While I've not often referred to the phrase "monetary equivalence" since beginning this blog, the concept of equivalence for time aggregates remains central to what I believe is necessary for monetary representation. Not in the sense of specific valuations for given skills (as is presently the case for asymmetric compensation), but making certain that individuals eventually have a choice to contribute economic value through symmetric means, for the course of their lifetime. People need the option of time based wealth which need not make demands on other existing resource capacity. Such organization could also arise without distorting the functioning capacity that is general equilibrium conditions.
Presently, monetary representation for nominal income is not only missing, but a growing lack of this central marketplace factor has yet to be openly acknowledged. Fortunately monetary authorities have often provided sufficient representation for economic activity in the past, even when they weren't necessarily straightforward about doing so. However - during the Great Depression - and once again since the onset of the Great Recession - lack of sufficient monetary representation is starting to take its toll on the populations of multiple nations.
Some have responded with suggestions to remove the independence of central bankers, in the U.S. However, I'm not convinced that governments would automatically provide better monetary representation on behalf of their citizens, as things currently stand. Even as central bankers have skewered the rationale of monetary policy towards banking interests, governments harbor their own built in obscurities, often in the form of knowledge use shortcuts as substitutes for accurate recording of time based product.
The result of these knowledge product shortcuts, are government imposed limits on knowledge use, where "well being" measures supposedly make actual time aggregates unimportant. Not only is this a dramatic restraint on freedom of choice in services provision, it is a restraint on growth potential and a slap in the face to the sacrifice of personal time investment. As a result - until time value is once again closely associated with services product and monetary representation - Washington might not choose to provide the broad monetary representation which the public needs, should they gain the power to do so.
It was not always so difficult, to hold in one's mind the idea of human capital in aggregate as a direct contributor to wealth creation. For centuries, even as knowledge contributed to wealth gains in advanced sectors, more mundane forms of human capital still contributed to the economic activity which provided the consumer base so necessary for these gains. In all of this, aggregate time value existed as a direct component of supply chains, even when time value was not reflected in the statistics.
As governments have taken on larger roles in today's economic systems, they've also grown more reluctant to fully share monetary equivalence with the public. Much of the discussion which revolves around GDP as a "lost cause", reflects this reality - given that GDP (including its nominal component) is the measure of all economic commitments which are held on the part of populations.
In yet another recent discussion about the supposed lack of merit for the GDP measure, one commenter noted (at Askblog), "I get suspicious now that people are suggesting we reduce our interest in GDP now that GDP is going to stagnate." Mark Thoma's article in particular, mentioned the lack of association of GDP with well being, as reasoning for a GDP downgrade. However, the idea that government can be responsible for overall public well being - even as it benefits from the wealth capture of today's knowledge use limitations - is sadly an illusion.
Discussions about the lack of value in terms of GDP are dangerous, because they further remove the possibility of economic vitality away from all of us. It is dangerous in particular to point to (supposedly) less need of money because of technology gains, when said digital gains have not been allowed to evolve, so as to decrease the costs of services product which money is needed to represent. This broader debate around a supposed lack of GDP value, is a larger philosophical concern regarding market monetarist views, than I suspect is widely realized.
Contrary to Thoma's assertions re government responsibility, well being results when societies provide ample room for individuals to fully interact with resource potential in their own environments. When people are given room to measure (for GDP) and monetarily compensate their own personal contributions, citizens finally become free to fully participate in their lives. And in today's world, knowledge use lies at the heart of our economic realities.
Money needs to become more closely associated with the ability of individuals and groups, to create closely woven nets of social stability and wealth creation. Today's far flung nets - valuable though they have been and continue to be - largely originated through the wealth creation of tradable goods structures. In spite of the strength these nets still represent, the "holes" in the nets are - crucially - too widely spaced. Consequently, even as society has progressed in recent centuries, too many individuals are underrepresented, even though they experience some degree of participation.
Among the examples of "holes" in the net, is an over reliance on broadcast means as a stand in for the now burdensome (asymmetrically compensated) time value in today's budgets. By putting broadcast information to better use in personal settings, societies would gain the ability to reconstruct nets with a tighter "weave" than is presently the case.
This would also restore the possibility of longevity to all income levels, not just those who are able to access asymmetrically provided services product. Symmetric time value would also give individuals a chance to connect with others on levels that go well beyond the expectations of today's services product. In the process, the value of time aggregates would be restored in ways which asymmetric compensation simply cannot be expected to provide.
Services product on asymmetric terms will continue to face limitations, as traditional forms of production are expected to pull back in a time of reduced growth. But this doesn't mean human capital can't come to the fore, to gradually make up the difference and restore growth potential. The possibilities have scarcely been tapped, for human capital to become a direct component of wealth creation and by extension, provide hope for the future. But in order to do so, human capital needs to return to the beginning of the wealth creation chain, instead of the end of the employment line where much of it has been squandered in a race for highly exclusive skills preferences.
Human capital has to become more directly associated with money, if freedom is to remain a reality in our lives. Fortunately, there are ways to set this process into motion, and individuals will eventually realize how important money is in the quest for personal freedom and ability to become fully human. Not in the sense of being "rich", but in the sense of gaining the means to use one's time availability in a more meaningful capacity. Not in the sense of "removing" competition through value in exchange battles, but by making room for more competition in a broader, value in use economic arena.
There are vested interests which would understandably hesitate, at the prospect of average individuals discovering how important the time/money connection really is. But think about what happens otherwise, when people either reject money or else find themselves rejected by current economic conditions. Think how we take for granted getting things done in life through gainful employment, only to lose what we build and all that is associated with employment as well. As someone who has struggled to maintain personal freedom and identity the last 60 plus years, I sincerely hope that these vital connections between money and personal ability are not lost. Our future potential as fully functioning human beings, completely and utterly depends on our personal ability, to secure accurate and vital monetary representation for the bulk of what we seek to accomplish in our lifetimes.
Hopefully this post provides readers with a better understanding, how I think about monetary equivalence. I was asked earlier this month to provide a glossary of some of the terms I use, and this phrase is one which began the course of the blog, by serving as its identification online. My health has left a lot to be desired all month long but if I can just get my bearings, I will try to continue the process of adding my own personal interpretation to other phrases I have used in recent years. Eventually I hope to provide a glossary page for the sidebar, and whenever I do a blog post which touches on these concepts, will provide links to the relevant posts in the glossary page.