Thursday, April 9, 2015

All "Educated Up", With No Place to Go

How is this possible - a moving towards "inevitable" secular stagnation - given the high level of societal commitment to time based investment? Have the investments of human capital been forgotten? Think about what education at all levels has worked to produce for so long - a broader level of intellectual capacity than otherwise would have been possible.

Normally, one thinks of production as either intended for consumption, or else as an intermediary societal position which is intended to further more means of production. Even though knowledge based consumption holds value in and of itself, the value of consumption is greatly increased whenever knowledge is allowed to provide for both means and ends of economic endeavor.

The work of the mind can easily be lost, when its capacity is treated primarily as a consumption good to further special interests. All too often, the challenges of the mind get little respect, for they are treated as expensive consumption signals which might gain economic access. For reasons that are difficult to fathom, there have been few organizational attempts to tap a vast wealth of educational gains in the marketplace.

More of the U.S. population is already well educated with "no place to go", than anyone can comfortably acknowledge. Granted, there are those who do not have sufficient education to take part in knowledge based endeavor. Still, the greater reality consists of many who are marginally employed, given the skills capacity they would be able to bring to the marketplace.

One of the stagnation arguments which especially frustrates me, is the idea of slowing population growth as supposedly responsible for the current economic malaise. Particularly given the fact that many baby boomers remain at a point in life when they seek to engage in time and knowledge based services at multiple levels. The older one becomes, the more important the life of the mind becomes, and individuals crave the experiential product of time value.

Even though there are cultural factors which play into reduced manufactured goods consumption, this sector nonetheless remains limited because of present day housing costs of entry for lower income levels. For the most part, reductions in family formation are related to a lack of economic access and limited opportunities for advancement. With a time based marketplace for knowledge use and services, and an innovative building approach, education and the people who take part would have more "places to go". In turn, family formation would return - alongside higher levels of consumption for manufactured goods.

Greg Ip mentions the population argument in this recent contribution to the stagnation discussion, but fortunately he highlights more substantial arguments. Like Jason Furman, whose WSJ article I referenced in yesterday's post, Greg Ip is concerned that productivity growth has slowed in developed countries.

Most important: Greg Ip highlights the lack of discussion regarding supply side circumstance. After noting that both Bernanke and Summers are still ignoring monetary policy, he continues:
Something else I think is missing from Mr. Summers and Mr. Krugman's version is any role for the supply side of the economy. Mr. Bernanke himself says that "the secular stagnation story is about inadequate aggregate demand, not aggregate supply." Yet many of the symptoms of secular stagnation are consistent with not just weak demand, but weak supply - that is, slower growing labor, productivity or both.
Understandably, policy makers have good reasons for their reluctance in stressing supply side issues. And not only because it's difficult to know where to begin. Who wants to antagonize multiple groups with a "get your act together" message, in order to encourage growth? And how - exactly - are the wildly diverse elements of supply side interests supposed to respond as a group?

There are multiple factors in these circumstance and while many participants are responsible for a consequently limited economy, limits hardly exist in isolation. Fortunately, there are ways to target new growth through which the assistance of various supply side groups can be sought, instead of needlessly putting them into a difficult position. What's more, the supply side isn't just about special interests in terms of traditional production. Production reform needs to address what isn't widely recognized as the most important supply side factor: knowledge utilization.

For anyone who is concerned about knowledge use, the fact that much of it remains in government hands is worrisome, because government does not have the capacity to extend this valuable marketplace to all who actually need it. If that were not enough, government budgets cannot hire all those whose education has no place to go. I can scarcely blame Brad Delong for his recent wishful thinking, in regards to more government funded services than are presently the case. And if nothing else, I wholeheartedly agree with him that a future without sufficient future knowledge based services would be economically catastrophic.

But how to convince Keynesians that populations could prove capable of knowledge use preservation through voluntary means? In the U.S. a lack of services at local levels, has bearing on the fact that more individuals are abandoning the idea of knowledge use as meaningful economic growth. There are plenty of specific examples in this regard, but they are so politically charged that I would rather not "go there", if possible. Suffice to say I never imagined that anti-intellectual arguments would ever be taken so seriously, in my lifetime.

If production reform cannot be tapped to bring broad based knowledge use to populations as a whole, education may lose its time investment potential. But even worse, is the possibility that individuals become convinced education serves little purpose. Let's make certain that this does not happen.

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