Monday, February 22, 2016

Economic Freedom and Intentional Outcomes

Are free markets more of an expression, than an actual reality? Often it is said that free markets work well (compared to "everything else") because they are not centrally planned or designed. Still: even though "master" planners supposedly don't exist, plenty of inadvertent (and often permanent) designs routinely take place behind the scenes, through the convergence of government and its most successful participants. Then, the results surface in the form of what is frequently ill begotten legal rules and regulations. Somehow this mish mash is expected to provide a cohesive whole, to serve as a hard standard across wildly divergent circumstance in general equilibrium.

This post is also intended to explain the rationale for my blog name, "the intentional marketplace". While I would have preferred "monetary equivalence", the latter phrase represents the dream, more than the reality. And presently, the dream is mostly aspiration on my part, that time value could prove adequate (when necessary) to make a good life - given sufficient effort. As things now stand, the time value of too many individuals is not capable of fulfilling that role.

Wouldn't it be great if economic freedom - that is, one's personal right to inclusion in production and consumption definitions - could be maintained without constant effort and diligence. If only! Whenever it is painfully obvious what stands in the way of economic freedom, I believe societies should step back, reassess laws and regulations, and try again as often as necessary, to achieve more freedom for all concerned.

A marketplace for time value - particularly in a time when knowledge use is vital - would also make a difference. Presently, individuals have few means to assist one another - even after years of personal time investment - on economic terms. Time value would build a new frontier in the form of alternative equilibrium, just beyond the walls of today's NIMBY borders.

Markets are defined by intentional actions on the part of individuals and associations. Both will sometimes shape market use patterns for their personal preferences and intentions, in spite of free market rationale which may reason otherwise. Small wonder that capitalism routinely comes under ridicule!

Hence even though the blog name wasn't my first choice, I take its meaning quite seriously. Over time I'm slowly learning to let go of reactive responses, whenever someone insists that "free markets aren't broken and there's nothing to fix". Likewise, when claims are made that any form of marketplace planning is "detrimental to free markets".

For the record, I haven't been reactive because I think capitalism is a problem. Rather, I've been reactive because I am concerned that long term growth is increasingly endangered. And because I'm concerned that cities might become the only viable places for goods, knowledge use and most forms of services. Many who have spent part of their lives in rural areas, know how devastating such a development could be.

While more voices are being raised across the political spectrum for greater inclusion, the problem is that some of the most important forms of economic exclusion in today's society, occur by default. Once a given set of marketplace rules are set into motion (and built upon), they serve as choices for those who hold similar sets of income levels and preferences. Consequently, few other marketplace design options are given a chance to emerge, which could serve other sets of income and lifestyle preferences. Not only has this mindset led to a crushing sameness in physical infrastructure, it also generates shortcomings in the infrastructure patterns which generate knowledge use and services formation.

Even though tradable sectors remain the first movers of economic activity, they need to be first movers for knowledge wealth as well, in order for growth trajectories to remain strong. And for knowledge wealth to qualify for inclusion (with time value as a first sector raw good), product definition cannot be dictated by the few.

One reason the battle between Democrats and Republicans in the U.S. has become so intractable, is the fact both sides remain determined to carve out an entire economic equilibrium in a specific image, in spite of the great variety of humanity that actually exists. Worse: rather than being considerate enough to allow further options within equilibrium, each side would now rather take a chance on diminishing equilibrium, if that's what it takes to prevent success for one's opponent. Interestingly enough, Charles Koch spoke about the problems of cronyism in a Washington Post article, as he noted what he actually held in common with Senator Bernie Sanders:
The senator is upset with a political and economic system that is often rigged to help the privileged few at the expense of everyone else, particularly the least advantaged. He believes that we have a two-tiered society that increasingly dooms millions of our fellow citizens to lives of poverty and helplessness. He thinks many corporations seek and benefit from corporate welfare while ordinary citizens are denied opportunities and a level playing field. I agree with him.
What is not recognized, is the degree to which centrally defined economic activity contributes to problems of inequality and a lack of economic access. The stakes are simply too large, in terms of what is to be gained by the participants who are allowed to take part. Fierce struggles over marketplace design outcomes are ill fated because it's not just about groups with personal agendas, but the entirety of general equilibrium conditions. As it turns out, Charles Koch recently provided an apt example, just through rumors that he (and his brother) may provide funding for a group which in turn will advocate against electric cars. How is the freedom of economic choice even possible, when certain forms of infrastructure are always expected to win out against all others at nationwide levels?

Where governments also falter, is the fact that once they design pathways with the help of special interests, policy makers have a difficult time accepting the fact such pathways may not remain useful, indefinitely. Further, when patterns of economic access start to bog down, people lose incentive to invest in them. Why should they? Charles Koch made a good point in the Washington Post article when he said, "It is results, not intentions, that matter." Indeed. However, too many pathways for economic access are blocked by what have turned into the wrong results - and in some cases, the wrong results at the outset.

It is still tempting for governments to take control of markets, which may have already faced artificial limits in the private sector. This too can be an intentional outcome, on the part of government. Unfortunately it is a pyrrhic victory. Why? Because governments are then the ones left standing - forever seeking the revenue to build a knowledge based marketplace which nonetheless reverts back to higher income levels, when marketplace innovation is turned back for too long.

Indeed, when governments begin their retreat with entreaties that future growth might not be promising, that's a tacit acknowledgement that further innovation has become too threatening for all concerned. This is no time to assume that technology can somehow continue to do the work of economic progress on our behalf. The hard work lies in generating an open marketplace where technology assists all of us, instead of a mere few of us assisting technology.

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