Sunday, May 24, 2015

Long Term, Productivity Needs Full Employment

In a recent post, Diane Coyle highlights "The Social Framework", a book which John Hicks published in 1942 about national income accounting.  His book also served as a marketing tool, for what was still a new perspective. Coyle explains:
It's an introduction, for the general reader, to the then-new fangled concept of national income accounting - beautifully clearly written and very straightforward. The book is upfront about the limitations of the exercise. For example, Hicks explains that it is progress if people work on average fewer hours to produce the same quantity of goods and services, even though the national income or output will not rise. Progress can be "deliberately taken in the form of increased leisure".
If economic participation can only become "naturally" limited over time to generate further productivity, how is it possible for economic growth to remain representative of populations as a whole? Production reform for services coordination is needed, which can further clarify productivity through knowledge and time based means. Otherwise, reliance on decreasing time aggregates for all production gain, could eventually cause progress to go into reverse.

Consider Hick's focus on leisure, which plays out quite differently, depending on income levels. For instance, high income levels often purchase leisure as experiential goods. Whereas, "leisure" for those who lack economic access, might turn into the planned containment of prison at a system wide level, or abusive circumstance at the personal level. "Leisure" might be the loitering that property owners don't want, instead of someone considered trustworthy who is merely "hanging out".

A lack of economic access can slowly short circuit the most basic benefits of productivity, when individuals are not meaningfully engaged in economic participation. Productivity on present day terms has managed to provide centuries of economic growth, but it is slowly coming face to face with its own negative externalities.

When knowledge use is secondary to traditional production processes, this represents the natural growth limit which Hicks noted in his book. The problem is not so much the natural growth limit, but that it takes place in a way that employment is slowly being replaced by consumption. Knowledge use systems would also represent another natural growth limit to some degree, albeit with an important difference. The growth which represents all of a given population, would be more reliable than the growth which only a population subset can provide.

What's more, full economic participation could make monetary policy simpler, in that it would be able to faithfully follow nominal income alongside aggregate spending capacity. The services productivity of a time based marketplace, would provide real gains through both knowledge use and social value. By finding means to bring greater productivity to services structures, populations would not have to rely on leisure alone, to protect the stability of long term growth.

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