Friday, January 24, 2014

Last Century's Wealth

Prior to the Great Recession, people of all walks of life (and income) shared a similar passion in many instances: finding the "great" bargain, whether by consignment shop, thrift store, or the fortuitous yard sale. Today, this recent pastime exists in a subdued form, and has shifted online as well. Even though a lot of shopping is digital now, it doesn't match the levels of product movement which took place for at least four decades. Individual shipping simply makes movement of some goods impractical. Not only have yard sales declined, but many a retail shop has closed in recent years, in cities and small towns alike. And even before 2008, flea markets - once another place for stupendous "finds", had already experienced their heyday in numerous parts of the U.S.

Indeed, where once several thrift stores existed on the nearby Main Street, the last one closed its doors some months back. As if on cue, a nearby pickup location for another thrift store quickly removed its collection box. For the donations invariably spilled out all around the large metal container box, before they could be picked up by employees of the non profit.

In the meantime, people are trying to figure out what to do with all the extra goods of recent decades, whether housed at home or in nearby storage facilities. So for anyone who is faced with the daunting prospect of organizing a yard sale, the question looms...will anyone come? Of course some customers will show, but mostly on the first morning. Just the same, it's time for me to put together what will be one of several more yard sales. Reasons? The same that most organizers have: making room to get around more easily in one's domain. This house is going to feel even larger than before (at least for just two people), after some of the extra years of taking on are pared back. Hopefully, customers will take advantage of a lot of clothes and collectibles which will simply be offered for free. That's the thing: even though they're still perfectly good...who really needs them?

The 20th century was really a production "wonderland" for factory product of every kind imaginable. Today, people of all political stripes continue to count on greater production capacity to provide a good life for millions. To some extent, today's latest manufacture and asset creation can translate into limited forms of services. But in and of itself, production of physical goods cannot continue the herculean task it once fulfilled, for 20th century services.

Perhaps the production transmission problem would not be so significant, except that most individuals now want more service offerings and less product. But in their desire to keep a tight grip on product definition and related financial support, governments have yet to come to terms with this basic fact. Therefore, services are created on government terms which only lead the middle class to complain about a diminished standard of living. All of this merry go round of nonsense also keeps monetary printing from any hope of tending to the plight of the unemployed.

While many aspects of the 21st century workplace will be redefined through automation, people still need to address the portions of services which would greatly benefit from social interaction and coordination - not just the miracle of robots for bottom lines. That's a task which - as far as I know, has yet to be started. In other words, services growth potential needs to be defined in free market terms: more direct, inclusive and locally responsive to all involved, than what is presently in use. We need to stop handing over the most vital aspects of our lives to "customer service" strangers who do not and will never know us. That especially holds true for anyone who is compromised in any way with such dealings and has no one around who can help them.

Services reform really needs to happen and soon, or far too many are going to lose aspects of the marketplace which contribute to overall well being and social inclination. Millions of individuals who presently have little ability to use their education or lifelong learning, could assist in the creation of a new and individualized services free market. Think people seem antisocial now? If the existing services marketplace is left to fend for itself while government even takes over marketplace terminology in TV ads to hawk a completely dysfunctional healthcare system, we haven't seen anything yet.

As people from all walks of life seek more services, a lack of direct (individual) services creation means services of every kind imaginable will continue to be throttled back. That's pretty much a given, if our basic approach to services is not reorganized and considered in its entirety. In the meantime, automation will continue apace and start to replace more job functions as they have been recognized for so long.

Time to think about what the wealth of the 21st century is going to represent. Because if it is ever to have a chance at being productive and meaningful, it really needs to take place on different terms than those of last century's wealth. The twentieth century was a great time for the shopping hunt, for asset accumulation, and "See the USA in your Chevrolet" as one commercial of my childhood had it. Much of this does not represent the daily realities and needs people experience in the present. What's more, people don't have recognizable ways to experience work realities that match the promises of their educations, let alone the social rationale for working with others.

It should not have to be the responsibility of monetary authorities to have to worry about aspects of the economy other than the actual function of monetary printing. Alas, this responsibility has nonetheless defaulted into their laps just the same, as governments the world over have refused to enter into real dialogue with their own citizens as to what citizens want and need the most in terms of 21st century product. As a result, governments - alongside finance structures, still try to continue the old course of asset formations as though the 20th century can stand in for the 21st.

People want to experience the world in ways different from even a decade ago, and too few policymakers have become cognizant of this fact. As a result, people struggle everywhere to define the marketplace in more usable ways, and economists are left to hash out the broader ramifications in macroeconomic terms. That's even as the public bemoans the ineptitude of policymakers, and yet continues to leave the job of defining economic destiny, to them. Clearly, this process isn't working anymore.

The job of determining how to make free and inclusive markets which work for everyone, belongs to everyone. We have to let go of the last century's definition of wealth, no matter how sentimental or solid it may have seemed, to some. The fact that governments have allowed knowledge based services to be determined by the few who can siphon wealth from production, has now spilled over into massive wealth limitation the world over. It would be bad enough if knowledge use limitations only affected developed nations and mature economies. But these services deficits, which also exist in the form of government deficits, are not affecting just the developed world. The services instability of the developed world, also makes it more difficult for developing countries which depended on the continued success of the developed world.

Wednesday, January 22, 2014

Midweek Market Monetarist Links and Summaries - 1/22/14

When it comes to blogging, Scott Sumner can't seem to stay away very long - he's been the busiest by far this week.
Last summer it wasn't easy to gauge signs of growth: The dust is beginning to settle
Sometimes, these two get confused - China: the problem is easy credit, not easy money
The unemployment rate should not have been put into the Evans rule - The Fed struggles to find the right guidepost
Some clarification re monetary offset: Reply to Matt Yglesias
And, Central Banks do monetary offset even while denying doing so
Individual members of the Eurozone no longer have room to devalue: Is the ECB making "rookie mistakes?"
How to think about recent gains? I consider myself a moderate supply-sider however...
IndoAsia is probably a nonissue for US inequality going forward - Goodbye BRICs hello IndoAsia
Re-employ the 3 to 5 million excess unemployed, then start working on supply-side problems that reduce U.S. employment:  I welcome "abrupt policy adjustments"
Some clarification re Krugman vs Barro
In 2008, it was as though New Keynesians became old Keynesians, while monetarists became Austrians: Further thoughts on Robert Barro

Econlog posts from Scott Sumner:

The "feel good" post of the week, with graphs (Marcus Nunes)
When FDR delinked from gold, things improved in a hurry...
Marcus offers highlights of a paper from John Williams of the San Francisco Fed

Bubble...or no bubble? Some links (Lars Christensen)
Lars takes an international monetary perspective:
Perhaps this letter to the Financial Times will help...

The UK inflation rate drops in December (Britmouse)

Negative for the last five years? Not an easy question to answer (David Beckworth)
David explains how the efforts of Miles Kimball and Scott Sumner have made a difference:

How might the theory of the demand for gold, play into matters? (Nick Rowe)

Some clarification on a recent Econlog post from Scott (David Glasner)

Discussion re David Glasner's "Free Banking and Monetary Reform" (Jonathan Finegold)

Gold, per se, was not the problem (James Caton)

Goldman Sachs is still bullish (James Pethokoukis)
Is the US recovery about to die of old age? 3 reasons why it isn't

Also of interest:

Since The Browser goes behind a firewall on Feb 3, I want to highlight a few more articles they've picked up, prior to that date Both of these are helpful for thinking about healthcare and related issues:
David Pilling (FT) How Japan stood up to old age

Car ownership is changing:

Tuesday, January 21, 2014

Aggregating Functions and Other Musings

This post is mostly prompted by the fact that The Browser will be taking their readership "behind the wall", as of February 3rd. There's no big expense involved, for anyone who wants to keep reading - just twelve dollars a year to stay connected. So why not just go ahead and pay a small sum? The problem:  if I subscribe to The Browser, where do I stop at buying subscriptions? There are so many other publications I would like to keep up with, as well. Indeed, some of the articles which The Browser collects have already been placed behind existing paywalls, which I imagine would still apply after this particular subscription.

If I were more comfortable about purchasing things online (still have a ways to go in that regard) I'd probably subscribe immediately. However here's the issue: For a similar fee, I could subscribe to other equally worthy publications as well. But where is the time to read them? Consequently, I find myself aggregating information and knowledge from the places I can still access at no cost.

Lots of others take a similar route for the same reason, and there's no question it affects how a lot of dialogue plays out - online and elsewhere. Even so there is something of a loss involved. In particular, articles which The Browser aggregates often serve as a window to the world, which I otherwise would not seek out in my spare time. Readers who have kept up with my posts also know that I've linked to plenty of those articles over past months. Everyone benefits from knowledge and information aggregators, but there is something about individual time perspective which is at odds with the way that publications are trying to address the problem.

Again, it's not the costs that are unreasonable. Rather, the fact that very real limits on our time are going to affect how many publications successfully continue going behind paywalls. Standard economic reasoning may not give enough consideration to one's limited time perspective. To be sure, publication offerings are yet another product separate from time. Many publishers and aggregators need to at least charge enough, to help the providers continue in their efforts. What's more, if such reasonable offerings were actually a book, many wouldn't think twice about buying, because the book exists in a form that serves to remind us of someone's focused effort. At some point in the course of a lifetime we would finally return to it, as needed.

But that's not the way it works with recent articles and short publications. While some stand up to the test of time, a lot of them are quickly forgotten in the crush of competing information. How to find better methods of aggregation that ensure a lot of written words - especially current and pertinent dialogue - aren't just forgotten? This is particularly important when it comes to K-12 education. Once, society was doing enough to provide default aggregation points for all students, but that is no longer the case.

Default options serve little purpose in providing the same information to all students, unless that information is really important. And when school is left to public or private special interests, often a lot of students never get more than the basic default settings. For the most part, students need to define education after that basic point on their own terms, if they are going to make that information of use to them. Otherwise a lot of time just gets wasted.

Even though everyone utilizes certain default information for basics, they need access to these settings through a mechanism that sorts by their own intentions and levels of communication with the subjects. In other words, students have to be able to take more active roles in the aggregation process, and they would benefit from local facilitators who can help them to do so. However, in order for local facilitators to become part of this process, education needs to become less about what happens in classrooms, and more about individual life paths that intersect with one's own applications and interpretations of the latest knowledge. Not to mention, how such knowledge intersects with previous handed down "wisdom" and yes, wisdom.

Perhaps that's what a lot of the "stumbling about" of the digital present represents: finding the kinds of aggregating functions that people can get behind and support in sustainable ways. No one knows yet, which methods can stand the test of time, and it would be great if knowledge preservation were a vital part of the process at local levels. If local education can move towards more interactive roles, it would make a tremendous difference for many a student and community.

Local facilitators of information and knowledge aggregates could be some of the best options going forward, for making things happen. Today, subsets of subjects have so many books, interpretations and articles, that they would easily fill what 20th century libraries provided through multiple subjects. Thirty years ago, those subject delineations still made sense, but that is no longer the case in many instances.

It's not that we no longer need schools and libraries - just that both concepts have long since outgrown their earlier physical and specific constructs of the 20th century. As a result they are more digital and need less dedicated physical space for individuals to congregate around - an advantage that local learning efforts need to start taking advantage of. That also means space use can shift to multiple definition with a minimum of staging efforts.

The aggregating function is a substantial component, for local "branches" in knowledge use. Through that function, individuals become like mini libraries (and sometimes, counselors) in their own right, for the local student who wants an open door for any subject that goes well beyond what a simple class can provide. There are a number of ways one might think about this function, because it also serves as an extension for activity once reserved for urban places, where knowledge use was condensed and apportioned on time that was once quite expensive to assimilate. We all become aggregators of a sort, for the aspects of life we focus on the most. With a little luck, that could matter more and more, in the years ahead.

Monday, January 20, 2014

For Prosperity's Sake: Set Knowledge Use Free

Otherwise, everyone is in a world of hurt, right now. I know we are supposed to be making progress, and some nations continue to do so, in important ways. But global growth has stalled. What's more, many parts of the world remain fragile, because too many local economies don't have useful ways to connect with the gains of technology, knowledge use and economic prosperity. That leaves them vulnerable to fringe elements, which would just as soon the locals lose their ability to stay connected with the gains of progress. Likewise, local resources and institutional structures become threatened in their turn, as their citizens are gradually disempowered.

Terrorism and fringe elements especially thrive, where locals have little knowledge use access to more developed areas. That leaves isolated areas vulnerable, to those who would usurp their hard won gains in other regards.  Strategies are not just a matter of building up schools and/or military, and then crossing one's fingers that schools don't get torn down. Rather, this is a matter of knowledge use implemented locally to strengthen citizens from all walks of life, wherever they reside. If maintenance is needed for local technology for instance, that's something which needs to be integrated into local work and ongoing calendaring. Building a stronger economic base is something that any nation needs to continue for itself, instead of making promises with development or other monies that are only redirected towards local special interests.

Nations can only move ahead in the long run, by regaining faith in their own citizens to rebuild a truly free marketplace of ideas. Widespread skills and knowledge use are the only counterpoints to 21st century technology, which actually have the capacity to make technology applicable for overall prosperity. That means providing all citizens with the right to important knowledge use in their own domains, instead of institutions which are situated far away. By so doing, areas that are far flung from major city centers can remain better connected to those major centers, as active economic subsidiaries of knowledge use. By taking knowledge use beyond the city institutions, outlying areas would be also less exposed to fringe groups which seek to take those central governments down.

Developed nations have their own vulnerabilities, when their citizens are increasingly denied the gift of true freedom to use their minds. As a result, that lack of freedom obscures an entire potential marketplace. It represents vast economic investments, which consequently may not have a chance to materialize. There are few really free service markets, in a world which depends more on services and knowledge use, by the day. When the few are granted the right to determine knowledge substitutes for the decisions of others, remaining markets become primarily about political coercion.

Special interests are often not cognizant of the degree to which they endanger capitalism by seeking favor from government. Worst, the lack of spontaneous economic activity not only makes people think capitalism has failed, they seek to supplement it with even more coercion. I was not able to read Ryan Avent this morning (reached my monthly limit already at the Economist) but some readers who haven't yet reached their month limit can get through. The article is "There Could Be Trouble Ahead", and it looks at the potential effects of automation on the labor market.

Because knowledge use is currently limited to the few amongst populations, a growing number of individuals are also endangered in the job markets, as technology becomes a greater factor. As a result, the very technology which could otherwise provide prosperity for the majority, ultimately becomes possible to access by mostly the few. Even though some want guaranteed incomes that would preserve limited aspects of technology for the masses, a guaranteed income floor in and of itself could not provision the kinds of technology, that would allow populations to continue improving infrastructure.

Compensated knowledge use arbitrage has the potential to bring balance back to the economic realm. Indeed, many people took on educational investment in the 20th century, with the belief that this was the new economic reality. Where once people could depend on land use to assist with survival, skills use was supposed to take the place of land use, thus governments led their citizens to believe that it could.

Hence when that promise seems broken, citizens have a right to be angry with their governments. But the good news is that governments can still realize that promise by allowing people to once again assist in the needs of one another, without the constant intervention of special interests to keep them from doing so. If governments are willing to do this for their citizens, free speech will actually come to mean what it is supposed to for a democracy to work, instead of just being a vehicle for coercion and intimidation.

By bringing knowledge use into monetized time arbitrage, the use of knowledge can once again be restored to democracies which might otherwise fail, without a similar process to preserve educational investments. No nation can expect to remain secure - no community can expect to remain strong, if their citizens invest in knowledge gains and yet have no way to make their investments work for them, outside the limitations of institutions. Without the ability to use knowledge to help and assist all individuals in free marketplaces, education - no matter how targeted - would only mean diminishing returns for ever larger segments of the population.

Set knowledge use free, for prosperity's sake. For democracy's sake. For the sake of every individual who dreams of a better future for themselves...for the world...for those who every person cares about. Set knowledge use free, from the shackles of institutions which unfortunately take what they need and end up throwing the rest away. Until our institutions are willing to allow us to create a true marketplace for knowledge, technology remains a threat to the participation of millions, when it should be a vital part of what frees us all. The enslavement of knowledge use, is the enslavement of mankind. We can do better than this.

Saturday, January 18, 2014

Externalities: Got Negatives? Make Positives

Dialogue can be a tricky thing. Thus, a lot of economic issues are conveyed, depending on how they are ultimately framed. Sure, it's easy enough to emphasize context, but how could that turn negatives into positives? Presently, the most important economic "externalities" are the unemployed of all nations. Their problems need to be addressed both at home and everywhere - in a world that needs immigration and focused domestic efforts at the same time. The unemployed and underemployed are the negative realities which today's institutions no longer have room to include - at least not to the degree that individuals prepare for. However, the ways that economists try to explain unemployment, are being brought into question.

The reason this matters, is that society does not have other cultural or social places for the unemployed which make much sense. Only consider the degree to which people marry those who are in similar circumstance as themselves. Just to marry someone with "subpar" health or related circumstance, can mean a life of struggle (in spite of one's hopes to the contrary), for anyone who marries for love. In the past, people without perfect "report cards" could still have a life and raise families. Whether because of land holdings or the ability to emigrate, they generally had options to the institutional ones that came to define the 20th century. Thus in the aggregate, most still had ways to contribute. What's more, it didn't really matter in a larger sense, if one's contributions for the world appeared "subpar" by industry standards.

How can we rationalize that anyone without a straight "A" report card, doesn't have what it takes to be responsible for anything...or even not be expected to "have a life"? Hmm. Invisibility only goes so far, especially for negative externalities such as unemployment. Hence, some dialogue can make the unemployed seem like so much "pollution", i.e. more of a nuisance factor than anything.

Or, some simply reason that these people do not want to be employed. And in many locations, marketplaces are not set up well for full employment, either. What gets missed: any system that does not have ways for all of its participants to contribute beyond consumption, is going to end up fragile. Humans don't do well, when consumption is their only real option. The longer that anyone lives with primarily a consumer role, the harder it becomes for them to maintain reciprocity and understanding, with others.

In some ways, it makes sense for an institution to refuse employment to someone with a chronic illness. On the other hand, the institution has thereby created a negative externality. It does not make sense for society to think that the individual with chronic illness still has the ability to carry their weight or pay their bills, if they are not in fact employed or otherwise able to participate in economic activity. Disability payments (beyond medical need), are little more than a result of the fact that no one has come to terms with this problem. Even though nations worry about the plight of the unemployed and underemployed, the greater worry over middle class issues, now gets in the way. Consequently, governments expect businesses to address inequality and access, at the precise moment businesses find themselves able to do less.

What this means: in the aggregate, fewer people are gaining the positive side of the ledger which institutional validation provides. Oddly enough, when too many people find themselves on the negative side of the ledger, so too do interest rates and investment opportunities. At multiple points in history, individuals could provide their own resourcefulness for better outcomes. But there are not as many means in the present to do so. As a result, a growing number find themselves on the negative side of the ledger. That's often true, even though they may have limited access through part time or work representing a portion of their actual capacity. The growing negative on the part of individuals, translates into the larger societal negative interest on return. How to turn that around? How do we contribute to the positive side, outside the role of institutions?

After all, making positives is not easy because it implies the need to rearrange basic elements and even starting over, in some instances. At the very least, this is not the only discussion for starting over with something simpler to use, all around. NGDPLT or nominal targeting is a way for central banks to start over. Also, simpler tax systems are sometimes argued for in similar terms. Indeed, by providing incentive to allow everyone to contribute knowledge and skill,  much present day taxation for services might eventually prove unnecessary. People would be willing to contribute their part in matched services to the bottom line, if they had real means by which to do so.

A more positive return overall is something we can generate, by stepping beyond the bounds of what our institutions are capable of providing. That doesn't mean that we abandon them. Rather, it means a broader definition of skill set applicability than our institutions are capable of harvesting. Our institutions not only pointed the way towards broader skills delineations, they tried to take us there, before the Great Recession intervened. In the process, they have also shown us how we would like to be able to interact with one another, both socially and economically. There is a wealth of skills possibilities which could readily be adapted for use at local levels.  

One interesting aspect about the unemployed and underemployed creating their own knowledge based marketplace: it might be the most comprehensive experiment in overcoming IQ limitations the world has ever known. No doubt, institutions could observe the work these individuals prove capable of and say, "Hey, you don't have to do all that - after all that's something we can do instead!"
Likewise I know the limitations of my IQ. Often, posts that take me the better part of a day to complete, could be knocked out in an hour by someone with a higher IQ. But that's just the thing: people with high IQ, tend to find their time is in high demand, and there is only so much time to go around. Therefore, they can only attend to so many who ask for their help. The same is true of those who can only hire so many, for limited jobs. Let alone doctors, who can only tend to so many patients.

Yes, these institutions would handle all the knowledge work and the decision making if they could. But they can only do so - under present day demands - with the best and the brightest; those who win the popularity or talent contests, the ones with the fewest sick days, bright minds with the best math abilities. However we live in a world where everyone needs to participate, not just the best and the brightest. By arbitraging skills sets between time use similarities - perhaps even age related "handicaps", production value and wealth aggregates need not be lost in the quest for economic inclusion. It's time to turn "lemons" into lemonade.

Thursday, January 16, 2014

A Demand Proxy "Demands" a Functioning Marketplace

Will the real indicator for existing demand, please stand up? Of course NGDP is the stance of the Market Monetarist. But what might this most basic of measures indicate for monetary activity, and any changes such activity might experience in the years ahead? In a recent post, Scott Sumner stated that the Fed needs a good demand proxy. Is the Fed reluctant to adopt nominal targeting because so many links between supply and demand have become distorted? 

Even though a considerable degree of pricing remains sticky in the marketplace, sometimes pricing becomes disputed or even causes outrage. Other times, prices just cause people to turn away from that particular marketplace altogether. Sometimes, leaving a marketplace for others to engage in is perfectly rational, especially when other similar product options exist. However - depending on what a product actually consists of - walking away from a limited marketplace is not necessarily a good thing, especially if that marketplace supplies a basic good. How do marketplaces differ, from the way they may appear?

To be sure, when a good is "naturally" limited (i.e. not because of political reasons), a higher price only makes sense to preserve the good, so that it will not be destroyed or otherwise used up. That's true of both tourist destinations and desirable living locations, for instance. The most important exception to this economic reality, is that of knowledge skill limitations. Not only are such limitations political fictions, false limitations on knowledge use also serve to make the time of others less valuable in orders of magnitude. What's more, limits on knowledge use - unlike economic limits on real scarcities, serve to make important knowledge use more vulnerable to total loss. Tim Harford wonders whether pricing norms might affect recessions - in and of themselves:
...the course of recessions and booms might also be shaped by our desire for prices that move in line with accepted ethical norms rather than the laws of supply and demand...If prices adjusted swiftly and smoothly, "Say's Law" would always hold true. The gnomic law, named after a Napoleonic-era French economist, is that "supply creates its own demand". The implication is that recessions can only be due to supply shocks, not simple lack of demand, as Keynesians claim. Prices and wages should adjust to ensure that supply and demand are always equal. In the world of Say's Law monetary policy should have no effect. Yet prices and wages sometimes fail to adjust. Of such inflexibilities are born substantial economic fluctuations.
Many readers know that I believe recessions have monetary causes. However, central bankers are often swayed by supply side circumstance. That only makes circumstances worse, when central bankers do not continue to follow the monetary demand that backs the intentions of economic participants. I still have some confusion about why monetary policy would have no effect as to Say's Law, particularly given discussions at Economists View where many commenters do not believe either in Say's Law or monetary policy either, for that matter.

Harford's quote is longer than I normally post, because I wanted to explore it a bit. For one thing, regular readers are aware that I believe Say's Law can be applicable to knowledge use and services, in lateral time arbitrage. The reason supply and demand could be inclusively matched within the same hour framework, is that matches would be sought out within a variety of production structures, rather than one default production structure. Significantly, that allows multiple interpretations of services otherwise not possible. Yesterday's post explored some thoughts regarding services product. The reason time arbitrage would represent additional growth instead of redistribution, is that work and consumption not otherwise possible, can be created by unemployed and low income individuals. Often, these groups forego services that higher income levels take for granted.

When even those with higher incomes begin to react to relative pricing, it may be time to take a closer look at the existing equilibrium. How important is the marketplace that contains the limited product? Do other options exist besides the marketplace for this product, or are they mostly imaginary? And how in turn might one compensate? What would "making do" without the product actually look like, and is it antisocial or "anti economic"? Are individuals ostracized when they try to find ways to get around lack of access to product? Always, the issue is not the price of a specific product, but whether or not the marketplace for related product is optimally functioning if it is really needed. If there is not properly functioning marketplace for basic product, that's the issue that individuals need to take up with one another.

Sometimes in an effort to leave basic (convoluted) marketplace structures as they are, people shift to price perspectives, contentious though they may be. Invariably, basic economic reasoning gets skewered, but people prefer that to fighting battles which seem impossible to take on. The best strategy is not to struggle over relative pricing, but to seek out other options when limited supply leaves people waiting in long lines or time frames, for instance. However, extended waiting periods have become par for the course, because the provider knows the price can only go up so much. Thus the queue and expected wait becomes part of the "pay". That scenario occurs both in location and service contexts.

A good way to express the difference between new and (already) existing services wealth is the concept of time banking. Granted, time banking shows up as "free", but the rationale (for what is actually barter) is to maintain a service equilibrium which has already existed to a relative degree. Thus time banks take place in economies which are attempting to preserve an existing equilibrium, which may have been threatened by monetary tightening. Importantly, the time banking concept also takes place where income levels are sufficient to already support diverse services. That is, inhabitants are coordinating barter to maintain existing lifestyle and social choices.

Whereas the idea for lateral time arbitrage is for people who otherwise would not have a place to economically participate. Thus, it can create a new marketplace for participants to help themselves and one another, rather than pretend needed services don't matter or else try to make do, on their own. The resultant coordination takes place at a basic level, which gradually allows Say's Law to function monetarily for services. This is possible because time use condenses two to one as measured, and is arbitraged individually for variance, within the hour itself (Say's Law isn't possible when skills use variances are paid through production residuals, for instance).

There would be no taxation on time use, because all community service structures would also be integrated as part of the ongoing calendar. Infrastructure can be coordinated through means other than time arbitrage. Skills licensing set asides would need to take place before such a marketplace could become a reality. Legal compensation set asides would also need to consider the equal use of time involved, by participants.

Lateral time arbitrage is wealth creation potential, which goes well beyond present attempts to regain lost prosperity. Widespread knowledge use for services creation, could bring most community participants back into economic inclusion. So long as enough people have access to adjacent neighborhoods, these activity commitments could prove easier to fulfill than the demands of some present day jobs. By approaching lack of employment in this context, money diverted becomes good reasons to create money, instead. That makes a considerable difference, given the obligations that have already been placed upon the money supply. Even better, the government budgets that have been earmarked for services, can be used more effectively where those services become individually arbitraged.

Creating pathways for more people to enter and access the marketplace, would allow the economy to grow, once again. Of all the demand which appears as though missing, knowledge use is by far the biggest part.

Wednesday, January 15, 2014

Product is Special

How so? In an aggregate sense, product is just as special as money. However, no single product is special in its own right, as money is. Money is special in the sense that it can buy any product. But a single product offering can readily be dismissed or acknowledged in any given timeframe, whereas money is accepted in all time frames. The biggest problem for product in the present is that too much of it meets the needs of special interests and institutions, rather than consumers or potential service entrepreneurs. In a timeframe when too much product consequently doesn't really feel special, capitalism is questioned as a result. Product formation needs to have free expression - even elements of surprise, in the same sense that individuals need to be free to express themselves. Thus the fate of both product and individual are connected in unexpected ways.

If property serves as a spatial point, product is the energy between those points and the participants involved. Also, product exchange is the way the process is measured - hence the manifestation of money and the centrality of product to the process. However another problem with product dynamism is the degree to which wealth capture can destroy it. If people don't recognize services as special product in their own right, it's because they haven't had a chance to prove services belong to this category.

Think how the idea of product has shifted from the physical realm to the mental realm. However it has lost much of its luster in the process. How might services product become more directly represented? Indeed, the need for services creativity and greater expression has been growing for quite some time. However for this to occur, services need to be understood for the wealth potential they actually hold. The institutional definition of services, reluctantly covered with production residuals and redistribution, has long been a default position that does not really meet the needs of the provider or the recipient. As a result, the reciprocity which normally lends so much to human interaction is also lost.

Why hasn't our time use been recognized as a valid product of wealth? Did it just not seem necessary to do so? That could be changing. Until now, it didn't seem to matter that our institutions held the key for our skills sets: even as investment for skills was our sole responsibility. Even so, we do need affirmative validation for knowledge use outside ourselves.

Edward Lambert wrote, "Labor's share of national income sets a limit upon the utilization of labor and capital. That is the basic principle of effective demand." The reason I find a problem with this outlook is that the previous transmission for services from asset formation, has been stretched as far as it can go. While present formations of living and working environments can be maintained, they need to be augmented by broader sets of asset formations in order to continue growth into the future. The previous valuations were necessary to continue supporting many knowledge based services (in limited formation) as provisioned by production residuals and taxation.

Another problem with the idea of labor per se, is that no one really envisions "traditional" labor as product in the same way as knowledge use in its more social or challenging forms. But this important distinction tends to get missed: not only work time as measured in statistics, but in the time frames people are expected to retire. Where knowledge use extends lives, menial or repetitive labor can shorten them. What we end up with is extended labor participation in areas recognizable as desirable knowledge use product, and shortened participation supplemented with disability, for strenuous or physical labor.

Even so, governmental budgets are pressured to delay retirement even further. Yet those with employment that is knowledge use product, generally neither want or need to retire. Meanwhile, disability reimbursements for the wear and tear of strenuous labor, only grow. There is much more than retirement issues at stake. As a civilization matures, knowledge services product become increasingly important. And yet, this becomes more difficult for governments to support. As a result, the whole process tends to break down. How can governments preserve knowledge use for their own citizens?

The fact that our matched and arbitraged time with one another counts as desirable product, also makes it a vital component of wealth creation. This is why lateral time arbitrage could become a part of monetary policy, without the distortions that occur from rent seeking and political battles of will. Earlier services formations often represented product as defined top down, which took away many desirable elements of the actual product.

A community can continually increase skills product offerings, in ways that would not be possible through single institutions whose resources are coordinated from elsewhere. Today, knowledge use in an aggregate sense might be compared to fossil fuels, before a marketplace even existed. Or, imagine other earlier settings when product formation was ramped up to more specific usage by populations in general. In response to David Glasner's thoughts on a pre-monetary economy, Jonathan Catalan wrote:
One guess of mine is that there arose a type of merchant who coordinated suppliers and consumers by accepting a broad range of assets (goods) and assuming the risk of a double coincidence of wants. They would hedge this risk by accumulating stocks of multiple types of relatively liquid assets, which began to narrow over time as some goods became more liquid than others. Finally, intermediate exchange would converge on a single asset: money.
In a marketplace for knowledge product - that is the normal expressions of our identity and purpose as negotiated with other individuals - a community can fulfill the role of the coordinating merchant, amongst which we all in turn become merchants of the accumulated skills pool. While some aspects of skills use narrow (surgical ability) this is supplemented by both technology and optimized education for all skills participants with natural ability in given areas. Plus, when lateral time use is reimbursed instead of skills differentiation (which cancels the time use of others), more natural choices and patterns of skills diversity have a chance to emerge.

Perhaps the biggest benefit of all is that of being able to associate our own identity with economic product potential. Just the act of learning (once again) how to negotiate to achieve desired ends, could do much to bring back social skills, respect and civility. Product could become special again, by freeing and personalizing it - even providing elements of surprise and intrigue. In the process, we would be able to free ourselves of the worry that no amount of education, preparation or investment is enough to survive. By validating the efforts of each participant, product can become something that is once more worth our time and commitment. And when product becomes something we actually enjoy, everything is easier.

Midweek Market Monetarist Links and Summaries - 1/15/14

David Beckworth submitted a request for the Federal Reserve to provide monthly estimates of the short-run natural interest rate:

In a reply to Simon Wren-Lewis, Bill Woolsey explains that monetary and fiscal policy are not the same thing (my reply to Wren-Lewis is here): Wren-Lewis on Fiscal Policy
How might the need for base money eventually change? Market Monetarism and New Keynesian Economics, Again
Neither one of their proposals is a good idea: Summers vs Blanchard: Choose Your Poison
Woolsey agrees with Rowe that the ZLB is largely self-imposed: Rowe on the Liquidity Trap
The lower interest rate only dampens the decrease in asset prices: Secular Stagnation and Asset Prices
Is MM irrefutable? Testing Market Monetarism

"A test has already taken place." (Marcus Nunes):
Price stability first?
Marcus highlights a recent Ambrose Evans-Pritchard article:
Some variations in the last five business cycles with charts:
How will history remember Bernanke?
If this graph doesn't convince anyone...

James Grant misses the mark in this WSJ review (David Glasner):
A Stephen Williamson "takedown" via Greg Hill:

What is actually necessary to manage liquidity? (Nick Rowe) Monetary policy, fiscal policy, the target, and the size of the central bank
Where "corporate bonds" become land (Nick responds to Bill Woolsey):

(Scott Sumner) given the fact that construction costs are much higher in the U.S...The U.S. should have crappy infrastructure
Some days it's just emotionally rewarding to offend people - Bashing Smith, Kling and anyone else that gets in my way
Further thoughts on inequality: Reply to Ryan Avent
Is NGDPLT really what's happening in this hypothetical? A reply to Arnold Kling
"what really matters is how policy affects macro forecasts, not how actual results differ from market forecasts" Mike Konczal provides two arguments against monetary offset
Still a mystery: Different types of unemployment (it's not the discouraged workers)
What purpose served? How would the Fed respond to the elimination of extended UI?
I certainly agree: Why history of thought matters
An important distinction: Fiscal and monetary policy are not alternatives

This week at Econlog (Scott Sumner)

Another "must read" for Lars Christensen:
A new paper:

This was not one of the "genteel post-1980s recessions" (Ryan Avent)

Bonnie Carr contemplates the road less traveled:

From Evan Soltas:

The only category rising? Less than high school education (Kevin Erdmann)

James Pethokoukis: For the long term unemployed, the U.S. job market is in a depression
Turn more workers into capitalists? The solution to income inequality and immobility? It's been right in front of us all along.

Also of interest:

From the book "Naked Statistics" (Charles Wheelan) now out in paperback

Don't we all! (Ryan Long)
Regrets, I Have A Few

Tuesday, January 14, 2014

A Reply to Tony Blair

In a recent article for Project Syndicate, Tony Blair promotes education for cross cultural dialogue, amongst students around the world 12-17 years of age. Here's some of his concerns:
...stories of terrorism and violence perpetrated in the cause of a false view of religion...Today, in an arc that stretches from the Far East through the Middle East to the streets of cities in Europe and in the United States, we face a scourge that has taken innocent lives, scarred communities, and destabilized countries."
Blair seeks to counteract growing terrorism, the result of fanatical Islamists, as well as "Christians, Jews, Hindus and Buddhists who disfigure the true nature of their faith." However, I sense underlying economic causes, which I wonder whether Blair has taken into account. In recent decades, there has been a sea change in rural life in the U.S. While there is frequent dialogue regarding struggling areas in the cities, the lack of economic access for rural areas is mostly ignored in U.S. dialogue. Discussions about poverty are not the same thing, for they mostly revolve around governmental solution finding instead of actual economic viability at local levels.

So when political insurgent problems finally arise which start out rural in nature, they can be like a fire which is practically impossible to put out. Rebels of all stripes may be inclined to laugh and fire their gun in the air when people look astonished and ask, "Why can't we all just get along? Where did all this anger come from?"

Much of what was labeled a war on poverty, should have been taken on as a campaign to restore economic viability and diversity at local levels, decades ago. Terrorism has more backing than ever, in places around the world. But it wasn't always this way. Today, anyone with money who has issues with the status quo, can just tap into the economic vacuum that was ignored at local levels by everyone for far too long. Finally, the hate spilled over into the cities and everywhere. Any nation or government which hoards the main economic action for its cities and capitals, leaves its rural areas too vulnerable.

One only hopes that Blair's efforts can do some good. Still, I am concerned that the outreach he supports, will mostly reinforce good feelings that those of different faiths already want to extend towards one another. In other words it works as a social signal for those who already stood to gain, from being so inclined. Efforts in this regard, don't take into account why different faiths step into community roles which they never should have had to assume in the first place. Who else was around to help citizens discover better ways to help themselves? Too often, the purpose of formal education has been to encourage escape, from places which are consequently left with little economic purpose.

For too many places, local faith ends up as the last provider of social coordination and integration, left standing. In all this, the fact that we have history to show us how to avoid episodes of conflict, isn't enough. When people are not economically connected to one another in real ways, they will keep stumbling over and over again. No government can afford to forget that, yet it is a crucial mistake which formal education and governments have been making all along. Working through the same channels to repeat a similar message again mostly reinforces the status quo.

Local education is often not a contributor to success at local levels, because it is taken on for purposes mostly beyond the community which commits to it. This is true both for teachers and students. In many instances, their activities are not connected to actual ongoing services needs and wealth creation potential amongst the community. Once a student graduates, oftentimes a dozen years of efforts simply stop with no further place to go.

That may still hold true even when private schools provide better quality education, for the purpose remains externally and institutionally directed. In other words, education is still mostly about preparing people to look for something other than the ways they are experiencing reality. Supposedly, other institutions are able to pick up where schools leave off, but the coordination amongst these doesn't really exist. That translates into students not knowing how to proceed from their present circumstance, and not knowing how to help others from what they've learned. It's left to one's local faith to pick up the pieces - whatever that faith happens to be.

A lot of this comes down to patterns of centralization or decentralization, and how they are ultimately arrived at locally and nationally. Today there are calls for decentralization in the U.S. but so far the dialogue is reactionary. What matters is whether proposed methods for decentralization are productive or reactionary, for there is a world of difference between the two. One is simply fed up with dictates from elsewhere. Whereas the other is prepared to take knowledge use, and apply it so as to allow communities to take better care of their own and create renewed wealth.

Before anyone can actually become capable of economic diversification at local levels, they need the rights to knowledge use for individuals which would make that possible. Such knowledge use rights would make local education effective, so that all in community could become part of local coordination efforts for services and wealth creation. These knowledge use rights might also encourage local leaders to once again take the chances on extensive support of local educational efforts. In some parts of the world, villages without local knowledge use are even hampered further, by terrorists who block the entry of doctors who would come to help the wounded and the sick.

When people who are geographically isolated are expected to rely on coordination from economic structures far away, they don't trust them. But that's not the worst of it. They may not trust each other. They become reluctant to approach their neighbors for anything, because they don't see their neighbor as being invested with value or skill either. That's particularly true  if no institution is currently investing in the skills of locals. They may no longer see the product formations of others as valuable, and begin to reason that if they need something they can tend to it themselves. It's just not a good idea for any society to go too far down this path.

Instead of providing choice and freedom, products and services are now seen as something to be parceled out on merit, instead of spontaneous ability and aspiration to share with others. People in every community need knowledge use and economic diversity where they are - not just access to cities in critical moments of their lives. Otherwise, no social diversity will ever make sense to them, and understandably so.

This set of affairs has been going on for too long, and I don't like the fact that it is happening. Without the right to local knowledge use wealth, no village can aspire to economic and social connectivity. Every faith struggles to turn its own radical members around when they have been economically abandoned - in some instances for centuries at a time.

Sunday, January 12, 2014

Inequality: Just Another Word for No Access

...There's no better way to say it, because it's true. Unfortunately, anyone who thinks that ongoing rounds of income increases can take care of "closed doors" is only kidding themselves. But the powers behind the closed doors will settle for higher wages all around, because it gets the heat off of them till the next time. Instead of constantly expecting better rent from the landlord or more pay from the employer, what we really need is the right to use knowledge and resources of all kinds to tend to our own needs. I should ask forgiveness in advance from my readers, as it's been a while since I've taken on a blog rant like this one.

People don't really like to talk about a lack of economic access, for good reason. Consequently, a lot of important economic matters gets discussed in terms of price or income  "justice" instead. Basic economic logic frequently goes out the window, because there are other issues at stake. Several times, for instance, my Dad asked, "Are people supposed to sign on to Obamacare, who don't even have jobs?"

Thankfully neither of us have to find out the answer right now, because we both do what we can to stay as healthy as possible. Since Dad never signed on for Medicare, at one point recently he was concerned he would be required to sign up now and have money taken out of social security, which he's been using to pay the considerable expenses for Mom's last year. As always I am proud of the way he's been able to tend to every bill, as soon as it comes in the door.

This blogger is not looking forward to the inevitable income inequality debates, for the remainder of Obama's time in office. Government has created far too much of the inequality it now wants to complain about, and there are lies enough to go all around. No amount of taxation sleight of hand is going to fix this mess. So far, no one is really interested in tackling the basic equilibrium - the one where the most important points of economic entry to life itself, are jealously guarded. No one in power is going to be the first mover and suggest actually making economic access easier for anyone. Because to do so, only weakens the relative status of the special interest (institution) that extends inclusivity.

Yesterday I indicated that I wanted to post more thoughts on Jesse Myerson's Rolling Stone article, in a post which touched on potential land use in the 21st century. As it turns out, the Myerson article caused quite an uproar this week. While yesterday's response was in good spirits, a look at some of the other arguments and the way they actually played out, has unfortunately upset me a bit. Instead of recognizing the fact there was good reason for the litany of complaints, the entire discussion degenerated into a series of outbursts and the usual retrenchment all around.

Hence, my grouchy mood today. Indeed, the temptation was quite strong to place the words "NO ACCESS" of this post title, in caps. A writer at Forbes responded to Myerson, that if he didn't like the way things were, he could live in a yurt. Sounds okay to me. But I don't know of any yurt neighborhoods or subdivisions. Clearly, this would not exactly be a money maker in traditional community terms, and participants would have to think things through quite carefully. In other words, people with like interests would have to organize and do a lot of work to make it a reality. In the meantime, someone at Forbes is imagining an important form of economic access, which really doesn't exist in regulatory terms. At least not in any neighborhoods I've seen in the course of my lifetime.

Recently, there was a news story on TV about one of the designated "promise zones" which Washington plans to commit to in coming years. A young boy from one of the poor neighborhoods selected was interviewed, and he spoke of how he wanted to become a doctor. But then, he explained why in a way that startled me: by speaking of the "rock star" lifestyle it was going to provide for him, particularly the nice house and nice car.

At first, thinking about the news report, I was dismayed at his response. But then it occurred to me - how could he really think about life any differently? If the young boy saw success at all, it was probably people in the media who lived in the way he envisioned. The actual work he would be doing, seemed little more than an afterthought. Becoming a doctor, not so much about healing as about having top status? There's little in between, and little real element of choice. Either make it in a big way or not at all. How on earth are we supposed to do it this way? No wonder so many are counted as "losers"

Perhaps what it really comes down to is this, for some of us. Just move away from abstract ideas of ownership, or somehow redirecting wealth from production of something that isn't part of our most basic needs. But move towards the production of anything that is directly related to us; that is an ongoing part of our lives, and that technology can enable us to do. For most of us, we don't need to own the abstract means of production or gain its excess wealth, whatever that might be in our minds. Rather, we now need - again - to own specific means of production that relates to our own realities. Instead of some indefinable share of the world's wealth, we need to return to the idea of how we can transform resources, skills and time into our own wealth.

The only way to overcome the worst aspects of inequality is to allow people to build or rebuild their lives from where they are now. Sometimes that means the safest and least complicated measures possible of making a place to lay one's head, one flexible component at a time. Or, an effort to cooperate with others, one measured hour of skills arbitrage at a time. That way, we do not have to constantly despair that we cannot escape the circumstances we actually live with.

Suppose people create zones of infrastructural variation, that don't resemble the wealth of the present. Does that necessarily mean we have just entered a lower IQ or suboptimal zone? No. It is too easy to forget how many people from all walks of life would select simpler infrastructure, living and working arrangements if they felt secure in doing so. Just the same, no social signal presently exists for this very real need. People would sometimes choose such a reality, who love their work and don't spend much time at home. Or others would choose this low "material" state just so that they could have more time to do whatever they wanted. It's been far too long since anyone has had the right environmental options to make this choice.

Too much of our culture has been obsessed with escape of every kind, when the places anyone can actually escape to are no longer available as they once were. Every time someone escapes, there is still the reality of the inequality of the place that was left behind. It's time to allow ourselves to find and create new wealth within, where we already reside. That's the only way that inequality will become less of a problem than it is now.

Saturday, January 11, 2014

What Purpose, Land?

In a sense this post considers what I would also call a primary intersection of time and resource - that of land. There was a "Take Back the Land!" call in a recent Rolling Stone article by Jesse Myerson, "Five Economic Reforms Millenials Should be Fighting For". Were it not for Jonathan Finegold who discussed some of the landlord aspects of his arguments, I might have missed the article. After all, I have not read Rolling Stone regularly since my twenties (three decades ago). The arguments of this music magazine once influenced me, before I even associated with political ideas. Hence I could only think, what a "long strange trip" it's been since those early notions!

What purpose, land? It helps to think about the ways land is used for wealth creation, in terms which go well beyond Myerson's complaints re landlord holdings. Even though people are fed up with the status quo, that doesn't mean land is ready for a mass free for all (short of revolution) - any more than money printing is ready for a mass giveaway just because it seems possible to do so.

As Jonathan Finegold reiterated, land is scarce and must be economized. Until the recent "optimization" for "professionals only" (which finally lowered some values) in desirable areas, people have done a reasonable job of economizing land. Even though the process has not been without its struggles, people moved from agricultural land use to land use for product pathways. And elements of both will continue into land use for the 21st century and beyond.

Except now, these two vital processes are no longer enough. Throughout the 20th century, skills and knowledge use were being prepared, yet without the more complete marketplace representation they would actually need. Even though this marketplace will not require the space that agriculture and product movement need, organization needs to occur in more dense and overlapping formations of land use. Until this happens, much  of our socialization and knowledge use processes remain trapped in online applications. And many institutions only contain skeleton versions of the knowledge use that needs to be tapped and implemented.

Today, many of the places that the younger generations desire to congregate and interact with one another, are already fully occupied. What's more, these institutional residences aren't always amenable to patterns of knowledge use that fall outside their specific domains. That leaves the Internet, for tremendous amounts of social and economic engagement - a dystopian reality if there ever was one. Perhaps this is a part of the frustration in the Rolling Stone article - a frustration that cannot be ignored.

How to think about this? For one thing, we need to give one another the right to harvest a vast marketplace of skill and knowledge use potential. Many obstacles still stand in the way. Also, there needs to be land use components which better fit services diversity. Presently our institutions hold most of the rights for knowledge use, and much of the (most desired) space for land use as well. That's why new areas will need to be created for more productive knowledge use markets. If we were an active part of our existing institutions, none of this would even need addressing. Capitalism remains capable of representing the flexibility and dynamism that encouraged the flowering of knowledge. Regaining that earlier flexibility requires stepping outside the bounds that no longer work. Capitalism needs the knowledge use marketplace that we can create.

Think about the spatial aspects of this problem. Land parcels that could be set aside for economic regeneration, are places to begin the process of moving forward. Even though these communities would rely on traditional transportation, most of it would reside outside the bounds of areas where primary economic activities take place. Because of the automobile and transportation of the 20th century, earlier services densities had drifted towards far flung service formations. The service amenities which once were possible in a city of 25,000, eventually required millions. And even then, there was no guarantee that service optimization patterns were even close to the former.

New spaces would represent voluntary and informal service provisions, on the part of all members of community. In other words, such land parcels would be associated in the public mind as places where one can freely go, so long as economic activity with others has been coordinated or in the process of being coordinated. Contrast this social intent with parks and public spaces, for instance. Much as anyone likes public areas, they are not key for social and economic change. Certainly they help for lifestyle factors, but in and of themselves are not really capable of contributing toward community progress.

A central issue for the 21st century is the degree to which wealth gradually coalesced around limited economic access points, and their associated real estate. Unfortunately, these were overwhelmingly defined by special interests, rather than existing for an entire continuum of economic participation. This is why even the most commonsensical solutions are not feasible, when people are finally compelled to problem solve. In knowledge based terms, such polarization also shows up as further deviations in IQ. By making land a focal point for multiple activity amongst multiple groups, IQ can once again become a moving target instead of a fixed judgment.

Land, of course, is just one aspect of the article by Jesse Myerson. There are some other responses to the article that I hope to read tomorrow and then do a follow up post.

Friday, January 10, 2014

An Intersection of Time and Resources

There are a number of ways one might consider, what makes up the nominal target measure. Simply put, it is aggregate spending capacity. Yet, it also relies on time elements of participants, in order to derive snapshots of how activity evolves. This is also why labor force participation is so important. After all, the greater the overall involvement by populations, the more dynamic an economy is going to be. Aggregate nominal income does not necessarily mean everyone holds "jobs" per se. Rather, it is about the intersections of our economic time use, with the resources that are affected in turn by our input. This intersection represents the degree to which resources are actually utilized in an aggregate sense, and shocks fluctuate primarily around this trend.

Lately, some differences in these intersections are increasingly on my mind, and I hope to post more specifically about them in the near future. Perhaps variance in these time/resource intersections may not appear all that significant, but I find them fascinating just the same. Oh, to be about twenty years younger so that I could really explore them all! (Unfortunately I needed to be about twenty years younger to retain what I was learning in math as well, some years back) At any rate, this blogger is convinced that a time/resource intersection point helps to explain the reliability of a level nominal target. One might say it is the nominal indicator which still stands, should other methods of measure eventually fall off the rails.

The nominal level also serves as a short cut measure, to counteract numerous supply shocks on the part of multiple resources. The reason it is capable of doing so, is the fact that aggregate time use is the most consistent or steady element. Even though variations in resource use are ongoing, they still change our time to resource representation more slowly. That's another way of saying that central bankers should not have to be losing sleep at night, putting out the fires of shocks. To be sure, the impacts of those shocks need to be accounted for. Even so, they need not stand in the way of the money that is being printed at any given point in time. Indeed, when they are accounted for first, that only ends up distorting the patterns of economic participation.

Also the nominal level is useful as an indicator, to highlight how resource use changes over time. For instance, it is capable of contrasting changes in production for product separate from our time. This measure would be capable of holding independently, arbitraged time as designated for knowledge use and skills. These individual groupings can be held constant with one another, which would make production gains in both, easier to ascertain. While the first provides clarification for a futures market connected to globalized product, the knowledge arbitrage market of the second can provide a way to calculate services alongside production.

No single resource is really relevant on its own, in simple quantity terms. How does society relate to the usage of that resource in an individual sense? The resource dynamic is also affected by our coordination patterns, and the degree they are affected by the resource in question. So long as business cycles involve patterns of resource use which appear sustainable for any reasonable time frame, there's a better chance that the level path of a nominal target may not be called into question or taken advantage of.

Intersection of time and resources is essentially a vortex which all economic activity aligns with, even when this does not occur in an optimal way (i.e. full employment). Time as a part of nominal income, indicates the degree to which our participation rises and falls throughout the process. That is what can be misleading about economic gains that don't actually represent our time or participation.

Another benefit of the nominal target is that it can be applied to experimental group settings of economic activity. In other words, it does not necessarily need the complexity of a full menu of government activity, in order to provide real benefits for the participants involved. This lends the nominal target to decentralized efforts to apply knowledge use in local settings. Here, the intersections of time and resources could be targeted to a degree that they would also be capable of telling their own stories. In all of this, a level target is more than just a nominal stability. It can provide means to better align measurement in multiple settings, whether centralized or decentralized.

Thursday, January 9, 2014

Before Social Programs Devolve to the States...

Whoa, hang on just a minute there. Sure, it's reasonable to suggest - as Senator Rubio did - that the vast majority of social programs be handled at state levels. But how does anyone really propose to do that? Presently, Washington struggles to fund or otherwise support more services than are presently possible at state levels. The fact remains that local and state governments do not yet have the additional means, coordination or resources in place, to be able to take over the process.

By trying to force this devolution through political channels instead of active negotiations, thousands of details would not be considered beforehand. Discussions with thousands of participants from all walks are life, are needed before such a process might actually proceed in designated locations. People need examples of services coordination alongside local education preparation over time, to see what works and what doesn't.

Let's hope no one will vote full scale services changes across the entire country at once. Indeed, the same complaints about rolling out Obamacare in each state at the same time, apply in this situation, as well. Without domestic summits and any real participation from the public, "solutions" would mostly look like the same special interest wealth capture as before. Those institutional incentives would only stretch state budgets even further, while making the actual services marketplace even smaller than the present.

In a podcast with James Pethokoukis, Oren Cass discusses a plan to consolidate assistance programs. The plan has also been endorsed by Senator Marco Rubio.  Indeed, anyone with only a passing acquaintance with my posts might wonder, what is the problem here? Doesn't this blogger advocate for services coordination and accountability at local levels? The problem is the fact that no one is considering this potential sea change in an economic equilibrium context. How so?

States are more dependent on national monetary assets to services transmission, than they realize. People in many rural areas are especially reliant on national assistance for health care. What's presently lacking, is an understanding how income potential and economic access affect this process. Only consider the battles between economists, as to whether monetary equivalence for all participants even matters. If economists aren't making that connection between income and consumption potential, how can anyone expect states to be able to do so? There's no true context of accountability on the part of individual, state or community, yet. Any devolution of social programs to state levels now, would immediately put a lot of people in a world of hurt.

The primary issue in this regard is that only the budget context is being considered, and budgets are stretched out of recognition because of supplier to consumer realities, in services. Just as national government has been forced to dip into deep pockets to reimburse the suppliers of healthcare, state governments would presently be expected to do the same. What's more, the states would no longer have the backing of the entire monetary system behind them, to be able to do so. That means an immediate shift in terms of the population which has access to healthcare.

Consider pension obligations, particularly the "unmet" garden variety which lurk in the shadows of vulnerable municipalities everywhere. Unions! Lefties! Hmmm, but why exactly were those pension payouts getting so high in the first place? A working paper highlighted by Arnold Kling gives a few clues: "...we find that unfunded retiree healthcare liabilities are 1/2 the size of unfunded pension obligations." Arnold adds, "there are strong incentives for politicians to avoid transparent accounting."

They want to get reelected don't they? I certainly concur. Here's the thing. The problem for anyone who relies on social programs, is that sufficiency of vouchers and choice are wishful thinking. At least, so long as the person who seeks services has to rely on product which is essentially defined outside of the marketplace (with political favors). Healthcare providers in particular, are set up for the portion of the marketplace which contributes to their present structure. Many of them are far from ready, to accommodate those individuals who would be showing up with vouchers or the like. What's more, the most basic services people expect now at the national level are becoming strained, as this chart indicates for calls to the IRS since the Great Recession. Clearly governments are overwhelmed at all levels. Citizens need to begin coordinating services by more direct and informal means, in the years ahead.

Even though many social services tend to be associated with lower income, the fact remains that they are necessary to maintain for all levels of income. Even so, no economic balance is really possible, until those with lower incomes can move towards a future for themselves. They need dedicated spaces, where they can generate services based solutions in line with their actual needs and desires. But to do so, they need environments where they can break free of the constraints of special interests.

It is not easy for governments to break their exclusivity arrangements with suppliers, producers and providers, even though services provisions for lower incomes are now being curtailed. An apt example of this discrepancy, is the recent separation of the SNAP program from its former association with government agricultural programs. One would have expected these agricultural subsidies to have been rolled back as well, but the reality is that commitments between Washington and agriculture may only be growing stronger.

The agriculture example illustrates how governments aren't well positioned, to expect suppliers to to be accessible to all income categories. The best that can be hoped for is to designate areas where individuals are free to create product and services more in line with their income and resource capacity. As it becomes more difficult for any governments to provide services, the best road to sustainability for all concerned is to allow individuals to innovate - with legal backing. Over time, institutions of all kinds will need to adapt, for they are responsible for the broken equilibrium between income levels that caused the present dilemma.

Empires of wealth were recently built by healthcare and housing interests in the U.S. but these can no longer be maintained in their present status. Local governments supported these forms of wealth capture just as surely as national governments. Thus the idea of better sustainability minus national dictates won't get too far, so long as the same product restrictions and political favors remain in place.

Wednesday, January 8, 2014

What Does IOR Really Represent?

Some readers might accuse this non economist of taking liberties with language and who knows what else: yes, guilty as charged. There are days I enjoy the places my mind seeks out, but plenty of days as well when I wish it would do a better job of staying on the "main road" - more company there! So for the "skeptical" reader I apologize in advance: this post is perhaps more hypothetical than usual. And yet, I've wrestled with IOR for a while. How to explain my own coming to terms with this phenomenon?

My initial suspicions about IOR still apply, in that it appeared to be a last ditch effort to preserve - as best as possible - a broken equilibrium between varying income levels along a wide spectrum of economic interaction. But the tool itself has skewed normal use of money beyond all recognition, to maintain present realities. Those realities include settings where individuals are either deemed "good enough" to economically participate, or not. And the dividing line is harsh, which makes financial risks higher than they ever needed to be.

Hopefully, IOR is but a temporary tool for the short run, for it appears to hold little real usefulness for the medium or long run. Ultimately it provided some breathing room, to preserve presently defined wealth. But  it needs to be wound down, once a broader range of asset valuations can emerge through innovation and diverse interpretations of product possibilities. Fortunately, IOR has made it possible to amend the lack of liquidity, that one would expect from a functioning equilibrium. Even so, the present lack of normalcy also translates into what some perceive as a lack of "safe" assets. Part of the problem is that all income levels are expected to function with similar risk settings and parameters: i.e. risks conceived for a single (income access) equilibrium that doesn't really exist.

Meanwhile, some are already resigned to interest on reserves as something that will be with us indefinitely. Let's assume for a moment this proves the case in the U.S., and yet a nominal level targeting rule is adopted by the Fed. Even under these conditions, a nominal level target would reduce uncertainly and provide greater stability for both monetary policy and business cycles. However, the balancing effect of nominal targeting could be somewhat reduced with IOR affecting economic outcomes. How so?

One way to frame the issue: visualize unmet (or unrecognized) wealth potential, from aggregate service related production and consumption. If IOR were considered representative of this framework, the only other missing element, monetarily speaking, would be the nominal spending capacity which was never recovered after the Great Recession. Even though central bankers felt they had little choice but to back asset valuations with a vast pool of IOR, no one was really pressuring them to represent the lost wealth of economic participants in the same way. By the time nominal targeting did approach normal, a part of the earlier assets to services transmission was already lost.

Why did those earlier valuations need to remain essentially as before? A lot of sticky prices don't readily adjust, for each price is part of an interconnected web of similar price structures which reinforce one another. The prices of assets in turn are the transfer point for multiple services expectations. The need for IOR was also a result of governments creating lock out effects for their own citizens, over extended time periods.

Interest on reserves is really an attempt to preserve 20th century patterns: patterns which in some circumstance no longer have a place in the 21st century. However the recent dialogue about inequality completely skews what has happened in this regard. Consequently, people are led to believe that others are "unjustly" preventing their access. However it is really the infrastructural circumstance that has proven impractical, for much of the income and resource capacity which actually exists. Governments wrote the laws that prevent the inclusivity their citizens now seek, even though special interests asked for those laws. Invoking inequality in these circumstances is not a good idea.

This is also why suggested tactics such as consolidation of poverty programs or wage increases to assist the middle class, are misguided. When special interests continue to raise the bar of economic entry and access, simplicity in low income vouchers or higher incomes can't address the problem. All economic participants need to have access to production of both services and asset formation on more personal terms, before the general equilibrium can be shifted towards inclusion of all income classes. When this happens, we might finally be able to consign IOR to the temporary "solution sets" of the Great Recession.