Thursday, April 14, 2016

Defining Circles of Sustainability, and Some Examples

I've used this term infrequently, in part because some concepts associated with it are being discussed in related contexts. Still, it's a phrase I relied on prior to beginning this blog, hence the designation deserves a spot in the glossary page notes I hope to have ready, later in the year.

Circles of sustainability can be thought of as special attention, to internal design patterns which affect the economic outcomes of free market potantial. In turn, this process corresponds to realistic assessments of local group capacity for total economic output, given the resource commitments involved. Complex economies benefit from multiple patterns of resource use that are both recognizable and accessible.

It also helps to differentiate local circles of sustainability, from patterns of sustainable specialization and trade (PSST)  as advocated by Arnold Kling. While the adaptations Kling notes may be deemed spontaneous market conditions, they still result from intentional design on the part of both public and private interests, for the broad settings of general equilibrium conditions. Think of digital tech entrepreneurs which contribute to traffic flows for information and knowledge use, for instance. Kling's general equilibrium approach would also reflect the economic patterns that eventually gain historical perspective.

What happens when equilibrium conditions are not enough, to support economic inclusion? When individuals have little ability to contribute to local definitions of production and consumption, one result is frequent calls for wage increases. However, this approach can mean further imbalance in general equilibrium conditions. Another important example are the calls for less taxation, which - if and when heeded - sometimes lead to negative aggregate supply outcomes. Some economic activities were previously generated on fiscal terms that don't easily gain supply side replacement in the marketplace, when less tax revenue is available.

Current struggles in general equilibrium conditions, also include attempts to provide greater housing density in prosperous areas, so as to bring lower income levels to closer existing work proximity. One cannot help but wonder, how prosperous cities once had ample room for multiple income levels. Might the problem be the fact today's municipalities "need" citizens who can pay higher local taxes? If so, that means zoning "keeps out" the ones who cannot. One could reason that municipal obligations weren't so burdensome, when heavy backlogs of pensions didn't have to be paid and infrastructure was relatively new - meaning less costly maintenance was involved. In any event, sustainability requires local citizen resource capacity, hence sustainability in new communities includes arbitrage time value when wages fall short of the mark.

As a result, some who would benefit from better economic access, will need to start over with different infrastructure obligations, in new settings for mutual employment and service possibilities. Part of this process will include greater economic complexity for groups which only number in the hundreds. Getting started, means local participants will lend their own personal thought processes for infrastructure design and revenue capacity.

Presently, when national or state level governments fulfill infrastructure roles, results tend to be one size fits all infrastructure. These initial requirements can leave lower income levels compromised, in terms of participation and the capacity for bearing responsibility. Consider a recent infrastructure request from "the fortunate" in an article at the Atlantic, by Robert Frank. He asks, shouldn't the rich contribute more? In promoting his new book "Success and Luck" (which sounds like a good read) Frank emphasized how luck is more of an important factor for success in life than many are inclined to think. He was the guest of this week's Econtalk with Russ Roberts, where they also touched on some of the infrastructure arguments included in the Atlantic article.

One reason it's difficult to argue for the rich to commit further taxes for purposes of infrastructure, is the fact (also noted by Russ Roberts) this request is quickly diluted in a barrage of competing government obligations. And again, even in the best of circumstances: when outside parties are expected to do the heavy lifting, the result is externally defined infrastructure which meets the needs of general equilibrium, instead of the income levels which need alternatives to general equilibrium conditions. It is better to redefine alternative equilibrium in which all income levels can contribute to the desired results.

Another consideration: today's infrastructure requirements reflect the additional resource capacity of "home advantage" periods. In other words, overhead costs and (legal) pension requirements tend to be established when trade advantages make these costs reasonable for many citizens. While infrastructure costs aren't such a burden for prosperous regions where local residents have access to international wealth flows, it is more difficult to maintain the same forms of infrastructure, in areas where income levels face limits. Indeed, the example of many a struggling municipality serves as a warning, to consider infrastructure options which prioritize walking over auto for daily work/life needs, alongside innovative choices in electric and water systems.

Fortunately, reducing overhead for living and working needs is not as difficult as it may seem. Many forms of mass production for infrastructure and building components can be assembled on site by local citizens. Best of all, digital networks have greatly reduced overhead costs for business formation, and are gradually becoming capable of reducing costs for learning as well. The next logical step, is to use digital means to coordinate diverse economic settings at close range.

For sustainable infrastructure and living/working environments, it is best to create ways for participants to contribute to the infrastructure which is most capable of addressing their needs. Instead of counting on the lucky and fortunate (yet again) to "make up" for the ones not so fortunate, design environments for greater economic freedom. This way, the potential for luck could draw a bit closer, to many who didn't appear quite so fortunate in the demanding conditions of general equilibrium.

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