Saturday, May 31, 2014

Wrap Up for May '14

What a relief to finally view a major task through the rear view mirror. It took months to put together and price, but all the "bits and pieces" finally formed an actual yard sale - certainly the most labor intensive of any I've experienced. Like so many of its ilk, not exactly a moneymaker, but extra room to move about in the house afterward is always a good thing. So much back and forth was involved that the day afterward, I could scarcely walk.

Why bother with all the work, then? To be sure, clearing clutter is a factor. But in spite of the exhaustion afterward, I felt really good. Ordinarily there's too few reasons to talk to neighbors, and so a full day to do so was most invigorating. It reminded me of the days of retail that I loved, and sometimes still miss.

Plastic as the new "collectible"? Collectible glassware doesn't seem to have the panache it held prior to the Great Recession. Fortunately Mom played that particular market right by selling much of her best glassware in the height of its popularity. I even gave an old plastic watering pitcher to a young man who enthused about his backyard garden, which he presented on his tablet. What a surprise to see plants growing in the same weathered plastic pots (decades old) as some still taking space in the garage! A young woman purchased some of the pink plastic dinnerware had which graced the dinner table fifty years earlier. Odd to think we were both sentimental about old plastic! I showed her one of the salad bowls I still used - stains and all.

Of course, the main thing that stood out in this month of May: lots of resignation all around, regarding lowered growth levels in the economy. Let alone the fact the "winding down" process is apparently just beginning. Who knew: agreement seems to exist between the Fed and Washington elite about this whole state of affairs. But why haven't new possibilities for growth and economic direction even been discussed? It almost feels as though our government is telling citizens, "Sorry, we're just not that into you". Because if renewed growth mattered to Washington, by extension it should matter to the Fed as well. Combating inflation is mostly an excuse.

This wrap up includes some additional links which proved too numerous for inclusion in the midweek MM postings. First I want to highlight a quote from Michael Strain (HT James Pethoukis) in this Washington Post article, "Robot workers could tear America's social fabric".
Today, it is tempting to think of creative destruction as a relatively benign thing - Starbucks replacing mom-and-pop coffee shops, or companies going out of business from time to time. In reality, creative destruction can be a massive, painful force.
That's not to say creative destruction isn't needed, of course. But all too often we're left with limited circumstances where creative destruction is allowed to take place, versus the scenarios where creative destruction doesn't get a chance. Often the latter are the ones which could have provided significant societal gain. Why the difference? And how can economic environments continue to exist, for the social activities which people miss most? I hope that Strain's article gets the attention it deserves.

Sometimes creative destruction doesn't get a chance to happen because of concentrated markets:
http://www.nytimes.com/2014/05/28/business/economy/concentrated-markets-take-big-toll-on-economy.html?partner=rss&emc=rss&_r=0

Or, creative destruction doesn't get a chance because of the way the rules of the game are written:
Robert Litan for the WSJ...A Start-Up Problem That Extends Beyond the U.S.

An interesting statistic indeed: http://blogs.wsj.com/economics/2014/05/28/7-million-people-earn-americas-other-minimum-wage-23660-2/?mod=WSJBlog

And, some rather inspiring posts:

Tiny Houses with Big Ambitions from Time

These words from a commencement address given by a Navy SEAL made me feel better in a despondent moment:

For failing the uniform inspection, the student had to run, fully clothed, into the surfzone and then, wet from head to toe, roll around on the beach until every part of your body was covered with sand. The effect was known as a “sugar cookie.” You stayed in that uniform the rest of the day—cold, wet and sandy.
There were many students who just couldn’t accept the fact that all their effort was in vain. That no matter how hard they tried to get the uniform right, it was unappreciated.
Those students didn’t make it through training. Those students didn’t understand the purpose of the drill. You were never going to succeed. You were never going to have a perfect uniform.
Sometimes, no matter how well you prepare or how well you perform, you still end up as a sugar cookie. It’s just the way life is sometimes.
If you want to change the world get over being a sugar cookie and keep moving forward.

The above quote was a great finish for this post, but there's one more link worth reading, for those who have time: http://www.farnamstreetblog.com/2014/05/certainty-is-an-illusion/

Growth...What is it Good For?

The old "War" song comes to mind - war, what is it good for? "Absolutely nothing!" And like too many wars, the loss of growth feels almost as inevitable as of late. But how did general acceptance in a lowered growth trend for economic activity come about - an acceptance which spans ideological divides? In a post some days back which touched on zero sum mindsets, I neglected to link to a recent post from Ed Dolan. In the nineties, Dolan taught Russian students at a business school in Moscow, and he recalls:
...the hardest thing for some of them to grasp was the idea that business could be something other than a zero sum game...who is going to get the best of whom?...The question reflects a belief that every human interaction with outsiders necessarily has a winner and a loser.
Granted, in the nineties there was considerable contrast between this attitude, and the exuberance of so many in the U.S. But what about now? Only consider how many believe - for instance - that more money printing by the Fed would not really assist aggregate demand. Supposedly, it would only put more money in the hands of the "winners" instead of everyone else, i.e. not positively affect overall outcomes. How much difference exists between this "logic" and what Ed Dolan encountered among his Russian students?

I might have forgotten to return to his post, but then he followed it with this one, "Why the Correct Answer to 'What Should We Do About Slowing Growth' is 'Nothing'". Wait, what, absolutely nothing? If we are going down the road of assuming less growth isn't problematic, more individuals could very well take the attitude those students held. Indeed, it seems that some can scarcely wait and are more than ready to start the winner-loser public proceedings...in multiple ways.

Or course, Dolan's post is far more considered than his title implies. Any readers concerned about this topic might check out Delong's referenced article, which has a number of good links as well. Another related link is a podcast featuring James Pethokoukis with Brink Lindsey, "Why is fast growth getting harder for the US economy?" Delong's article also pointed out that Paul Krugman forecast an eventual slowing of the U.S. growth pattern back in the nineties, when hardly anyone even noticed - yup, the same growth pattern which dated back to the post Civil War economy.

In a response to Ed Dolan's post, Dietz Vollrath asks, "Who cares how fast GDP grows? Vollrath summarizes:
The ultimate point of Ed Dolan's post, and this one, is that there is nothing inherently desirable about rising GDP. It is simply a statistical construct capturing the total value of currently produced goods and services. If we prefer things that are not currently produced goods and services, then who cares if GDP rises or falls?
Just the same, GDP represents the labor participation rate to a greater degree than it may seem. If income isn't there, goods and services (output) will also decline. Part of the rationale which has emerged is that a falling participation rate is okay - perhaps even to be expected. But the way it is taking place is misleading, because previous lower participation rates in the formal economy, coexisted alongside agrarian roles in which family members both young and old, still participated. The fact that automation replaced the agrarian economy in the developed world, means no alternative equilibrium exists for a considerable portion of the population. It is this missing equilibrium that the marketplace needs to redefine on new terms.

What's more, the recent (formal) role of women in the marketplace was a factor which was far more recent than the reliable growth trajectory which emerged after the Civil War. That calls the rationale of the one off economic gain, into question. Business and government brought women in to assist the war effort as the agrarian economy changed. This indicates their hidden presence in the earlier agrarian economy, and the economic smoothing it represented for the trend line of growth. Indeed, women began entering the formal workplace, only after they were not needed on the farm.

Just as important, children were part of the informal equilibrium (yes my Dad picked cotton, long before his college degree), and their economic contribution to land production was gradually replaced through their consumer roles in educational formation - another economic smoothing effect. In other words, not just women were contributing to an informal agrarian economy all along, but youth were also represented in the economic balance over time.

An important corollary for labor force participation is the fact that as education moves into the digital realm (making today's education formation a smaller GDP component as well), economic representation of students after the age of twelve in knowledge and skills participation will also be needed. In other words, when they are allowed to produce from what they have consumed in educational terms, the economic balance of education in GDP will not be lost. They can be brought into the formal economy (monetary compensation) for incremental or stair step education among peers, as well as diverse skills sets in local community. This way, the digital realm would not become isolated learning environments to replace classrooms, and time use in education sharing would become actual product.

Only consider the growing fragility of school environments today, where youth spends far too many years without actual ability to interact responsibly with others. The reality is that the genesis of this process of participation should emerge prior to one's teenage years. It should be what the first years of education prepare students for. When students are left in a dependent state for too long - especially in an economy which no longer exists at full potential - it's hard for a zero sum mentality not to emerge.

There's a good reason why the age of twelve feels traumatic. After all, one has outgrown a certain phase of childhood, yet nothing has really changed for the student otherwise in their immediate environment. Today's student is still needlessly left in a dependent state, despite a lot of focused preparation for one's future which has already taken place. Instead of real reciprocation with peers and adults at the appropriate age of twelve, students have been left dependent on adults and in competitive environments with peers for too long. Economic participation after the age of twelve needs to be a rite of passage, not only for economic balance but also the restoration of purpose in many a student's life.

Many readers are aware that I consider lifelong participation in the formal economy a necessity for both economic stability and individual aspirations. Fortunately, the gains in automation of recent memory give people the option to do this on the knowledge and skills based terms most significant, to them. I realize this post seemed to ramble a bit, but it needed to capture some of the missing elements of economic equilibrium which otherwise might not have been considered in this context.

My line of reasoning suggests that workforce participation has not really been this low in anyone's memory, even if some participation was of a hidden nature. To accept this present state of affairs as inevitable, would likely lead to deflation and a gradual unwinding of many economic gains, over time. While GDP is certainly not a perfect indicator, it tells no lies re whether or not a population is adequately represented in economic terms. No solution in this regard is complete, without the inclusion of a larger percentage of populations in economic life for the long run.

Thursday, May 29, 2014

Hunters of Experience, Gatherers of Wisdom

How might the concept of hunter gatherer ownership fit in with knowledge use systems? It's one thing to gather information and seek wisdom just because we want to. And - in a sense - doing so is priceless. But when society leaves vital elements of knowledge use in a random and undefined context, much of the quest for progress through knowledge can ultimately be lost. If this does happen, civilizations can take a long time to rediscover knowledge and make it important, once again. (If they do)

When decision making becomes confined to institutional settings, knowledge components can be reduced to the role of a work horse. Then, it becomes difficult to link societal goals and aspirations to those of others. The fact this happens, means knowledge cannot be carried forth and amplified meaningfully through time. Basically, that forces individuals to succeed by their own wits, without the ability to stand on the shoulders of those who came before them.

Unfortunately, this is when economic growth also starts to diminish. Everywhere one looks, the loss of growth in human potential is being rationalized away. The faith of growth through humanity, needs to be regained. After all, people could still make knowledge use and its related service potential, a more complete part of a free marketplace. So far, this potential has scarcely even been unleashed.

Knowledge needs active application among individuals in ongoing settings, so that focused time use can be stored and measured in public memory. We might read a thousand books in a lifetime or take multiple classes, but if we don't apply the concepts or discuss them, it's not the same. This digital (and personal) memory would be locally maintained by individuals in their communities, instead of institutions which wall off such information at will and wherever they desire.

What's more, this local memory would become part of the larger memories which surround it, and they would be connected by subject and story. Indeed this was a natural process for knowledge use, before formalized education changed societal expectations as to where and how economic activity was "supposed" to happen.

Each focused hour that an individual engages in with others, becomes capable of contributing to a voluntary public sphere. This is also a form of group coordination which goes well beyond what governments have sought to provide for the public. Presently, the "hows" for conceptualizing new infrastructure connections have no place to occur - let alone a sphere where choices in infrastructure could become a grassroots process.

One of the most important aspects of such a process, is that focused time can become useful and available for arbitrage in incremental units. Time use in such frameworks, also takes on vital characteristics of capital. This in turn would allow individuals to engage in roles of wealth creation which they have long prepared for. In a sense, time use held a similar value in earlier hunter gatherer environments. One's focused time use often meant the difference between survival or not, which is something no economic setting can realistically leave out, even now.

Hunter gatherer ownership patterns would provide ways to ensure that the economic frontier remains open. Otherwise, local economies tend to freeze lifestyle options so that innovative and resourceful solutions become impossible. This frontier is especially needed, when nations have become weary of immigration and the marginalized already among them. Such patterns would allow creative destruction to occur in an equilibrium which is flexible enough to not disturb the larger, more fixed equilibrium of middle to upper income levels.

Services and physical environments need to contain enough diversity, that all citizens have cultural lifestyle options. Otherwise, lack of organizational options means too little trust for positive economic and social relations. After all, no amount of non profit effort can pick up the pieces that are left in an incomplete equilibrium at lower to middle income levels.

Hunter gatherer ownership can complete the missing equilibrium, by establishing flexible use physical environments, alongside flexible forms of knowledge use and services. The nature of lower income equilibrium has often not been well defined in the past, which has prompted every kind of social unrest imaginable. Hunter gatherer ownership can provide both incremental success stories and "soft landings". One would find social and economic patterns to either build up slowly and gradually over time, or simply get a cultural break when it is no longer possible to live large.

We are each a unique synthesis of knowledge skills sets and experiences. Many of these could serve as a base, for community to be rebuilt upon. In settings where we are not tied to specific forms of knowledge use, it becomes possible to work in spontaneous teams and projects with automation. That also allows us to make the choices as to what we want automation to do, and nothing about those choices needs to be set in stone.

In turn, social and repetition elements can be brought back into the work mix which actually matter to individuals. Here, it helps to remember that some forms of work can be the most desirable product of all. After all, the memory of the movable feast in motion, can be equally significant to what the harvest provides. And no one has to constantly leap the length of the Grand Canyon just to have a life. Anyone can move upward: one focused hour, one bit of valued experience, one additional building component, one completed harvest, at a time.

Wednesday, May 28, 2014

Midweek Market Monetarist Links and Summaries - 5/28/14

When monetary policy is quite lousy, the short run can seem as though "forever" (Nick Rowe):
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/05/how-long-is-the-short-run.html
"How would we do the economics of migration if we modeled countries as homes?
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/05/countries-as-homes.html

"...you need to be clear about the equilibrium position corresponding to the initial conditions from which you are starting." (David Glasner) http://uneasymoney.com/2014/05/24/never-reason-from-a-disequilibrium/

Is the economy really on "firmer footing"? (Marcus Nunes) http://thefaintofheart.wordpress.com/2014/05/21/charles-plosser-fomc-member-the-rates-will-have-to-go-up-sooner-rather-than-later-guy/
QE 3 has added to the confusion: http://thefaintofheart.wordpress.com/2014/05/22/two-fomc."-voting-members-are-likely-to-lock-horns/
The chart shows how it's done: http://thefaintofheart.wordpress.com/2014/05/22/making-my-nightmare-come-true/
It's not easy to enforce standards when they've been relaxed... http://thefaintofheart.wordpress.com/2014/05/22/for-something-to-happen-usually-another-something-takes-place-before/
Sometimes, "moderation" loses its meaning: http://thefaintofheart.wordpress.com/2014/05/22/a-great-moderation-is-possible-at-many-activity-levels-the-question-is-to-find-the-right-one/
"We cannot forget to talk about money supply relative to money demand." http://thefaintofheart.wordpress.com/2014/05/22/because-they-ignore-monetary-policy-rbc-theorists-think-its-always-due-to-a-supply-shock/
When financial history gets confused with monetary history: http://thefaintofheart.wordpress.com/2014/05/22/theres-an-unlearning-process-going-on/
Marcus highlights a telling chart from Ryan Avent: http://thefaintofheart.wordpress.com/2014/05/23/heretics-at-the-gate/
Looks as though price level targeting is being discussed again: http://thefaintofheart.wordpress.com/2014/05/26/wolfgang-munchau-dismisses-ngdp-level-targeting-too-quickly/
Monetary unity was imposed under the wrong conditions: http://thefaintofheart.wordpress.com/2014/05/26/uncle-milt-was-always-worth-listening-to/

Why wouldn't 4% inflation "do the trick"? (David Beckworth) http://macromarketmusings.blogspot.com/2014/05/how-to-get-what-paul-krugman-really.html
This shirt is definitely a conversation starter: http://macromarketmusings.blogspot.com/2014/05/ngdp-targeting-as-fashion-statement.html

For Britmouse, "NGDP day" trumps voting http://uneconomical.wordpress.com/2014/05/22/uk-2014-q1-nominal-gdp/
Perhaps central  bankers are just running out of excuses http://uneconomical.wordpress.com/2014/05/23/from-too-much-uncertainty-to-not-enough-uncertainty/

Legacy costs and costs of entry are both considerable (Bonnie Carr) http://dajeeps.wordpress.com/2014/05/23/off-the-cff-about-structural-problems/

"I've never met anyone whose life outcome seemed strongly liked to the quality of their schooling..." (Scott Sumner) Education and Marriage
What to make of this Financial Times article? Define Damaging
In an Econlog post, Scott exlains that The Middle Class is Doing Fine
Also at Econlog, When monetary stimulus is (still) making up for lost output, this form of growth is capable of generating further saving.

"...ultimately the turn toward less policy accommodation never made sense in the context of the Fed's own forecasts and questions about the degree of slack in the economy. It makes me wonder how seriously the Fed is truly interested in closing the output gap." (Tim Duy)

Lars Christensen looks forward to resuming a more active blogging schedule:
http://marketmonetarist.com/2014/05/27/hitlers-hillways-and-uk-monetary-policy-two-interesting-working-papers/

Benjamin Cole: Japan's economy "grew at a 5.9% annualized rate in the first quarter."

Also of interest:

"Are big profits best viewed as generous return on capital, in the way that worries Piketty? Or as coming from innovation that ultimately benefits us all?" (Evan Davis) http://www.spectator.co.uk/features/9211721/unequal-battle/

Virginia Postrel http://www.bloombergview.com/articles/2014-05-14/why-it-s-so-hard-to-get-a-job

Probably more truth here than meets the eye. Heh (Douglas Adams) http://www.farnamstreetblog.com/2014/05/douglas-adams-reactions-technology-over-time/

Tuesday, May 27, 2014

Why Does This "New Moderation" Feel Zero Sum?

There is an odd sort of zero sum mindset, in spite of all the growth potential and positive numbers we keep hearing about. How to know, whether the Fed's ongoing prescriptions are proving too low of a dosage, for a still lingering severe economic injury? (hint - bring NGDP back to the earlier growth trend) As Russ Roberts said in this recent podcast, "...it's been five of the least pleasant years in the American economy that weren't called a recession."

Granted, this "mystery moderation" (U.S. - good recovery or not?) deserves contrast with the state of the world economy. In spite of the setbacks of the Great Recession, nations in aggregate have still experienced the most substantial gains of all, in the last fifteen years. Scott Sumner recently agreed with several commenters that this indeed was the case.

And yet, something about our mystery moderation doesn't feel right. Why are so many of the old skirmishes heating up again - that is - the usual fights as to winners and losers? Marcus Nunes voiced this concern perfectly in a recent blog post:
It's interesting to observe that when opportunities to "move forward" are blocked by the policies that gave us the "Great Recession", and that now are responsible for keeping the economy depressed, the debate on inequality flourishes. In that sense it's a fallback or second-best debate. Once you're 'stuck in the mud', the only option you have is to fight over relative positions.
Lately I've observed old arguments being rekindled not just over inequality, but also open borders and related immigration issues. More recently, familiar arguments regarding race reparations and gender have joined the fray. Some of those "knock down drag out" discussions at Marginal Revolution for instance, leave me shaking my head in dismay. If recent economic gains are that substantial, then why have so many battles seemingly behind us, returned to the fore? Or, if something substantial needs to happen, why are so many policy makers telling us it's not possible to do anything to improve growth outcomes?

Too many people are still not economically connected, who also do not have adequate means to connect socially as a result. This means a sizable segment of the population which does not have the capacity to organize or otherwise tend to their lives. And even education can become a dead end at some point, if people do not have a way to make it about what they are actually doing.

And yet, the problem with these second best debates is not really about group X or group Y. It's about an elite which systematically downplays the importance of skills capacity and knowledge use, in terms of spending capacity and monetary representation. Perhaps this set of affairs would not be so problematic, if society hadn't spent the last century telling everyone that an education was what they needed, in order to live a good life.

However, the battles which get the most attention today revolve around relative position, which only serves to drown out the battles over economic access. But it is where economic access does not exist, that has skewed the playing field in the areas which are so fiercely disputed. And monetary policy still closes the door, before such access gets a chance. Only witness today's long term unemployed, who aptly represent the output gap someone "forgot" to close.

One reason higher growth is needed now, is to address the imbalance in services equilibrium. That imbalance was generated by setting services valuations so as to limit access to them, throughout populations. The fact this was done, is partly responsible for the fact that monetary authorities have now become reluctant to represent time use in aggregate. Just the same, they have to come back to doing so eventually, if monetary stability is to be achieved.

Monetary stability revolves around the time which people spend in economic activity and contribute to it, both as producer or consumer of product. What's more, as banks should have discovered this time, it's not a balance which can be achieved from consumption alone. Total spending capacity is the most reliable constant. For while asset valuations may temporarily drift from nominal income capacity - especially with the machinations of finance and credit - they cannot do so for long. This is also why a price level target would fail, because eventually it would drift too far from the time anchor in aggregate spending capacity.

Therefore I suggest this is not really a new moderation at all, and that it won't be until the aggregate time capacity of all citizens has actual representation. When central bankers are willing to consider the economic circumstance of actual citizens instead of just governments and financiers, we might not have to constantly descend into the same fill in the blank categories of social injustice. After all, solutions are particularly hard to come by, in second best debates.

Monday, May 26, 2014

How Can Local Economies Harness Productivity?

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

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

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

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

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

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

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

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

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

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

Saturday, May 24, 2014

Some Notes on Innovation and Regional Factors

When do limits to innovation affect regional employment options, in knowledge use terms? And, to what extent have knowledge use limitations become more significant? In a recent post about student loans and housing, Ashok Rao notes a growing tendency for new college graduates to prefer coastal regions for employment and lifestyle options. Previously I'd noticed a growing (coastal) preference for what appeared as ideological reasons, but apparently job markets are starting to reflect this reality as well.

Fortunately, these logistical concerns have not always been the determining factor they've become as of late. Not only are coastal areas able to reimburse the commitment and effort of the ambitious college graduate, there are cultural differences between such locations and much of the heartland. One of Ashok's commenters agreed, as he felt forced to live 1800 miles away from his family, just to secure a good job. Indeed, I'd had a conversation with another blogger last week which echoed these same thoughts.

Coastal areas benefit not just from normal city agglomeration effects, but also economies of scale and network effects which are intensified in these regions. And yet, this is an odd story for a country which until recently was viewed somewhat differently. Supposedly, large swathes of the U.S. appear as though an intellectual wasteland, or at the very least a compromise for the aspiring college graduate. In an age of digital possibility and an extensive transportation system across the country, how has this happened?

For much of the twentieth century, most individuals thought of knowledge use as being capable of lifting all boats - after all, knowledge could be readily dispersed. A recent article in Slate, looked at the benefits of innovation and some historical moments when innovation proved capable of generating broad swathes of wealth. However, more open environments for sharing, have often taken place when new ways of doing things are just getting off the ground. After that point, it can be tempting to shut down knowledge dispersal as industries mature.

Cities which continue to be associated with innovation, are home to businesses now burdened by patent gridlock, even as their real estate values pull away from the broader marketplace. And while some argue that agglomeration effects aren't a significant problem for innovation, there could be some wishful thinking in this Vox article. Until the internet becomes widely used for work beyond the walls of specific institutions, polarization of regions in terms of opportunity will likely continue.

There is also a political divide which currently stands in the way of innovation, and even the process of stopping patent trolls has ground to an unexpected temporary halt. One has to wonder, why couldn't a problem with such an obvious solution, get more traction in Washington? Like many, I really didn't think a bill for patent transparency would be so difficult to pass.

To be sure, individuals such as Marc Andreessen (a great Econtalk podcast) are convinced that "software will eat the world" and innovation will indeed transform the coming decades. But before anything remotely close to this vision can happen, innovation needs a broader societal context than either political party has been able to provide for the public. Neither party really knows how to make knowledge use beneficial to the bottom economic line, in ways that all can benefit. And as long as Democrats and Republicans remain divided about the innovation frontier, so too will the regions which have yet to benefit from the innovations of the 21st century.

Friday, May 23, 2014

It's Time To Get Real About Labor Force Participation

Seriously, no one can afford to kid themselves that all is well. Declining labor force participation is like a slow moving avalanche which - if not addressed - will slowly render everyday life unrecognizable in developed nations. Anyone who thinks a sizable portion of the population can expect to live their lives without real connections to economic activity, has not given this issue enough thought. To be sure, make do work is no answer. And creating work with meaning, means breaking through the tangled discourse which implies it can't be done.

For some, it's tempting to think women should stay home so that others will have work. But the economic conditions which previously allowed this circumstance, have changed drastically. It helps to remember that women without substantial connections to the workplace, also tend to have a difficult time marrying and raising a family. Of course, everyone needs more time to tend to home matters. But our environments need to be opened up to real innovation and transformation, before doing so becomes a realistic option.

Already, young people from all walks of life are questioning whether an economic place even exists for them, which can be won without a struggle. And too many baby boomers have taken early "retirements", who never would have imagined doing so. Granted, there will always be some who have reasonable ways to get by without active engagement in the workplace. Unfortunately this is the exception, rather than the rule.

Since the beginning of the year, the oddest of "normal" economies appears to be returning.  A growing number of bloggers now discuss anything but labor force participation. And when the subject does come up, one often hears from the commenters: Look at demographics! People are retiring, so is this really unusual? Or...why should women expect to remain in the workforce in large numbers, anyway? Even present day youth are presumed to simply be getting that college education instead of a first job. The paradox is that rationale against higher education, continues apace.

Sorry, none of this is cutting it. It's time to get real about labor force participation and dig deeper to determine what can be done. Only consider that the U.S. was in a much better position 13 years ago, as to labor force participation for those between the ages of 25 and 54. Indeed, even Chris Dillow asks in a recent post, "Do we greatly over-estimate what governments can accomplish?" This question is a step in the right direction, for it can break the cycle of passivity where everyone waits for someone else to do something. Labor force participation is a project for many agendas, and government is but a facilitator.

Problems regarding labor force participation are of such a wide ranging nature, that they are not really amenable to quick fixes. Bonnie Carr, in a post which mused over some of the structural issues involved, noted the high legacy costs which large organizations face in the U.S. What's more, those who seek self employment do not always have the remaining support base which would allow them to do so. Even a short bout of unemployment can change one's circumstances fairly quickly. That may affect transportation, needed medical care, or other basics that make it possible to fulfill one's commitments.

In spite of structural issues, there are obvious monetary remedies for labor force participation which are strangely missing. How is it even possible the Fed has lowered aggregate spending capacity since 2008, without any serious discussion with the public as to why? What's more, there has been little outcry from government, as to the decision to do so. Don't members of the Fed understand the long term results they are generating with today's lowered growth expectations? In a recent post, Marcus Nunes considers the latest "new moderation" growth trajectory, and questions why this would be considered sufficient.

Reading his post, I had to wonder: does the current consensus in growth trend represent a purposeful reduction of labor force participation? If so, why wasn't anyone notified in advance? What are people expected to do? Something else about that trend line stands out, for it is not even remaining parallel with the old growth trajectory. Indeed, total spending capacity is gradually falling away from the earlier trend, over time. Are there private takeaways regarding this consensus about employment, which have not been shared with the public?

To be sure, citizens are now being told told that no one can expect growth to be what it once was. But those who mostly agree with that consensus, already have a guaranteed spot in the outcome. There needs to be a lot more consideration for the many who do not have any guarantees. This is no time, to say nothing further can be done.

Thursday, May 22, 2014

Why Does Equal Time Use Capacity Matter?

Granted, the title question is quite open ended - thus impossible to "do justice" in any single post. Just the same, I occasionally need to try! By time use capacity, I am referring to knowledge use systems which allow local residents to experiment with focused time use patterns, at community wide levels. Doing so would bring services within reach of the communities which need them. This would also reduce dependencies on regions where so many have migrated to compensate for educational costs. To a degree, this long term challenge could be approached as community wide games, where vital aspects of work and education become completely integrated across skill levels.

Even so, the resulting activities would have real world effects, i.e. which go well beyond optimizing low or "substandard" population densities. Over time the results of these efforts would not be "make believe", at all. Presently, governments focus on "improving" areas by preparing residents to migrate to other areas or else replacing local residents with more "successful" residents: a questionable approach at best. Positive change can also occur from the inside out. However, sustainable economic methods of decentralization need to be utilized, in order for that to happen.

Time spent in coordination across all local groups, would result in both new service provisions and product formations (separate from time) which otherwise could not have been organized. What's more, recording these structures can provide ways to build upon them in the future. These systems would include everything from individualized activity sets, to the larger aspirations that citizens hold. Democracy is always possible, where services are understood within a contained and sustainable capacity. Democracies mostly fail when the economic relationships between services and production start to break down. These systems would help to make the mutual relationship clear, once again.

This would bring order and new meaning to ongoing focused endeavor, which otherwise isn't possible to measure or reimburse. Much of this activity could replace the hollowed out areas of middle skill work. What's more, recognition of these activities involves some of the happiness factors which have been problematic for economic thought.  It's easier to take note of the decisions we feel good about, when we can each use our economic time in equal measure for individual and community goals.

Not only could skills arbitrage systems bring the unemployed and underemployed back into the marketplace; doing so would eventually bring confidence back to Main Streets which have yet to participate in the fledgling recovery. Even so, these suggestions are focused on long term potential, and much about the short term remains confusing.

After all, Main Street knows that something is still missing. There is too much false confidence and reasoning that the U.S. economy is returning to normal, on the part of both political parties and many at the Fed. Just the same, not everyone at the Fed is as sanguine about the economy as Charles Plosser. In a recent speech, NY Fed president William Dudley noted the absence of new middle skill jobs, and the fact that some regions had scarcely overcome the effects of the Great Recession.

One reason it is difficult to move past the recent economic upheaval: the wrong reasoning has been pressed on the public, by interest groups which have little desire to change their methodologies. Presently, few are even convinced that monetary policy exists to back the economic activity of individuals. All anyone can see in connection with monetary policy is political posturing and the machinations of finance. Time use systems would serve as an apt reminder that monetary policy is about the aggregate activity of individuals - not governments and however many loans get served up in a specific time period.

Another important rationale for equal time use: otherwise there are few places for individuals to pursue their own aspirations or innovations, without subordinating those interpretations to that of others. Granted, at the outset it would not always be easy to match one's interests with others, but as communities create original knowledge use patterns, it will become easier for like minded individuals to seek one another out. In the past, it has been necessary to do so through the agglomeration effects of the city. Just the same, the digital realm can assist knowledge use communities to move past this limitation.

Equal time use capacity especially matters for the recreation of community, which otherwise has few ways to intersect the purpose and intent of those who live in close proximity to one another. Economies of scale - alongside technological gains - long ago reduced the agglomeration effects which could be achieved in rural areas. Still, the paradox remains that rural regions are not only still needed, these places are also refreshing for the soul. Many of us who grew up with a love of both city and country, often found it difficult to choose.

By finding ways to interact within true time capacity, new agglomeration effects would be possible in lower population densities. Regions without access to the high value skills sets of exclusive education, could still thrive. This would make it possible for those who have a special affinity for rural regions to remain here and yet still be successful. It's an option which particularly matters, for those who don't like having to leave family behind for the totality of their working lives.

One of the primary reasons for equal time use capacity: this provides an understandable template for the use of robots in more humane ways - not just in city environments, but also in rural environments. Only consider what rural group investments in robotics might look like - particularly in colder climates where houses have steep pitched roofs. How about robotic chimney sweeps, for those days when the rooftop is too frozen to scramble about? What's more, these kinds of locally useful robotic investments could be available to all locals, who seek to augment their income beyond a time use base.

This post needs a stopping point, for I could go on all day! Equal time use capacity could restore trust, by providing meaningful interaction among people who otherwise would have no reason to interact with one another. Granted, not all interactions would be enlightening, but social calendaring would allow individuals to once again discover the places they have common ground. Also, meaningful economic interaction would allow knowledge use to once again percolate from the bottom up, into the larger society. Such knowledge and skills use systems would go a long way to alleviate needless polarization and isolation, which has occurred in recent decades.

Wednesday, May 21, 2014

Midweek Market Monetarist Links and Summaries - 5/21/14

"By definition, nominal spending is equal to nominal income (the total amount of money made) and to the size of the economy." (David Beckworth and Ranesh Ponnuru)
https://www.nationalreview.com/nrd/articles/378042/right-goal-central-banks

A commenter to the above National Review article, didn't think the central bank could control the nominal value of output. Bonnie Carr "sets him straight" in this post.
http://dajeeps.wordpress.com/2014/05/17/hardline-inflation-nutter-the-central-banks-fundamental-duty-to-protect-the-purchasing-power-of-the-currency/
Marcus Nunes also provides highlights and thoughts on the National Review article.

The alternative to monetary stimulus is not pretty...(Scott Sumner)
Krugman's paper does have some good points, but targeting NGDP would be even better:
Krugman on the need for a higher inflation target
"Our 'uniquely privatized system'? A system where nearly half of healthcare expenditures are made by the government? And much of the other half is made by insurance companies that are private in name only? Recall that nearly 40% of the cost of 'private' health insurance is covered by government subsidies. And that government regulators determine what procedures must be covered. And the government controls entry into the healthcare industry." Krugman on Levitt on healthcare
If so, what would it even mean? Is economics getting more liberal

Some Econlog posts from Scott Sumner:
http://econlog.econlib.org/archives/2014/05/what_is_monetar.html
http://econlog.econlib.org/archives/2014/05/has_medicaid_su.html

How did Australia "pull away" from the pack? (Marcus Nunes) http://thefaintofheart.wordpress.com/2014/05/15/the-rat-pack-loses-one-member-australia/
Sometimes it's not so much what you say, but where you've been: http://thefaintofheart.wordpress.com/2014/05/16/being-a-fed-chairman-is-a-good-personal-investment/
Is the Fed really "close to its goals"? Yikes http://thefaintofheart.wordpress.com/2014/05/17/bullard-loses-his-marbles/
He didn't call the tune, but he played it well. http://thefaintofheart.wordpress.com/2014/05/19/to-geithner-the-fed-was-the-hero/
Looks like the summer could "heat up" in more ways than one... http://thefaintofheart.wordpress.com/2014/05/19/the-sort-of-thing-that-gives-you-goose-bumps/
Some monetary "experiments", in graphs: http://thefaintofheart.wordpress.com/2014/05/20/non-randomized-uncontrolled-experiments/ 

Lars Christensen responds to Scott Sumner's recent housing post:
http://marketmonetarist.com/2014/05/16/time-to-get-government-out-of-us-housing-finance/
Not the first time Lars has stressed the importance of domestic demand:
http://marketmonetarist.com/2014/05/15/let-me-say-it-again-the-kuroda-recovery-will-be-about-domestic-demand-and-not-about-exports/

Londonism debunked! (Britmouse) http://uneconomical.wordpress.com/2014/05/15/bank-bites-back/

Also of interest:

Jonathan Finegold offers a thoughtful post regarding Sound Money

This must have been quite interesting for the audience!
http://blogs.marketwatch.com/thetell/2014/05/15/too-big-to-fail-battle-between-larry-summers-nassim-taleb/

Monday, May 19, 2014

Healthcare and the Second Tier

Will first and second tiers of service become tomorrow's healthcare in the U.S. - depending on one's income? Scott Sumner considered some possibilities recently, along with several of his commenters. While a two tiered result may still seem politically implausible, budget realities - let alone arbitrary limits in knowledge use applications - may eventually drive healthcare to this point. If class differentiation seemed likely before...

To be sure, basic forms of healthcare access are preferable to none at all, especially if someone can't pay. So why complain? There are more dimensions to healthcare issues than sometimes meet the eye. Today's extremely lousy excuse of a marketplace is not just about a lack of access, but also the ways in which healthcare services and remedies have become arbitrarily defined.

Battles for limitations in market definition took place in stages, and some battles in this regard have taken place only recently. While today's passive consumer has become part of the problem in terms of lifestyle and longevity constraints, the reality is that too many in healthcare exacerbated this set of circumstances. How so? By reducing the roles of more active and spontaneous components between providers and consumers, which were viewed as competition to traditional medicine.

While second tier levels of basic care would be valuable for emergencies, individuals who seek care often need to be a more active participant than the system acknowledges. Some care management comes across as patronizing, hence may even be a waste of time for the patient who is expected to "just follow directions". Low income default scenarios could worsen these aspects of limited choice, for passivity on the part of patients tends to magnify healthcare issues.

Unfortunately I'm in rant mode, because I'm now out of an herbal remedy which I've relied upon for over a decade, yet cannot procure locally! So when I hear "no choice" for lower income levels I tend to bristle, because the problem all along has often been that of the wrong choice sets at the doctor's office and in too many locations. If I were younger and still had reliable transportation, I wouldn't hesitate to order a whole range of alternative remedies, put a health library together, and once again set up shop locally. If only I could!

Readers of this blog, also know that lack of choice is far from the only concern I have about present day healthcare. In macroeconomic terms, the way healthcare has been structured in the U.S., has brought imbalance and needless complexity to our economic realities. To be sure, addressing the core structure of healthcare is daunting indeed. But until a competitive marketplace comes to healthcare, it will continue to be a drain on budgets and also limit other aspects of knowledge use in the marketplace.

Indeed, many who lean libertarian don't even propose radical alternatives to today's system because of the challenges involved. Protesting Obamacare by reverting to concierge care -while perfectly understandable - is little more than shuffling towards inevitability, hence nothing to be proud of. However, fiercely defended limits in production supply, only further distort time use across the entire economic spectrum - distortions which government redistribution cannot adequately address. This is why present day government debt is a greater problem than debt loads from other historical time frames. How are true markets realistically possible, if freedom to participate in health related services is not considered a viable option?

Therefore, if a second tier becomes a reality, I would only view such a development as a partial solution: useful primarily for emergency scenarios and lifesaving measures. In all aspects of healthcare, everyone needs the right to heal.  Healthcare in all its potential diversity, needs to be a part of environments wherever people live and work, so that entire populations do not become desperate to migrate to already full cities just to have a decent life.

For instance, does the American Medical Association realize its role in bringing U.S. citizens closer to a caste society? Of course, in their defense, this particular special interest group is far from alone. I get that supply side limitations are necessary, in terms of cutting edge care and new drugs. But I don't get the limitations, in terms of the care people could provide for one another, if only they were allowed to do so.

There are centuries of hard won knowledge to draw from and libraries full of useful information that can assist group collaboration in small communities. With a little luck, some of this knowledge may finally make its way to the digital realm. We can do better than today's version of healthcare, and give knowledge use the rightful role it has in all of society, so that people can keep their hope for a better future.

Friday, May 16, 2014

What Does Money Represent?

Of all the debates that nations really need with their citizens, better understanding regarding this question would particularly help. However, we seem to be drifting even further from any agreement as to what the use of money can accomplish. In recent years, money has been disallowed the basic representative role which it has held for citizens: a role which was reasonably followed for well over a century.

In the aftermath of the Great Depression, U.S. monetary policy returned to its earlier growth trajectory, even though it took a long time to regain earlier levels of prosperity. But that resumption of the previous growth trajectory has not happened since the Great Recession. Instead, aggregate spending capacity remains sacrificed to static forms of wealth generation which serve special interests, instead of citizens. In the process, money representation in the public's mind has become a political football, which continues to be pulled first one way and then the other in terms of banking rules and regulations.

Presently, U.S. government seeks further wealth capture from traditional housing, thereby distorting monetary policy even further in the process. Even as government blames whoever it can on the overextended consumer, policy makers remain inexplicably committed to making certain that consumers stay that way, through housing formations which no one in power is willing to allow reinterpretation or innovation.

This forces citizens to further support their governments through rigid roles of consumer leverage, rather than the productive capacity their skills sets could engender for sustainable wealth creation. Lars backs Scott Sumner's above linked post as well, and I completely agree with Lar's sentiment,  for "It is time to get government out of U.S. housing finance".

Money has taken on increasingly governmental overtones and definition, through government and finance collusion. Even as some would prefer forms of banking which don't cater to finance, states need central banks as a backstop for mistakes and overreach. This ensures that finance gets to keep its outsized role in the near future, until the public realizes what is happening. What's more, interest on reserves serves as backstop to these asset formations as well, and Kevin Erdmann notes how contractionary the effects of IOR have been.

Even though the role of IOR to maintain value is reasonable - in and of itself - the effect it has i.e. limiting the rest of the market in monetary terms, is not. As a result, governments prefer what boom times they can get, through funneling money toward further asset creation to provide taxation, instead of more innovative forms of productivity and skills use potential.

One of the worst aspects of today's financial emphasis: hard won lessons as to monetary policy from the Great Depression are in danger of being forgotten, yet again. We saw this first with Bernanke when he discarded the value of maintaining a nominal spending level, and other policy makers have continue to follow his lead. That makes more problems for all of us. When money is viewed through the lens of finance, it loses its capacity to represent human potential. .

When we rely on governmental monetary roles to do our coordination for us, we have to settle over and over again, for getting more done with less. While that sounds good on paper, it translates into wasted human potential. Too few people are actually tapped to generate needed services, when governments are asked to negotiate market conditions. When government wants to do the majority of our wealth creation for us, we are working twice as hard to maintain that vision than should have ever been necessary.

I must admit that what government is doing now in terms of housing, is what I was afraid they would do, all along. Granted, the U.S. was by no means the first to implement IOR as a backstop for rigid housing regulations and policies. But as Lars Christensen indicated, this country has stuck by what is the most socialistic policy of all: thus the wealth creation process flows in reverse - from the hapless individual who sacrifices work hours to generate home value, to the government.

Just as we have gained the opportunity of vast skills sets potential, governments remain tempted to depend on consumer citizens, instead. But by so doing, the wealth which nations need to prosper, may never have a chance to materialize. What's more, governments are too willing to distort the true purposes of money, and remain confident that the public will not notice what is happening. Since beginning this blog, I have promoted more flexible forms of building construction as local wealth, in the hopes that citizens could move past these roadblocks and create services strategies. However, this public discussion has yet to emerge. I continue to hope that it will.

Wednesday, May 14, 2014

Taxation, GDP Potential and The Right To Produce

How do these elements "play" into one another?  Restrictions which affect supply and demand potential, can also mean restrictions in GDP potential. This is especially true when limitations on the right to produce, leave us with few means for productive interaction with others. Limitations on the right to produce, consequently mean a smaller marketplace which holds less taxation potential. While some realize additional rents (and higher taxes) from high time use valuations, the process nonetheless takes place in a limited marketplace.

Granted, not all forms of limitation negatively affect potential supply and demand, especially when economies of scale are capable of leading to substantial product formation. For a substantial part of the 20th century, much of the business/government relationship was fairly stable, in both taxation terms and GDP potential. After all, economies of scale meant a massive degree of product potential. What's more, the wealth of standard manufacturing production was easy to measure. Not only did it provide reliable returns for the producer, it also provided ample remainder for governmental redistribution.

As a result, there once existed a reasonable trade-off between taxation, and the privileges which developed between government and special interests. However, the taxation which resulted from mass production, has declined in relative terms for mature economies, This has forced them to rely more on the taxation that is a result of artificial limitations on knowledge use and the consumption potential of the consumer in terms of traditional housing. Neither of these forms of taxation are capable of sustaining complete economic formations, in a long term sense.

It's one thing to grant special privileges to resource production which otherwise might not materialize in the economy. Sometimes, doing so also allows government to assist in infrastructure which these large interests need to operate efficiently. These are the government and business relationships which make sense to people, so long as they flourish alongside populations which are also allowed to flourish.

However it's altogether a different matter, when government/business privileges exist for those who gain profits through limiting aggregate supply and demand in time use terms. Housing and building requirements lead to the same time use choice restrictions, as knowledge use restrictions. What's more, this form of asset building - which is practically forced on many with discretionary income - also serves as a primary means to pay for the same limitations in knowledge use. A caveat: while "arbitrary" restrictions in supply and demand occur for resources other than time (such as diamonds or oil), these restrictions generally mean that markets will continue to remain viable in recognizable form, into the future.

Unfortunately, a prolonged marketplace does not generally hold true for wasted knowledge, education and time use potential. Just as time use is arbitrarily restricted in the present, the implicit acknowledgement of these restrictions exists in central bank thinking. As a result, their finance centric focus scrutinizes what the consumer "can" or "can't" do - instead of seeking to monetarily represent the individual as producer of one's own destiny.

Indeed, the economic "punishment" in this regard can exist across entire generations. The recent pullback on nominal spending capacity which created the Great Recession, was exactly this. The fact that many across the political spectrum are willing to give up on GDP potential, attests to the degree that few are willing to consider production reforms. Some also question the discussion of "unmet" GDP potential. In a recent post, for instance, Arnold Kling noted that GDP potential is his "least favorite" macroeconomic statistic.

But think about it. No one can afford to forget that taxation has been the trade-off, for government to business relations which are gradually limiting knowledge use as part of the transaction. If taxation does not remain viable in full market (i.e. consumer) terms, what really exists to preserve the relationship? Or how can a special interest presume to think their right to produce might not be revoked or otherwise lost? How can they keep claiming "maker" status if no one else needs to be hired? Ah, there lies the rub...by now some readers know that I'm a "lost cause" because I would like to follow this line of reasoning to its logical conclusion. No taxation on medical devices in spite of their costs, for instance? Okay fine, let anyone make them. Anyone.

Why should it matter? Consider the vast array of medical product - from complex to vastly simple. It is the "simple" end of the product spectrum especially, where healthcare providers are held hostage to an anti-competition environment which strangely resembles their own. Probably, no one needs to give this much thought until they are trying to buy (on a disability income, say) supplies for a chronic condition which need to be purchased regularly. Some of those supplies consist of really simple inventions which are nonetheless treated as though made of gold.

Don't like taxation? Fine. I don't either. Sometimes we can do a better job of producing or procuring for one another, what taxation never even gets the chance to do. Get rid of a lot of taxation that rewards suppliers for a limited marketplace, and give people back their right to produce innovative and helpful products for one another. Often the simplest is the best, but give people a chance and they will go a long way beyond the basics. Give people a chance to return to the GDP potential and growth trajectory which was followed for well over a century. The fact that people need to be allowed to help one another directly, is something that can no longer be safely ignored.

Midweek Market Monetarist Links and Summaries - 5/14/14

"...the causality between NGDP (money) and RGDP (and prices) is completely dependent on the monetary policy regime." (Lars Christensen) http://marketmonetarist.com/2014/05/10/the-monetary-transmission-mechanism-causality-and-monetary-policy-rules/

What really happens when anyone relies on "labor market slack and low capacity utilization" to contain inflationary pressures?? (Bonnie Carr) http://dajeeps.wordpress.com/2014/05/11/astoundingly-incoherent-bureaucratic-nonsense-and-gave-injustice-perpetuated-by-government/ 

The real economy does not happen independently of the nominal level (Bill Woolsey) Nominal GDP Targeting--Some "Micro" Observations

From a Twitter discussion with Amir Sufi (David Beckworth) http://macromarketmusings.blogspot.com/2014/05/what-caused-great-recession-household.html 
Financial stability shouldn't have to depend on regulators "getting it right" http://macromarketmusings.blogspot.com/2014/05/risk-sharing-as-way-to-improve.html

"We are left with this vacuum of policy (Britmouse) http://uneconomical.wordpress.com/2014/05/09/what-is-uk-monetary-policy/
Do changes in house prices really drive changes in aggregate demand? http://uneconomical.wordpress.com/2014/05/12/londonism-or-macro-models-based-on-reasoning-from-changes-in-london-house-prices/
"Cheap money? If only." http://uneconomical.wordpress.com/2014/05/12/liquidate-the-rentiers-on-a-cross-of-low-inflation/

Is Yellen in agreement with a 2 percent ceiling? (Marcus Nunes) http://thefaintofheart.wordpress.com/2014/05/08/yellen-slips-in-new-information/
Meltzer is "concentrating on the wrong measure of the money supply" http://thefaintofheart.wordpress.com/2014/05/09/meltzers-inflation-nightmare/
The Euro crisis wasn't about debt. It was about NGDP.
http://thefaintofheart.wordpress.com/2014/05/09/eurozone-the-solution-follows-from-the-correct-premise/
How long must they wait? http://thefaintofheart.wordpress.com/2014/05/10/forever-and-ever-again/
Under the "target" for 23 months straight...http://thefaintofheart.wordpress.com/2014/05/12/not-even-the-fed-makes-sense-when-talking-inflation/
"after 2007 the poor man was doubly penalized"

"I believe old monetarism is effectively dead" (Scott Sumner) Paul Krugman is dismayed that the conservatives he pays no attention to are not saying the things he'd like them to say if he did listen to what they said.

Some Econlog posts from Scott Sumner:
http://econlog.econlib.org/archives/2014/05/the_paradoxes_o.html
"Consumption" is a synonym for quantity: Never debate the impact of a price change

Bob McTeer responds to Allan Meltzer http://www.forbes.com/sites/bobmcteer/2014/05/08/how-the-fed-fuels-the-coming-inflation/

"Since states are not going to give up their central banks, the trick becomes to determine the best policy regime for a given central bank to operate under." (Lorenzo) http://skepticlawyer.com.au/2014/05/13/the-illusion-of-free-banking/

RGDP is only a production index - of course it's useful to have one (Justin Irving) http://economicsophisms.com/2014/05/13/ngdp-before-rgdp/

Yep. (James Pethokoukis) When your inflation forecast fails for 5 straight years, perhaps it's time to change your inflation model

Monday, May 12, 2014

Some Thoughts on "Home Grown" Wealth Generation

How could wealth generation be represented, in communities which are in the process of creating knowledge use systems? That is, what kinds of wealth are possible to imagine, in places where people are actually able to live, given the resource potential of the present? After the "lament" of my last post, it's appropriate to take a more positive approach in this one! However, these concepts are very much "work in progress".

Some who are particularly interested in locally generated wealth, may also want to listen to this weeks' Econtalk which discusses the future potential of strong towns - an interesting podcast which is a timely "add" for thoughts here. However, debates regarding "permanent" town structures (rather than Walmarts with 15 year lifespans for instance) serve as a reminder that flexible building components are especially important now. The marketplace may remain in a phase of experimentation for decades, until new forms of social wealth are reliable enough to engender more permanent community structures for the future. As much as I miss the "glory days" of retail, they're probably not coming back any time soon.

Even though many individuals would consider living and working closer to one another again, the terms on which anyone can realistically do so, are not yet established. While greater population densities can also mean greater wealth, the age of the auto scattered both time preferences and aspirations to the winds. By no means will it be an easy process, to find common economic ground in our time use preferences - even though that needs to happen. How can knowledge use systems overcome the reality of next door neighbors who no longer know each other's names?

New economic pathways can be generated through equal time use. To be sure, major differences in skills capacity is a valid argument. Just the same, organizational capacity can harness skills capacity which otherwise would be missed. This additional input is very much needed, for knowledge use based on merit (and increasingly, privilege) is turning out to be a limited form of wealth generation. As a result, millions around the world are gaining education at this very moment for the limited slots where skills can still be reimbursed through earlier wealth formations.

What's more, merit based knowledge use is difficult to adapt successfully (sustainably) to the degree it is needed in lower density population areas. This can sometimes lead to "brain drain" in developing nations, even if only in the sense of villages which are expected to "sacrifice" prime skill sets for the greater good of more prosperous areas. Whereas when time and education are combined with cooperative endeavor in equal time use, new wealth is possible not just in the cities, but in the villages as well. This could benefit nations regardless of where they presently stand in educational terms. What's more, such efforts might at least address the problems nations experience with groups which remain opposed to Western education.

Equal time access for aggregate knowledge gain, opens the door to immense wealth creation otherwise not possible. It also reopens the door to social elements of economic life which have largely been lost - especially for those not presently engaged in knowledge use work. When people experience social reciprocity in workplace environments, they also gain the ability to provide reciprocity for others in their personal lives. What's more, knowledge work would provide ways to remain engaged as individuals age and become less competitive in physical tasks. Many could remain in knowledge use environments, who otherwise would struggle to maintain physical labor for long stretches of time.

Time use arbitrage provides ways for people to tend to the services they need at all levels. It serves to make taxation unnecessary for what would otherwise represent municipal operational costs, among other benefits at all age levels. This basic income base also makes it possible for local participants to further engage in other aspects of local wealth creation. Why might this be important?

Local investment options in ongoing projects would mean additional income for those who seek it. By aligning additional income with (local) production windfalls and random resources, the time use base has a chance to remain inclusive and meaningful for the entire community. This matters, because the finite nature of time is readily diminished by changes in compensation. Whereas differences in compensation from random resource use are quite relative, in terms of one's ability to thrive. While the value of the shared hourly base may gradually rise, it would need to do so according to positive (i.e. innovative and cost cutting) changes in local resource adaptations, instead of attempts to keep up with rising costs. Income capacity need not become an issue, so long as a local production norm is maintained for basic environment components.

Admittedly, this is one aspect of the community wide system that I'm still trying to frame in the appropriate context. Changes in local land value - on the other hand - would gradually rise according to the worldwide marketplace they remain a part of under any circumstance. In the sense that time scarcity would be considered endogenous to the system, land use values remain exogenous to the system except in terms of how they might be affected by overall coordination.

How to think about basic and interchangeable building components for local living and working environments? These represent building "shares" in both a literal and figurative sense, for all residents to invest in. What's more, innovation in these areas could become every bit as substantial, as innovation in the digital realm of recent decades. Individual participation and investment in local building components, could especially prevent problems with the existing base wage structure.

Once building components are given over to ongoing innovation and the good deflation of productive gain, living quarters will no longer be out of reach for lower incomes. Incremental ownership options would also bring basic living expenses and services access within reach of any income, with little more than a full time commitment in time arbitrage. It is this affordability in living options, that makes it possible for individuals to exchange skills sets on equal terms - thereby generating completely new wealth, in the process.

Saturday, May 10, 2014

Economic Dynamism, RIP

Okay I get it... the post title is over the top. Just the same, this is one of those days when it seems as though my heart has been ripped out, by the disappearance of economic growth. A considerable amount of prosperity which was taken for granted, has slowly faded over the course of my adult years. If I feel the loss too keenly, extreme loneliness is one of the main results of my lack of employment. What's more, this is a form of loneliness I wouldn't wish on anyone - not even my worst enemy. By no means is a relative decline in business formation a figment of my imagination, for in a recent study, Ian Hathaway and Robert E. Litan wrote:
...business deaths now exceed business births for the first time in the thirty plus year history of our data.
They also noted that this decline is not limited to particular industries. Instead, the lack of dynamism extends across the U.S., in all but a few primary cities and regions. If you live in one of those towns or regions with few sparks of hope on Main Street, you're not alone. The downtown where I live is a sad reminder of its earlier days, and yet the school system here thrives in part because we have the reputation of being one of the safest communities in the state. Like myself (forty one years earlier), many who are about to graduate, often want to leave town and have brighter horizons on their mind. Small wonder!

But the fact remains: there are far too many hometowns like the one I returned to three years ago, which have also been left behind. How many schools continue to churn out new graduates who seek a "sweet spot" where they can thrive? Where to begin...this post isn't really a rant, just a despairing lament. Why do societies allow themselves to fall into holes such as this? Why do so many people allow one another to fall away from the economic circumstance which could sustain them as communities?

There is a growing reliance on larger business formations, as Arnold Kling also pointed out in his link to the above study. And clearly, these formations exist in places other than where many end up living their lives. Certainly, many a Main Street has long since surrendered to the real moneymakers, just as agriculture was given over to larger business interests in the twentieth century. In the meantime, retail and manufacturing are no longer a substantial part of the economies which had lost their agrarian roots.

The end result is a growing segment of the population which - unless they escape to or visit the city, has too few reasons to even go outside one's door to interact economically with the world. While there are the obvious exceptions of family events, religious life and sports, these activities are not enough to sustain the numbers of people who need the greater links to society which the economy once promised.

I don't think political parties realize the degree to which a lack of economic dynamism, lies behind many of the more difficult issues of the 21st century. Perhaps it just isn't possible to know what economic isolation feels like, unless one has experienced it, themselves. What's more, the ramifications go well beyond that of baby boomers such as myself who have fallen away from the marketplace.  While Noah Smith gave the above linked report a considered response (also check Ryan Decker's links), I have to disagree with Noah's musing that the whole debate might only be a "non story".

When economies are strong, they provide motivation and inspiration for everyone to keep going, whenever the going gets tough. Strong economies make strong individuals, because they provide concrete ways to continue interacting with the world. This becomes all the more important, if and when our personal and familial interactions fall short. Dynamic economies are needed everywhere and not just in prosperous regions: meaningful economic life is the present day reality of meaningful lives for as many citizens as possible.

Once economic setbacks occur, their effects can have an unnerving tenacity that proves quite difficult to reverse. I continue in my blogging efforts, in the constant hope that others will not have to suffer loneliness (among other burdens) for economic reasons. For a long time, I was embarrassed to admit that loneliness was the prime reason I started this project. But perhaps I shouldn't be embarrassed anymore. It could well be that social factors such as this have far more to do with the desire to produce and consume, than any approaching singularity ever counted on.

How much production and consumption might depend on social elements which appear to run counter to productivity gains? Indeed, matched time use could be the primary means to maintain efficiency gains, which otherwise tend to drive out social elements over time. Perhaps by introducing matched time use as service product, economic dynamism would not have to die an untimely death after all.

Friday, May 9, 2014

When Should Knowledge Use and Skills Sets be Compensated?

...That is, in terms of what local economies could generate and commit to, as directly formed services wealth. This post considers some of the economic relationships people would seek to monetarily compensate, through peer to peer interaction and spontaneous group formations for ongoing projects of all kinds.

For readers not familiar with these examples, I'm referring to communities which are in need of more services and employment opportunities than they presently have. Knowledge use system coordination and related skills, can provide new options for local growth potential. However, these activities would be approached from an ongoing community wide perspective. In other words, it's a very different mindset, from that of institutions with limited services missions. Where communities cannot rely solely on separate schools, for profit workplaces and local non profits, these concepts would flow smoothly together, to regenerate economic access.

Communities that elect to take an integrated approach to services formations, would seek to diversify as much as possible, thus combining larger goal sets of their populations across disciplines. Also, these would be generated as newly defined wealth, in that they would be matched both individually and through spontaneous group formations.

Local coordination would allow matched hours to take place on the positive side of the ledger, in that agreed upon time use takes the place of debt. Thus, the end product consists of focused time use as measurable capital. This is a somewhat different arrangement from paid wages for the purpose of (other) product formation, where individuals are hired by institutions with single missions. Rather than a boss and employee relationship, the arrangement could be described as corroborative efforts among entrepreneurs and managers of time use.

Time use in these instances, would span areas which are normally reserved for both public and private endeavor, alongside more personally defined services. For instance, when it turns out that products or services are either short or non existent in both public and private terms, education and resource coordination becomes an option in these systems to fill in the missing gaps. In the short run, decentralized local processes such as this can provide means to alleviate unemployment. As local systems evolve and grow in complexity, their compensation for time use might become a reliable component of nominal income.

How do we know that social agreements to compensate one another for services, would not be abused? The fact that everyone is structuring services within the same time constraints of a 24 hour day, means that all are optimizing time use in an aggregate sense. This process can also go a long way, to gradually smooth existing knowledge deficiencies at local levels.

When knowledge use is approached as interchangeable components within specific circumstance, participants have incentive to learn as much and as widely as possible. It is an approach which allows needed - and desired - knowledge to be diffused far more effectively, in lower density populations. Also, equal access in time use, makes it possible to measure ongoing gains in knowledge use productivity at local levels.

One aspect of smaller population densities (walkable communities for instance), is the fact that complete specialization is not often needed at this level. That's why specialists of all kinds are generally found in the cities. The problem however, is that some populations are increasingly dependent on cities at crucial moments, just as it has become more difficult to access them. For this and many other reasons, lower population densities have much to gain from the reformulation of knowledge use at local levels.

But even more important, is the fact that so many communities need more sources of wealth than they presently have. Some would have much to gain, by seeking out local services formations as direct forms of wealth. Just as citizens everywhere would benefit from greater diversity of activities, so too would many perfectly good buildings, which remain practically unused. By no means should people or buildings have to remain restricted to a handful of activities - the unnecessary bane of many a small town. Individuals could exchange for time use across generational lines, across multiple calendar schedules, as well as leave room for the unscheduled needs of the moment.

Also, multiple aspects of healthcare provisioning and education could be spread through populations with low discretionary income and/or low population densities. This would allow local citizens to respond to proposed projects and ongoing needs as they arise. The more diversity which can be encouraged, the more growth and productive complexity can be generated at local levels. Eventually, a far more democratic definition of the marketplace would ultimately emerge.