bring economic complexity and knowledge use to regions which could especially benefit from aggregate time use densities. This would result in a broader adaptation of productivity than single firms or non profits are able to utilize.

Populations need intentional design for varying resource combinations that work well for multiple income levels and lifestyles. For instance, some communities would seek to create normal transportation routes for time off and weekends (highways, etc.) whereas they might opt for walking and biking paths within more central or general working environments. This combination of wants versus needs infrastructure could provide strategic means for populations to increase the longevity of fossil fuel consumption well into the future.

One of the most important aspects of knowledge use infrastructure is the present dilemma societies face regarding "appropriate" ages for retirement and choices regarding medical needs. By creating alternate services structures at local levels, important decisions regarding individual choice need not be left in the hands of governments.

Growth is now stymied in part, because public dialogue still seeks to make too many factors of life conform to narrow sets of terms. With broader interpretations for services infrastructure, those kinds of hard choices would not always be necessary. Life is easier all around, when people retain the ability to interact with resources on flexible terms to the fullest extent possible.

Friday, September 26, 2014

Rethinking Monetary Flows

One of the problems with the growth slowdown in recent years, is that the earlier growth trajectory for the U.S. had remained in place for well over a century. This fact alone suggests that how money gets utilized in the economy, needs to be examined more closely. What is being missed, which needs to be measured in monetary terms? What's more, other nations have experienced the slowdown in ways that are quite similar. Some who follow monetary events closely, believe that individuals should have larger roles in financial aspects of the economy. However, finance as monetary representation can often be misleading because finance is but an echo of the factors which have true bearing on wealth.

Why is this important? The fiat definition of money in the 20th century had appeared to be more inclusive of human capital, than the gold standard had been. However, fiat money could eventually revert back to a gold or commodity standard, if populations do not make more room for the potential of human capital.

When work was more labor intensive, time value was easier to represent through commodity standards. But today's production which creates actual product, needs little human time. That's not to say that time use and knowledge are not (still) needed for services or manufacture, but until now, these have taken place based on what production residuals or government redistribution could provide.

Now, a substantial part of services formation needs to make a clean break - at least for some populations - with both production residuals and government redistribution, in order to remain a strong economic component well into the future. That is to say, services flows need direct monetary representation instead of fiscal assistance. However, in order to do this, local coordination needs to happen so that production processes are simpler and easier to understand than they are in the present.

While education moved growth capacity towards knowledge use, much of it was able to contribute to the needs of business interests. As a result, the growing use of education was able to transform wealth into a more knowledge based product than it had previously been. What's more, education accomplished this goal primarily through the redistribution systems which already existed, without generating excess burdens. That is, up to a point...When was that point crossed? Today, it has finally become difficult to bring more educational capacity into the economy through commodity backed wealth. A new wealth based approach is needed for education, which is capable of incorporating it into the actual pacing of our working lives.

As monetary systems slowly became defined in fiat terms in the 20th century, healthcare already claimed a substantial part of that representation at the outset. One might say that the U.S. healthcare system evolved at the most auspicious moment possible, when the economy was really starting to take shape. Unlike the benefits education provided for other sectors - however - the services of healthcare gradually began to make demands on other sectors of the marketplace, which in some instances stunted their growth.

Healthcare also makes complex demands on fiat monetary policy as a whole. The fact that healthcare needs continue to grow even as labor participation dwindles, implies a slower growth trajectory in the future than central bankers have already imposed. The best way to turn this slow motion train wreck around is to open the training of healthcare to all who wish to heal others in their own midst. There is no better time to do so, as the spread of knowledge continues to all corners of the globe.

Today's monetary flows originated when knowledge use as primary wealth was scarcely imaginable. Think how these flows have evolved over time, and how in a sense they began with initial resource use formations. These early productive adaptations provided initial income flows in populations. When they were substantial enough, and various institutions started to regionally interact with one another, they provided a point of origination for commodity based money. Those who were employed by these institutions could be thought of as generating initial income flows. What came next?

Asset formation, particularly in the form of housing. Those who took part in the initial resource flows created substantial forms of housing which involved more than just the adaptation of locally available resources. This process sets up a more complex equilibrium in which governments are eventually able to take advantage of follow up asset formations to generate services, hence asset distribution flows through taxation. From this, services income is derived, and then services income redistribution flows bring the process back to a national level. So the process unfolds something like this:

Resource use formations (initial knowledge inputs)
Resources income for participants
Assets formation by participants
Assets redistribution flows through governments
Services income either directly or indirectly from governments
Services income redistribution flows through governments

In a sense this process may not quite scale up to national levels until services income and services redistribution flows come into play. The latter part of the process is what needs to be reconfigured from the ground up. In some instances, services knowledge also needs to move to the front of the line for wealth formation. As it turns out, national - or state governments for that matter - are in a lousy position to dictate how populations resolve and negotiate services formations which involve the use of personal time. Some of the most serious problems between political parties are the result of unsolvable issues regarding services needs.

Asset formations are now cumbersome and illiquid in part because of the responsibility they bear for services flows - particularly those of healthcare. As a result, any further suggestions for redistribution only serve to make earlier redistribution less understandable than it already has been. Apologies are perhaps in order for my readers, in that none of the changes I suggest are easy to accomplish. If all members of society do not gain the right to heal, there's no guarantee that human capital can be approached as a direct source of wealth within fiat monetary systems.

The fact that healthcare is central to both welfare needs and human capital formation, has considerable bearing re why reforms haven't happened for a wide range of economic problems in the present - with low employment participation rates and regional poverty at the top of the list. Healthcare issues stand in the way of both conservative and progressive proposals for reforms of all kinds. Only when citizens are able to freely take part in services formations, will it be possible for monetary flows to gain equilibrium.

Thursday, September 25, 2014

Can Aggregate Time Use Become Productive...Again?

Lack of real participation in the economy as a whole, remains a primary problem for the people of many nations. As individuals slowly fall away from any representation other than limited consumer roles, countries now suffer the vagaries of primary (fossil fuel) commodity availability and related political circumstance. I know it's only the opinion of a blogger but still...the current political mess which is starting to build up, never should have happened in the first place. Rant time...

It is the mistake of many a nation, to refuse their citizens the right to take part in primary economic roles - particularly the important services roles of the 21st century. One often gets the impression that certain folk in high places believe that value lies anywhere other than the productive capacity of people. It has been the mistake of governments, countries and other assorted nimby factions to blithely assume all will be hunky dory, if anyone who does not "measure up" right out the gate can be left out of the process altogether.

Had it not been for these kinds of elitist assumptions and fierce denials of innovative options, citizens had the chance to build a reality which would not have included the kinds of problems that are now surfacing. Had it not been for power mongers of all stripes who wanted nothing to change, growth would not have been stopped in its tracks. Citizens could have built a world in which their input matters even more than the fossil fuels that nations so rely upon. After all, central bankers in the U.S. sent out a message that people didn't matter, when they shorted aggregate spending capacity just because of a spike in oil prices, and the Great Recession was the result.

The problems of the new secular stagnation could still be overcome, by allowing individuals to locally negotiate for production roles in the services capacities that are important to them. This is a stabilizing growth option which has the potential to return economies to the earlier growth trajectory, because it generates what has been a missing marketplace. No "perfect" form of political organization can really measure up to local systems of coordination. Today's institutions cannot make productive use of knowledge for needed services to the degree that local economies would be able, were they given the chance.

There's no getting around the fact that aggregate time use has not been considered as a source of productive value. Hence, much of time and educational investments are increasingly left out of the economic equation. Some nations continue to put their "extras" in prison, while other groups just keep killing off the undesirables who get in the way of the latest power grabs. As Rana Foroohar said recently of the U.S., "Something is very, very broken in our economy."

When economic representation (aggregate time use) was largely a matter of land management, people had natural connections to resources - hence ways to be productive on their own terms for the full length of their lives. To be sure, their productivity may not have appeared substantial to others but at least the connections with resources in their own environment had not been completely broken. Hence those existing options could often generate means for survival.

Whereas today, our productivity tends to be defined on the all or nothing terms of employment by others, or else it requires a consumer base capable of supporting overhead for self employment. Since agriculture was transformed in the 20th century, few have considered how important it is for all to remain productive based on their own interactions with given resource sets wherever they live. Today, the primary resource sets that institutions utilize are knowledge and people. Commodities of all kinds are - and should be - the frosting on the cake. Just the same, fiat money tiptoed toward the reality of human potential, only to back off as it became more difficult to use people as mere loan recipients.

The lack of resource use options in local environments is the critical missing component of today's economic systems. That missing element could be recreated by reimbursing local groups as they seek ways to assist one another, and remain economically viable for one another. What's more, education needs to back this process instead of working against it. And most importantly, these group efforts would need to be recognized for the direct source of wealth creation (through direct time use matching) that they would in fact create.

Economic systems such as these could provide new hope for the many places which continue to lose control of their destinies. Some places around the globe can scarcely afford to lose any more than they already have. New economic beginnings need to be defined on simple monetary and social terms that people can get behind and support. Such systems need to provide sufficient benefit to individuals so that all have a chance to develop the character which others also need, to lean upon.

Again, this post was one of those times when I had originally planned to write specifics re how people could learn to help one another locally. Except all of those notes got tossed, as I found myself drawn back into some of the important elements of the bigger picture. It's hard not to think about the primary issues right now, as negative world events continue to escalate.

Our time use - for all of us - has to be productive on monetary terms, if we are able to keep the very part of humanity which got us this far. Without the inclusion of our aggregate time use potential, it is hard to see how human capital will remain the catalyst for growth which it was so capable of, until the Great Recession. Do people still have the ability to build a better world? It's a question which all of us will need to respond to, if an affirmative answer is ever to be found.

Wednesday, September 24, 2014

Midweek Market Monetarist Links and Summaries - 9/24/14

At least it's not time to tighten...yet (Marcus Nunes) http://thefaintofheart.wordpress.com/2014/09/17/economy-remains-under-the-considerable-time-umbrella/
The Fed was already overly concerned about price levels in 2008: http://thefaintofheart.wordpress.com/2014/09/18/four-years-and-things-havent-changed-much/
"What I'm arguing is that the big mistake of 2008...should not be allowed to fall into the 'bygone be bygone' category." Only think what 1.7 trillion dollars more could actually accomplish: http://thefaintofheart.wordpress.com/2014/09/23/some-bygones-should-not-be-left-alone/
This does not sound like it is going to end well...http://thefaintofheart.wordpress.com/2014/09/23/rbc-theory-ready-to-do-serious-damage-in-the-ez/
An Australian example: http://thefaintofheart.wordpress.com/2014/09/23/the-sorry-state-of-the-australian-economy-in-two-charts/

Lots of ideas...will anything "take"? (Benjamin Cole) http://thefaintofheart.wordpress.com/2014/09/20/serious-economists-are-everywhere-but-i-say-cut-fica-taxes-financed-by-qe/

The Fed could make the same mistake with QE3 that it made with QE2 (Kevin Erdmann) http://idiosyncraticwhisk.blogspot.com/2014/09/inflation-housing-qe-and-taper-in-august.html
Single unit real estate is still a problem: http://idiosyncraticwhisk.blogspot.com/2014/09/follow-up-on-august-inflation-etc.html

An odd headline from Yahoo (Scott Sumner) Readers of the Money Illusion are not confused
The FOMC has really suffered as a result: Yglesias on Obama's missed opportunity
Commenters debate the Scotland Vote: No!
Corner solutions are not optimal for either of these: Infrastructure or Entitlements? This was also a continuation of a discussion from post re Hong Kong at Econlog
"It was obvious from the beginning that Abenomics would both 'succeed' and 'fail': Twice is enough (and don't expect miracles)
Scott provides some clarification in this Econlog post: There is nothing tautological about market monetarism
Even though QE has helped, Japan exemplifies the fact that monetary policy needs assistance from combined efforts for structural change: Abenomics is doing better than I expected (shades of grey)

Is there a path in Nick's post which is capable of equilibrium? (David Glasner) http://uneasymoney.com/2014/09/17/nick-rowe-teaches-us-a-lot-about-apples-and-bananas/
The IS-LM model leaves no room for a process where expectations can be revised: http://uneasymoney.com/2014/09/21/krugman-on-minsky-is-lm-and-temporary-equilibrium/
A response to Krugman: http://uneasymoney.com/2014/09/23/temporary-equilibrium-one-more-time/

If Nick Rowe were an orthodox New Keynesian... http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/09/the-orthodox-new-keynesian-position-on-liquidity-preference-vs-loanable-funds.html
For a while, people made jokes about having to eat squirrels: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/09/how-scared-of-deflation-were-you-in-2008.html
At least Old Keynesians and Old Monetarists had a story... http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/09/inventories-of-goods-and-money-si-again.html

A declaration of...peace? (Bonnie Carr) http://dajeeps.wordpress.com/2014/09/18/the-feds-exit-strategy-fact-or-speculation/
Take our good moments where we can get them! http://dajeeps.wordpress.com/2014/09/22/pinch-me-charles-plosser-to-retire-effective-march-1st/

Monetary offset makes the difference (David Beckworth) http://macromarketmusings.blogspot.com/2014/09/the-love-affair-conservatives-should-be.html

Lars Christensen responds to the post by Greg Mankiw: http://marketmonetarist.com/2014/09/18/the-mankiw-darda-rule-tells-the-fed-to-wait-a-bit-with-hikes/
Lars finds some inspiration from Krugman and Mankiw: http://marketmonetarist.com/2014/09/20/there-is-no-bond-market-bubble/

Josh Hendrickson responds to a recent article from Mark Thoma: http://everydayecon.wordpress.com/2014/09/23/what-do-we-want-out-of-macroeconomics/

James Caton begins a series on nominal income targeting and free banking: http://moneymarketsandmisperceptions.blogspot.com/2014/09/two-roads-nominal-income-targeting-and.html

NGDPLT is the best way to avoid fiscal austerity (Britmouse) http://uneconomical.wordpress.com/2014/09/24/austerity-forever-or-4-inflation-your-choice-britain/

From the Minneapolis Fed, an interview with Michael Woodford: http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=5379&&

Tuesday, September 23, 2014

Local Economies and Transformation Potential

This post serves to revisit concepts which I've been trying to organize in recent months. Also, I just noticed a new book some readers might be interested in, which explores private elements of choice in city planning. It especially seemed worth mentioning, after discussing Jane Jacobs books on city formation in yesterday's post. For any new readers who are considering how local economies affect larger economies in a broader sense, perhaps some of today's links will prove useful as well.

Regular readers know I believe that today's slow household formation is not at all necessary. If innovation were loosed and new concepts of strong/lightweight and portable construction in the offing, economic activity could begin to pick up where it left off, 1.7 trillion dollars ago.

Only consider the possibilities of a completely new marketplace for building innovation - one that breaks free of the higher incomes marketplace which represents nearly half of today's primary buyers. The WSJ link also notes that mortgages are not the place for social engineering to take care of income disparities: I certainly agree. However, many municipalities are structured so that they need today's higher asset valuations, in order to meet their designated fiscal flows for service formations. So in a sense, communities are in the same budget bind as many of their citizens. This is why some communities of the future need to be structured through a unique (endogenous) assets to services equilibrium.

Often, one thinks of innovation as a broad scale endeavor which applies to production in national or international aggregates. Even so, innovation is beginning to reach a technological point where it does not always have to rely on extensive economies of scale for reasonable costs. In a recent post Don Boudreaux wrote that "innovation is only possible by the lure of large above normal profits." Fortunately, innovation has taken place over the centuries for many reasons besides profits, and there is good reason why this could happen again in the 21st century. How so?

The digital processes which could readily disperse knowledge use at local levels, have been in place for decades. What's more, production potential for local building components is now exemplified in recent 3D printing technology. The combination of these with other automation, could allow local seasonal patterns for services offerings and production projects. This would also allow multiple business formations to operate simultaneously in close quarters. A unique assets to services equilibrium would have the potential to reduce costs and drive down internal inflation factors. Local production would be simple to account for, so long as time arbitrage is measured as a separate component for GDP than other products and goods.

Locally generated knowledge use systems would allow considerable investment potential, for all who seek to contribute to the resulting communities. Incentives for local citizen investment are "built in", in that coordinated time arbitrage contributes to a community wide form of GDP over time. How would this be different from normal investment, which is open to investors who are not actually part of the process?

Instead of a simple business relationship within a single context, an internal investment process completes an endogenous production and consumption loop between asset and services formation. This is also what makes taxation unnecessary, and broader knowledge use systems are just one of the fortunate results. In effect, services which once were possible to generate primarily through fiscal processes, are turned into direct monetary formations (through the direct matching of time arbitrage) which involve all local citizens. Instead of arbitrary separation between government and citizens, citizens take responsibility for what had been government processes through coordinated negotiation patterns, alongside other ongoing economic activities.

What of the broader economies of scale which are so integral to continued progress? Many economies of scale for tradable goods need to remain in place, if aggregate production is to provide the time use options which people find most important. What's more, communities in the process of building aggregate skills value need to begin with as many tradable goods choices as possible, instead of more expensive non tradable choices which could crowd out services formation in local equilibrium.

How local equilibrium plays out, can depend on shared commitments not to hijack primary consumption patterns. In one of my more frequently visited earlier posts, I basically asked: do local economies "shoot themselves" in the foot when it comes to comparative advantage? How can local economies embrace and benefit from the productive tradable goods of the international marketplace...instead of continually building moats against them?

Another important issue for community transformation: some of the more difficult aspects of inequality involve local origins of exclusionary tactics. Not only does this make inequality more complex than it appears, it is also why further government redistribution at this point could potentially make things worse. The worst forms of inequality, are those involving production at the heart of consumption baskets which involve our most important time commitments. Therefore, the process of breaking down inequality begins with placing time use options back into the center of our lives.

Monday, September 22, 2014

Dispersed Economic Complexity Is a Better Approach

Comprehensive knowledge use and broad services formations are needed, in the towns and cities which have been left behind since the supposed "ending" of the Great Recession. Perhaps one could argue that it's time for local schools to close the economic loop, open their doors to everyone, transform their education enterprise into something far more tangible and make it worth the while of local residents - who are expected to pay property taxes all their lives. After all, education is needed for a lifetime of purpose - not just the partial job of education for the young.

Why are so many local economies expected to rely on prosperous regions for services which - in many instances - they could now generate for themselves? Government debts are often formed from the expectation that local residents seek their primary services - indeed the substantial part of life, in the "elsewhere". Many local economies never regained adequate consideration from their own states, after losses of earlier economic positions in either agriculture or manufacture. In the meantime, more insult to earlier injuries has relentlessly been piled on, by the monetary tightening of a never recovered output gap.

For a long time, many individuals were able to compensate for lack of work in places of origin, by locating in prosperous regions and then returning to old home places once they were able to generate equity and/or retirement needs. Governments in turn relied on these gains from far flung housing equity, to continue their own fiscal responsibilities. This incomplete economic process needs considerable rethinking, for both the generations and local governments of the present. Prosperous cities in the U.S. can no longer take on all comers, in ways that all are able to build up a nest egg over time. As a result, local investment strategies and service formation strategies now need to be implemented where people actually live.

So far however, nothing of the sort is happening. Who is in charge to take care of such things? Governments are not yet in a position to do so. Neither are any individuals that I am aware of, or the remaining output gap would not have been soundly rejected, of late. And when anyone in charge at the Fed worries about these economic issues, these individuals are also being reminded it is not their responsibility to do so.

Meanwhile, much of the dialogue continues as though individuals have no say in their fate about the future of work - let alone the potential which human capital continues to hold for real transformation. Never mind the fact that work will always remain necessary for survival in the long run - whether it takes on the high skill trajectory that is still possible, or reverts to a low skill trajectory because of societal indifference. Indifference? Yes, it's there, because work is not currently being discussed as future positives but instead, moral reasoning to avoid starvation or else the reasoning that work is not even needed in an aggregate sense.

Hence, as I mentioned to a friend recently - I almost feel as though I need to compose a requiem for the remaining output gap, which at times I'm afraid no one will come forward to close! This sad circumstance is a reminder that not long ago, before her death in 2006, Jane Jacobs despaired about what might happen in the near future and wrote a book entitled "Dark Age Ahead". She knew that too much local economic diversity had been lost, for far too long. I felt a bit uneasy just walking past the space that book held on the shelf of a community library which I used to frequent. The ominous message on that book spine seemed to "laugh" at me and the economic project which I had already begun working on.

Are we already in the beginning of her Dark Age? I question whether small community libraries even carry the economics books which they would have purchased only a decade earlier. Back then, I could still find the (more optimistic) of Jane Jacob's books along with dozens of other valuable economics books in a rural library. In more recent years, only a few economics books remain on those public shelves. And that's in a rural area which is in a far more prosperous U.S. county than where I lived before...argh. Houston...where were your library copies of Diane Coyle's recent book on GDP? Maybe they have stocked a few since I've tried. Thank goodness for daily use of the internet. Otherwise I'd be pulling my hair out, since I no longer go on extensive book hunts!

Nonetheless I have a confession to make. One of the truly valuable economics books of the twentieth century is "The Economy of Cities", and I have yet to find a copy of for my personal library, in spite of years of book selling and book seeking. Diane Coyle was my personal reminder with her helpful blog, for she has highlighted Jane Jacobs twice this week. When people find books on urban diversity by Jane Jacobs they do not let go of them lightly, and I need to eventually take the time to read everything that Jane Jacobs has written about cities.

Diane Coyle points out the ability of cities - as Jane Jacobs argues - to drive national economies at the disaggregated level. Coyle elaborates:
Also striking is her argument about innovation as a process of branching out of new activities from old ones, in ever more intricate trees. The process is not driven by solving problems or meeting unsatisfied demands by consumers...but rather is producer driven.
When asked by a commenter about economics curriculum reform in the above linked post, Coyle expressed her concern that growth economics scarcely covers the specifics of innovation and urban economies at all: "A lot of economists are far too sniffy about economic geography." Even so, Coyle is encouraged that urban economics is being rediscovered. Let's hope the process continues - not just for cities but for smaller local economies as well.

Sunday, September 21, 2014

For Better or Worse: Born an American

In the early seventies, to be an American was to still be full of hope. Those bright expectations for the future were everywhere evident on the campus of Sam Houston State University, during my initial college days. And yet, some of what we wanted to accomplish was inextricably tied to the past. Those expectations for the future remained linked to earlier realities...

For instance, many music students "pined" for music which once existed in a world quite different from our own: the classical music which often represented "frivolous" projects on the part of royalty and the elite of earlier times. To a music student's way of thinking, classical music could feel more "evolved" than the music of the present. Of course a similar complaint has been lodged by baby boomers such as myself, about the music which followed that of the seventies and eighties! Fortunately, "frivolities" on the part of royalty remain with us today, caught as they are in the artwork and earlier music from the Old World.

Something about the love for classical music (on the part of music students), could be likened to a hidden desire for the old homelands of one's forebears. I once dreamed of flying (and dancing in the air) above an old warehouse full of the keyboards from Beethoven's time. Had a degree in music composition become a reality for me, the result probably would have been lots of modern day versions of Beethoven wannabee piano sonatas.

Consequently, it seems unusual that the symphony which stood out most in my mind during those college years, had little to do with sentimental concepts about the Old World, at all. Instead, someone "grabbed my arm" (and the arm of countless others) and said "Look at this". THIS is what's been happening in the world of the more recent present. Wow! In a single musical stroke, Antonin Dvorak generated a unique musical memento for the new realities starting to take shape, during the later years of his life when he lived in the U.S.

One might say that Dvorak made many of us proud to be Americans, by emphasizing in the most dramatic way possible, the feel of what was actually going on, through the New World Symphony. He was in a unique position to paint the reaction of all citizens to modernity, for he had aptly represented the folk music of the Old World as well. Dvorak was able to express - in musical form - the broadening economic horizon which was beginning to embrace not just the elite and the fortunate, but populations as a whole.

As a result, he could interpret not only the excitement of the new economic dynamism, but also the comforts and fears which resulted from the inevitable aftermath of creative destruction. This is why the template of Dvorak's New World Symphony provided such a rich mother lode for the American music which was to follow. It turned out to be one of those rare pieces of music which provides a centering point for individuals from all walks of life.

Perhaps most importantly: this still relevant piece of music manages to convey - in the space of  just under 43 minutes - more about the earlier economic dynamism of my country, than many a formulated school history textbook was ever able to describe. Fortunately, the New World Symphony provided a brief time capsule, for those of us who didn't experience firsthand what those tumultuous times must have felt like. Often, we never really know where our more valuable lessons about life might actually come from.

Saturday, September 20, 2014

Still Seeking the"Center"

Do we ever get too old, to stop looking for what feels most substantial? Apparently not. While beginning this post I remembered the U2 song, I Still Haven't Found What I'm Looking For. Even though it was recorded in 1987 it's a classic which could have been written yesterday. Who would have expected lifetimes to feel like that! Perhaps the main difference - getting older - is that fewer of us expect "ultimate" destinations anymore. Rather, it's more a matter of remaining curious what is "still out there" to be discovered. Apparently it wasn't just my generation which expected things to finally "settle" at some point...

Heraclitus probably would not have been surprised at all our restlessness, for he lived in times when change was a constant reality. Oh, for a time machine, to have a feel for the historical circumstance which informed the fragments of his work which remain! In some ways the pragmatic nature of his thoughts is reminiscent of the Buddhist material I've read in recent years.

Is it the lack of a coherent center for group expectations, which makes governments throw up their hands and give up on continued growth? People seek happiness, but how do those terms get defined? In a recent post from Scott Sumner, there was an interesting dialogue in the comments section about the differences in well being in different countries. How to know who is happier: individuals in developed nations or those which continue to evolve?

Of course depending on where one lives, some cultural reference points still apply. Will The Circle Be Unbroken is an excellent musical example, of the familial tradition which was once so strong in the U.S. I experienced that tradition at the generational level of my grandparents, particularly on my father's side. In the rural South, grandparents often still provided strong links for baby boomers with the past. In some respects, my parents generation experienced a greater shift to modernity than my own, in that many of them left their rural roots at an early age and never looked back.

At some point, the mass migration to the city slowed and a different sort of divergence began to emerge. How does one really define today's differences between rural regions and cities? In part, it depends on the parts of the world where they exist, and the degree of economic participation which rural places are still able to maintain. Sometimes the binding element for individuals from all walks of life, is simply that of beauty in nature. In the early part of the new century, I have fond memories of Saturday nights in a restaurant which did a good job of combining - if only for a few hours - what felt as though different worlds,

In a secluded mountain valley with just enough nightlife to make it worth an evening trip to town,  people could experience one of those more unusual centered moments. Among the crowd one would find the local rural matriarchs, sometimes with children and grandchildren in tow. Also among the group were transplants to the area, some of which had been there for decades already, and invariably, a couple of tables of tourists who were staying for the night in town.

Always the restaurant owners - who were then performing in a house band - would single out both local matriarchs and travelers from different states. Among the old rock and roll and bluesy favorites, old folk songs also united the crowd. While "This Land is Your Land" was a good group singalong which some of the old hippies in the crowd could appreciate, my favorite moment of the night was often when everyone sang "Will The Circle Be Unbroken".

Was there something about living an hour away from Houston in my youth, which made it difficult to discern where my own "center" really was? It's hard to know for sure. The rural Baptist churches of East Texas always felt earthy, whereas the local Presbyterian church where I learned to play piano as a child, felt "normal" with its more detached and intellectual approach, Years later, the Episcopal church I was introduced to for the first time, felt cosmopolitan by comparison, to both. Even so, there have been numerous times when I've been compelled to look further than Christianity to "center" and deal with life's more challenging moments.

What of town centers which have lost the appeal they once had? While this conversation isn't really happening for the U.S. at a national level, it is in the UK. Tim Worstall asks in a recent post, "Why does everyone want to subsidize the stuff that no one wants to do anymore?" Even if the initial ideas of government subsidies make little sense, at the very least it is good that people are thinking this through, for everyone in the UK cannot simply move to London.

Hence: if High Street is to be changed, how might it be transformed? Before anything can really happen, the idea of center also needs plenty of consideration. What will take the place of twentieth century retail? Will knowledge use and services gain the marketplace they need in the 21st century? So far, we pull up distant realms daily on a computer screen, and yet still expect the best of life to exist in the most specific of places. Somehow, more centers need to materialize in our minds, before they can expand our environments in visual and physical capacities as well. Seems it's going to take a while yet, for everyone to find what they're "still looking for".

Friday, September 19, 2014

Monopoly and Competition: What Works?

While the post title certainly has few "ready made" answers, the issue is nonetheless thought provoking. Shane Parrish in this post, takes a look at Peter Thiel's views about monopoly and competition in Thiel's latest book. My post also serves as a response to the summary which Shane Parrish provides, where he stresses that progress comes from monopoly, not competition. I don't completely agree.

Even though growth results from new perimeters which monopolies can make possible, monopolies are not always capable of providing full marketplace representation, no matter how viable they become as companies. Whereas competition attempts to generate growth through more inclusive - if marginal - means. Hence, competition at the margins needs greater overall support, in order for long term growth to reach full economic potential. Seeking means for more diversified competition would benefit cities, but doing so would particularly bring smaller communities back to life.

For instance: monopolies tend to define particular sets of infrastructure, which is why it's easy to see them as representative of progress or disruption - take your pick.  When do new monopolistic formations apply to regions as a whole? Are new monopolies capable of generating perimeters which extend well beyond that of the old boundaries? Consider the new taxi companies of the present, and the degree to which they are being limited in some major cities.

New taxi companies could vastly improve the marketplace in places which already face limitations in taxi services. However as far as I can tell, these services are primarily challenging preexisting structures in already diverse economies. In these instances, new monopolies might reduce costs without substantially increasing the size of the marketplace. That is a limited definition of progress. Done right, competitive environments sometimes have equal or greater capacity to generate growth and continued progress than monopolies.

Competition needs to be structured so that it is once again capable of flourishing at local levels. Anyone who has spent any amount of time in small towns, knows how limited their job markets really have become in recent decades. One way to think about this is to consider the means by which monopolies and competition might work better, than they presently do.

If a local economy could be likened to a tree, local monopolies might serve as "trunks", whereas local competition would become "branches" which carry economic activity beyond the certainty of infrastructure. Whereas trunks provide means by which to live one's life, the branches are the components which give life greater meaning, which is why they (competition) deserve our support in spite of their economically marginal nature.

The more basic functions of local monopolies (particularly land and building components) could be broken into more diverse components and widely held. The more trunks at the outset, the more branches will also become possible. Also, the more that local investment is dispersed through the trunks, the less problematic that local branches will be. In a sense, their primary purpose is to preserve economic diversity, social viability and identity.

Trunk "shares" in this instance are more practical than today's traditional building options for home or work, because holding shares in building components would provide economic autonomy for individuals as a whole. This in turn allows individuals to generate more meaningful contracts with their own communities over the course of a lifetime, whatever the personal circumstance of families might be.

Consider the restaurant model, which has faltered in many places which do not have enough local citizens to keep restaurants open. Part of the problem in this regard is the way the overhead is automatically structured for those who want to take part. Not enough locals want to eat out on an ongoing basis to keep a restaurant with a specific menu up and running. As a result, those who reach out to the public are forced to invest and work overtime for small odds of success.

How so? In order to pay the overhead, restaurants often need to stay open seven days a week. However, the response on the part of locals may simply be to stay home and cook their own meals (yes I've heard these discussions). They like the restaurant but it gets boring eating from the same menu that often. While eating at home is an understandable response, it means less economic choice and flexibility, and fewer occasions when neighbors are likely to even see one another in public. It can also mean a town remains or becomes a sleepy backwater - often unnecessarily!

In order to recreate Main Street, the marketplace needs to overcome these competition shortcomings at local levels. That means creating viable community spaces for shared competition, which can provide meaning for all local citizens. These forms of flexible investment could be coordinated by local entrepreneurs and citizens alike.  Even in small population densities, the economic variety which people naturally crave would continue to be possible.

Wednesday, September 17, 2014

Changing the Debt Equation

Complex debt issues have become a fact of life for both governments and individuals. Some formations in this regard aren't problematic, whereas other debt structures are aligned in ways that are not conducive to long term strategies. How to tell the difference? So long as government debt is acquired for circumstance with definite start to finish timelines. it remains amenable to the resource windfalls which can eventually whittle away past obligations.

However, when debt obligations become permanent in terms of provisions for retirement needs and expansive operating expenses, they can become problematic. That is particularly true, when debt is associated with aggregate time use negatives in populations which result from service structures. When too much government debt is forced to compensate for low skills valuations, it becomes difficult to detect the points where obligations can't be met through normal resource means.

Many primary debt formations are closely related to the non tradable equilibrium which represents assets to services flows. What's more, the real catch-22 for government debt loads is the lack of incentive for today's services structures to reform from the inside. For government, changing the debt equation means being able to adjust some services formations where they become capable of generating wealth directly, instead of through redistribution and production residuals.

For now, resistance to change on the part of special interests has also resulted in a backlash from the left. Calls for a debt jubilee on the part of the Occupy movement, are in a sense a reaction to the government generated equilibrium between asset and service formations. As Kevin Erdmann noted, the jubilee concept is conservative in the sense it seeks to preserve institutional formations as they have already existed. Of course the paradox is that much of the loan forgiveness would extend to portions of the marketplace (education and healthcare) which never had a chance to develop in free market terms in the twentieth century.

How to think about debt obligations in terms of family formation? It depends on income levels. While higher incomes can lose time use efficiency, particularly through tight definitions in asset formation (housing), debt related problems for low incomes tend to manifest as income deficiencies. Hence in debt based terms, the real scarcity tends to manifest in income among the poor, much as the same mechanism manifests in a lack of time for those with greater income. Timothy Taylor notes the similarity of higher and lower income response to this factor:
If you compare my own behavior in living deadline to deadline under a shortage of time, and the behavior of a low income person in living check to check with a shortage of income, some of the patterns look much the same.
This has bearing as to why so called "excess" debt structures are not obvious in terms of aggregate resource valuation. It makes little sense to insist on arbitrary divisions of resource use - for instance - which condemn individuals to live their lives within extremely limited social contexts. This is important if only for health reasons, in the sense that a life of solitude can decrease life expectancy to a greater degree than either smoking or obesity.

Hence, it can be difficult to disentangle what is necessary for anyone, from what may be construed as hedonic in measures of lifestyle gains. When we are forced to think about practical decisions for resource use, it makes more sense to consider one's time use perspective first. Otherwise, the arbitrary nature of hedonic measurement - enlightening though it may be in some respects, might not clarify societal needs. Also, it can be helpful to look at time use obligations for producer/consumer options at all income levels, so that changing the debt equation becomes possible in ways that all income levels have a chance to benefit.

For a low income family, government gains in the form of housing asset flows can sometimes be the family's loss, in that little is left for other necessities of life.  Mortgage and installment debt for families in the bottom quartile are far greater than credit card debt, for instance. Natalie Scholl's chart illustrating the leverage ratio of the poorest families, is a good indication that irresponsibility may be a smaller factor than it seems - particularly given the fact that installment debt is often necessarily to finance the car that gets one to their work destination.

If individuals are willing to commit to responsible processes more than they are given credit for, how can this be parlayed into constructive structural change? Many options exist at local levels to do so: if not where people live and work now, in new decentralized settings which can generate local investments to keep economic dependence on distant governments and cities to a minimum.

Not every city wants to take part in the methods that change debt equations, and understandably so. For instance, a news report on tiny houses came with a disclaimer from Austin, that structures such as this would be considered viable! I would have been quite surprised, had the news report been otherwise. Just the same, more cities and towns will find it in their best interests in the future, to seek new ways in which to change the debt equation.

Midweek Market Monetarist Links and Summaries - 9/17/14

You still want to talk about inflation? Okay...let's talk cars (Scott Sumner) The Great Inflation
At least the U.S. accounts for hedonics in its measurements...Further thoughts on "inflation"
Williamson's error is easier to forgive than the conventional wisdom "which views low interest rates as easy money" Williamson on monetary policy and interest rates
They have too much momentum to be losing ground now: China is still reforming
From Econlog Once again, tight money is the Achilles heel of the right

Nick Rowe and David Glasner agree that Walras' Law doesn't work but after that it gets confusing... http://uneasymoney.com/2014/09/11/nick-rowe-on-money-and-coordination-failures/
Scott Sumner asks David what is being differentiated, re the excess demand for money
And, http://uneasymoney.com/2014/09/14/responding-to-scott-sumner/

A response from Nick Rowe for David and Brad: non monetary shocks can still cause a monetary coordination failure: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/09/whats-special-about-monetary-coordination-failures.html
How to think about differences between countries? http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/09/open-borders-for-land-too.html

When the specter of inflation destroys commitment (Marcus Nunes) http://thefaintofheart.wordpress.com/2014/09/10/many-still-believe-the-great-recession-was-the-result-of-a-modeling-error/

Who will step on the elevator next? (Benjamin Cole) http://thefaintofheart.wordpress.com/2014/09/14/elevator-qe/
History gets revised! http://thefaintofheart.wordpress.com/2014/09/16/a-long-ago-and-forgotten-episode-of-qe-the-fed-money-financed-uncle-sam-ious-in-late-1960s/

Their growth trajectory continues to flatline (Lars Christensen) http://marketmonetarist.com/2014/09/11/end-europes-deflationary-mess-with-a-4-nominal-gdp-level-target/
There has been a correlation between the dollar and the NGDP gap in the past five years: http://marketmonetarist.com/2014/09/13/the-feds-un-announced-4-ngdp-target-was-introduced-already-in-july-2009/
Scott Sumner responds to Lars: Level vs growth rate targeting
And, http://marketmonetarist.com/2014/09/13/certainly-not-perfect-but-fed-policy-is-not-worse-than-during-the-great-moderation-an-answer-to-scott-sumner/
Lars explains the Mankiw rule: http://marketmonetarist.com/2014/09/16/mankiw-rule-tells-the-fed-to-tighten/

"UK macro is really quite boring at the moment, and I cannot be happier to report that news." (Britmouse) http://uneconomical.wordpress.com/2014/09/12/the-creditable-dullness-of-being-mark-carney/

Bill Woolsey responds to the 4% post by Lars: The Fed's new 4% target

(James Caton) Endogenous credit creation and nominal income targeting: in defense of nominal income level targeting   Bill Woolsey also responds to Caton's post.
(Caton) Lesson of the gold standard: The central bank should target nominal income - revisions to my latest paper

This post includes a "cute" robot that a farmer would find most helpful...(Kevin Erdmann) http://idiosyncraticwhisk.blogspot.com/2014/09/the-new-economy.html
A thoughtful post about Jubilee: http://idiosyncraticwhisk.blogspot.com/2014/09/jubilee-is-most-conservative-economic.html

Also of interest:

U.S. has the 32nd most competitive tax code out of 34 advanced countries (James Pethokoukis)

Poverty has changed little since the Great Recession

Tuesday, September 16, 2014

What Constitutes a Free Labour Environment?

Freedom in our choices of designated time use is not as simple as it may seem. Decisions we make, depend on a wide range of realities within already existing settings. Do the producer and consumer options we want actually exist, or do we have to follow paths which are already laid out? One might really want to work part time in a career that is mostly available as full time (or more) commitment. Or, one may need to pay for living expenses which require a full time salary, when only part time job options are locally available.

What forms do relationships take, within already existing settings that individuals and institutions conform to? What specifically about those relationships meets the economic needs of all concerned - or not? Over time, relationships once taken for granted start to shift, as dedicated resources begin to align differently within (and without) the system in use. What's more, relationships which once had a context that made sense to the participants, start to take on moral overtones when they are not readily amenable to change.

Slavery is of course an earlier example in this regard. Recent posts from Scott Sumner and Matt Yglesias reminded me of an intention to further explore this area - especially after Piketty's thoughts on slavery and graphs in his recent book which place slavery in the context of capital. Just the idea of slavery as capital is telling enough, and time use elements have been falling away from definitions of capital since the abolition of slavery.

Much as slaves had to reinvent their lives after freedom, each wave of recession means more individuals search for ways to reinvent their lives when the old definitions of work continue to fall away. When realistic options for economic access don't always exist, "freedom" is mostly a relative concept.

For instance, in a recent Econlog post, Scott Sumner speaks of the kinds of limits to freedom which people encounter now:
Blacks (and whites) are legally barred from many professions by occupational licensing laws.
Many people aren't used to think of their freedoms being limited in this manner. Indeed: for a long time, limits such as this might not have even seemed problematic, so long as adequate economic choices existed elsewhere.

In a sense, people can be forgiven regarding sentimentality about the "lost" manufacture which was skills intensive. When manufacture needed many hands, it was not hard to find places for all who wanted to take part in the marketplace. And today's manufacturing alternative does impinge on what was once the traditional territory of the few: the kinds of knowledge based services which proved so rewarding in pay structures throughout much of the 20th century.

As a result, the "bad news" is that the desirable service work which most could perform well into old age, now needs to be more widely shared. Of course, for anyone who does not have access to knowledge work, that is also the good news. What's more, it is the only logic which makes sense for the kinds of education which students are expected to pursue through the course of their youth. What's the point otherwise?

Why should anyone end up as a "slave" to all the unwanted work which everyone seeks to avoid? Not only can much of the drudgery be given to automation, the remainder which requires more thought can be shared with the work which gives all individuals a chance at a full lifetime. Doing so would bring people of all ages back into the same environments with one another, as well.

No one should have to be expected to carry the full load of difficult work which no one else wants. And yet this happened for many, particularly as the 20th century gave way to the 21st. What ultimately feels as though slavery of one form or another, often begins as coordinated attempts to carve out distributional flows which populations wish to rely on for economic certainty. Some of these patterns existed for centuries before they needed substantial change, which is why it is so hard to change now.

One way to move beyond gridlock is to listen to all voices and ideas, as to how to proceed with new work patterns. Otherwise, old ways of thinking about work will continue to run contrary to the potential of today's skills capacity. That is why it is important not to take existing definitions of the marketplace for granted, when the marketplace becomes problematic. When people forget that production and consumption are amenable to change, everyone ends up struggling. By attacking the root of the problem, much of the struggle can eventually be resolved.

Sunday, September 14, 2014

Where is the Foundation? (A Response for Lars)

Does a reasonable argument for an undeclared nominal target already exist, tucked away within the corridors of central banking? Certainly, market monetarists could hope so. Perhaps the logic has really been there all along since the Great Recession and we just didn't realize it. Recent posts from Lars Christensen suggest that the present level target of 4% could be purposeful along those lines. More importantly, he reaffirmed his belief that we need to let bygones be bygones, thereby accepting both the lower output and the growth path which has resulted since the Great Recession.

Regular readers know that I'm not convinced. Not only do I feel that the present (unannounced) level target is too low by at least a percent, but I also believe it is a poor strategy for the Fed to give up on lost output. Who exactly took the vote...in which we all gave up on future growth? In this response for Lars, my first concern (and that of others as well) is whether market monetarists can rely upon the seeming "goodwill" of the Fed to maintain a steady level nominal target. Even if the Fed has inadvertently done since 2009, to a relative degree.

Of course it helps to remember that an approximation of said target, versus a well voiced commitment to a steady nominal level, are far and away not the same thing. If one was to think of this "fortunate" reality more concretely, it's not at all clear that the Fed is very enthusiastic about the implied relationship with market monetarist expectations. If it was, not only would a potential nominal target rule be under active discussion, the Fed would also make that clear to the public as well. Sometimes I wonder whether the public will eventually convince the Fed of the importance of a nominal target, instead of the other way around.

As a result, little about the hopeful assumption on Lar's part really feels solid. Granted, to outsiders the U.S. can appear economically healthy compared to other countries, but many of the positive statistics are coming from cities of which economic circumstance are quite different from the country as as whole. In the U.S., the Great Recession should have been a strong signal for our governments and business interests to get their acts together and overcome the obstacles which stand in the way of innovation and the potential of a digital age. Instead, we have been subjected to moral stories about finance over and over again, as if our economic lives are somehow supposed to consist of little else than bank loans.

Hence, should we rely on hopeful assessments? Or will the first sign of high winds (i.e. the next really negative supply shock) send central bankers running for cover, once again? Supply side issues concerning Obamacare are one thing, as frustrating as they are. However, a primary concern is whether the Fed believes that certain commodities are worth a lot more than the economic participation of actual human beings. Unfortunately, I suspect this still holds true. How does anyone know that central bankers will not overreact again, should oil prices suddenly spike?

Without a level targeting rule in place, it's difficult to assume anything! But if one is willing to settle for "comforting" numbers in the meantime, how exactly does that improve the chances of gaining a rule for a nominal target? In the meantime the Fed continues to take on roles which imply it is capable of doing much more than its assignment actually allows. Even though the Fed concentrates on aggregate demand issues, it spends quite a lot of time debating and studying supply side issues - whether or not it is not in a direct position to do anything about them.

Worse, no one else is in a position either, to be responsible for the supply side problems which continue to create economic gridlock in the present. In spite of ongoing papers which continue to get churned out regarding both demand and supply side conditions, no one is preparing to take real constructive action on supply side aspects of this work as far as I can tell. If they were, we would not have already "gotten the memo" that real growth is out of the question.The problem for both the Fed and the U.S. government is that too many special interests have become highly resistant to needed change. The only way to circumvent the resistance is to begin the process of experimentation around the edges. This needs to happen before the possibility of greater growth in the near future is completely ruled out.

The Fed needs to do its part to break the logjam between government and business interests, instead of contributing to it. This is what worries me most about any praise for the Fed, even though I do not judge them as harshly as I once did. There is a chance that praise for them now, will only be interpreted as an "all clear" signal to move ahead as though everything is back to normal...when it clearly is not. What is problematic for market monetarists is that the Fed is still working from a perspective which lines up with the needs and expectations of finance, rather than the public as a whole.

In short, this is no time to declare victory. Not only is the present growth trajectory far short of its potential, but the purpose and intent of a nominal target is not yet obvious to the public, as a true source of monetary stability. As long as people associate money with financial concerns instead of the reality of their economic lives, not much can change. One only hopes if and when a nominal targeting rule is finally adopted, that its adoption will be associated with success and renewed prosperity, rather than the lack of it. There is still much work to be done.

Saturday, September 13, 2014

A Double Coincidence of Medium of Account

Yup, I didn't exactly make that clear in yesterday's post: new community "starts" would also rely on a local medium of account. It would represent time capacity separately for a monetarily compensated and aggregated base, whereas the primary monetary medium of account exists in normal economic context. This (still quite imaginary) reality of a double coincidence would exist for communities or local areas which would want to start fresh in economic terms. So how does one juggle the idea of money as central to the economy, while aggregate time use also holds a central function?

Aggregate time use would create a base in the form of a startup or entry (wealth creation) function, which then connects to local resource and investment potential. This is a better form of economic integration, than the base function a guaranteed income would provide for inadequate labor force participation.  Any form of guaranteed income is a static response, hence problematic in that it remains incapable of adaptation to constantly changing supply side conditions. One might say life isn't "fun", when populations end up arguing for improvements of underrepresented constituencies on their "behalf". What's more, this form of compassion does little to improve unresolved supply side issues.

Okay, the above paragraph also includes an idea why I believe a double coincidence of medium of account would be worth the bother. Time use aggregates allow producer and consumer functions at individual and local levels which are otherwise not possible. Instead of a static afterthought of an income base, create a dynamic time use base. The (parallel) medium of account function provides a direct monetary anchor for what otherwise does not always appear as monetary activity - given the barter aspect of coordinated time use. When I titled this post, a quick look at Wikipedia made me recognize my post title as an attempt to solve a double coincidence of wants:
The coincidence of wants problem...is an important category of transaction costs that impose severe limitations on economies lacking money and thus dominated by barter or other in-kind transactions.
Wait...what? This description is quite useful but our problem is not for want of money - it's for want of time. There's plenty of money to be had for overall resource representation, and yet it continues to exist in tight monetary conditions in that time is not well represented. Small wonder these discussions can get so confusing. Hence my suggestions for coordinated time arbitrage alongside the production residual which provides abundant money...if somehow inexplicably limited output, as recent blog "battles" can attest. It's difficult to imagine aggregate time constraints as a central factor in all of this. And understandably so, because most individuals who participate in these dialogues already receive adequate time compensation though additional resource aggregates.

Once and for all: I need to disassociate the idea of time use or skills arbitrage from barter in general. What's more, that holds true either in terms of time or resource use. The above linked Wikipedia source explains a bit of the friction involved, particularly in resources or commodities separate from time:
In-kind transactions have several limitations,  most notably timing constraints. If you wish to trade fruit for wheat, you can only do this when the fruit and wheat are both available at the same time and place...
Fortunately, this is the kind of constraint that pricing mechanisms have overcome so well for goods and commodities. On the other hand, service functions have suffered in that we attempt to provide them by generating time use negatives (gross skills devalue) within aggregate settings. In some circumstance, surplus resources (and the money which represents them) are capable of substituting for unnecessary time deficiencies.

Often however, not so much. Since the Great Recession, resource substitutions for aggregate time loss are less effective, hence the painful pullback in output potential. Monetary policy could have maintained output on a steady trajectory in 2008. Instead, the Fed and other central bankers strongly overreacted to a general perception that it is impossible to reconfigure the services supply side, for continued growth in the long term.

Growing use of a double medium of account, could eventually recapture the earlier growth trajectory. What's more, accounting for time use in a direct monetary sense (even in limited scenarios) can shift pubic perception regarding time use as central to monetary representation. This is important within the context of income or wage targeting. Over time, the resultant increase in production/output, would give impetus to real GDP formation that could eventually close the output gap and give further credence to the option of a nominal targeting rule.

How might one consider the possibility of inflation in the interim, as knowledge use systems gain public acceptance and start to multiply?  Chances are, this would not be problematic, because monetary compensation for time arbitrage is more direct than the open market operations which have attempted to compensate for inadequate labor force participation. As time arbitrage becomes integrated into the overall economy, greater demand alongside further asset formation would follow. While various forms of guaranteed income (on the other hand) could provide economic "relief" they would not be capable of integration at this level.

Let's consider some long run implications of time use arbitrage. Perhaps the most important is that a growing use of time arbitrage would make it possible to shift economies toward time use and knowledge use as primary wealth. This is particularly important in the face of gradually declining fossil fuel consumption, for time use aggregates also mean the capacity to reach economic goals in smaller population densities. The creation of high density knowledge use environments is a step in the right direction, to maintain a strong GDP growth trajectory, well into the future.

What about the sticky wages aspect? In a short term sense, time arbitrage appears as though a partial solution for sticky wages but this is understandably a tough selling point. Time use arbitrage is likely not for most individuals who have a good chance of turning an expensive college degree into a well paid career. Rather, those at the margin in income based terms would have greater incentive to seek alternative economic strategies.

What happens if these new economies become prosperous over time? Their compensated time use base becomes more substantial, thus new entries into these original formations become more limited - just like today's existing desirable cities which can only take so many comers. The solution is generating further knowledge use economies which work towards the same forms of prosperous maturity. One could imagine a long term scenario for some new communities, in which local production becomes so substantial that even the local time use base approaches median income levels. A time use medium of account acts as starter fuel for new communities, where others have already matured.

Last but not least I need to explain why I have gradually moved from the definition of skills arbitrage towards time arbitrage. Certainly, the arbitrage of skills sets - as composites of education, local production aggregates and life experience, are primary. However, skills sets are but a medium of exchange within a potential medium of account framework. Community based time optimization seeks to provide greater value for skills sets than they might realize in today's institutional settings. That is, communities would seek to build a greater medium of account, through the medium of exchange which skills sets can offer. This is why I have gradually moved the framing of skills arbitrage towards a time arbitrage, medium of account framework.