Thursday, April 7, 2016

Don't Pine After "Lost" Networks. Create Time Value Networks

MIT News, in "How network effects hurt economies", (ht Mark Thoma) highlights a recently published study of which Daren Acemoglu is also an author, and notes:
More precisely, Acemoglu and his colleagues have found cases where industry-specific problems lead to six-fold declines in production across the U.S. economy as a whole. For example, for every dollar of value-added growth lost in the manufacturing industries because of competition from China, six dollars of value added growth were lost in the U.S. economy as a whole.
Let's briefly break this down, because a "six fold decline" could be somewhat misleading. Granted, there are immediate - and sometimes lasting - losses to local business formation, when a manufacturer closes its doors. However, the most important losses tend to be in specific regions which are also offset elsewhere, in ways which may not be represented by this study. Also, due to the multiple channels which contribute to redistribution of still existing wealth, actual revenue losses (from revenue which had previously accrued to redistribution for non tradable sector activity), are not as easy to discern.

Another factor in all this, is the degree to which service sectors as future growth, was basically taken for granted prior to the Great Recession. Yet this confidence was abandoned as "push came to shove" and tradable sectors "failed" to provide their once reliable wealth to tap for existing government obligations.

Instead of forever looking backward, and dreaming of recapturing more tradable sector revenue for non tradable activity, why not strengthen time value networks as a future wealth source? The time value of the future could be set free, from its crippling dependence on asymmetric compensation and tradable sector wealth. Ultimately, this process would once again strengthen domestic tradable sector activity as well, because additional marketplace participation would eventually increase local demand for tradable goods.

In many respects, protectionism is little more than a response to an incomplete marketplace - in this instance, of aggregate time value. Stop pining for the marketplace of the past. Populations can take advantage of today's manufacturing and digital realm to rebuild the capacity of time value where it is needed most: individual economic activity, in relation to to the time value potential of other individuals.

Protectionism as a response, would also damage the fiat monetary systems which nations have relied on for the asymmetric compensation which makes it possible to coordinate much needed knowledge use at national levels. Whereas the time value networks that are needed for long term growth, are those which could develop on symmetric terms and contribute to local knowledge use and services creation.

How to think about potential for time value networks? The work objective (a "good job" as "meaningful" with perks) is no longer externalized as something that is "supposed" to be provided by others. Instead, local groups would create the internal conditions they seek, for mutually agreed upon work settings that provide greater measures of economic stability.

Aggregate time value is especially needed now, as general equilibrium conditions continue to be strained by the fact that governments attempt to provide infrastructure and services for those whose time value has not been included - a major factor why nations are reluctant to allow more immigrants within their borders. Only by increasing responsibility at local levels for infrastructure and services creation, will populations once again be able to feel better about the ability of all individuals, to contribute to wealth and economic vitality.

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