Friday, January 30, 2015

Productive Inclusion

If two words could suffice for present day economic concerns (besides my other preexisting bias, "market monetarism"!) "productive inclusion" would probably be at the top of the list. This phrase seemed an appropriate post title, after reading a recent post, "Redistribution or Inclusion?" from Ricardo Hausmann.

While his articles are always interesting, his last one seemed surprisingly close to some of my own views. In particular, he's concerned about human capital potential which is lost to poor organizational principles. Not only has this created problems for economic access, but also in terms of lost productivity. What's more, Hausmann believes that Piketty's redistribution thesis could dangerously mislead. Here's Hausmann:
Given productivity constraints, redistribution is only palliative, not curative. To address the problem requires investing in inclusion, endowing people with skills, and connecting them to the inputs and networks that can make them productive.
Think about this quote for a moment. Even the suggestion of more redistribution is a really bad idea, if and when a marketplace is not fully developed. There's a tendency to think of missing markets as a problem for developing nations. However in terms of needed services, this holds equally true for the U.S. After all, the ones who benefit from knowledge use exclusion in the marketplace, fund both political parties. Some continue to rhapsodize in speeches about educational investment, and the fact that as a nation we are worse off without it. Yes...but what about those who already have it? The problems of how and where to include all those time use commitments, are turning time investment into something of a question mark.

As a result, the kinds of inputs and networks which would make more regions productive, are still jealously guarded for obvious reasons. Only consider that a primary component of healthcare is pharmaceuticals, which as a group appears to be focused on achieving exactly the opposite of greater inclusion, in production and consumption terms. Today's protected institutions are not organized in ways that would allow them to optimize time use aggregates. Alternate systems are very much needed, for needed growth to become a rising tide that would raise all boats.

Hausmann continues:
The dilemma is that poor countries lack the means to connect all places to all inputs. They are faced with the choice of connecting a few places to most inputs and getting high productivity there, or putting some of the inputs in all places and getting very little productivity growth everywhere. This is why development tends to be unequal. 
This is exactly the situation with U.S. hospital systems, which in knowledge use terms could be thought of as a three tier system. In this system, most of the productive work occurs in the top tier i.e. prosperous regions. At the bottom are the (remaining) rural hospitals. In the event of emergencies, these often don't have the staff or equipment to tend to more than basic patient needs. Appearances suggest this group is largely able to pay bills, due to a costly (to patient and/or government) fleet of ambulances. Indeed, hospital staff here must rely on scheduling "luck", even to gain a spot in a second tier hospital where they can then transport the patient.

In the second tier (outside major cities and in large cities) the staff can provide more tests and sometimes, procedures. Still, these hospitals often serve as expensive waiting areas, until the patient can gain a location at a first tier hospital which has the staff and facilities available for what the patient needs. In the meantime, patients are lined up like so many planes alongside a runway, waiting for a chance to "take off" for the ultimate destination.

To be sure, many are used to thinking of certain skills sets as belonging specifically to certain individuals. However, this has led to productivity problems in many areas of life. In the case of hospitals, the primary work occurs at a fraction of the facilities involved. Productivity in terms of time use product, is quite different from the product which is separate from time and specific geographic representation (hospital or office). In other words, time use often can't be scaled down for productivity gain, without the actual loss of that marketplace in real terms. And the loss of that marketplace spills over into multiple areas of life.

Fortunately, some aspects of economic inclusion don't have to wade through the thorny issue of knowledge use rights! Locally generated investment pooling for time and resource use, would be one of the truly positive aspects of knowledge use systems. These kinds of investment structures would provide benefits for small groups of individuals who are directly involved. Time use aggregates are difficult to relate to other resource aggregates in constant terms, because time use aggregates exist in a finite range while other resources exist in a seemingly infinite range. Local systems would provide means to monitor time and resource use in relation to each other.

International investment flows scale into the random infinities that make up general equilibrium. That not only accounts for wide income variance, but leaves little room for small investors in open investment opportunities. Knowledge use systems need investment contributions that are capable of freeing up time for endeavor which cannot always be monetarily compensated. This is why local investment would seek to make investment really count for all participants, and it could do so because of the finite scale of investment actually involved.

Productive inclusion is a real possibility, even if it cannot readily take place in today's already existing environments. The targeted growth of knowledge use systems could mean inclusion for those who seek to help one another, when it is not possible to do so within the context of existing institutions.

Update: When societies do decide to allow innovation which leads to greater inclusion, is it because of who is doing the disrupting?

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