Sunday, May 29, 2016

Notes on Expanding Non Tradable Sector Horizons

Recently I finished the 1937 edition of "Economic and Social History of Medieval Europe", by Henri Pirenne. I enjoyed this book and it also provided an apt starting point for my summer reading, which will include the "Wealth of Nations" (in its entirety) by Adam Smith and some other classics.

Towards the end of his medieval history, Pirenne notes that nations were gradually assuming more prominent roles, which included loosening production restrictions placed on rural areas by the medieval towns and cities. Governments were inspired by the self contained organizational patterns of medieval cities, but wished to broaden what in some respects had become a closed economic framework. Hence one could categorize this national government "awakening", as a moment in time when increasing production rights also meant the expansion of tradable sector horizons. Pirenne's descriptions provided an interesting contrast to Jerry Muller's description of Hegel's rationale, for a growing state presence, in "The Mind and the Market".

Henri Pirenne provided a useful perspective, and he packed some important information into a relatively small book. For instance, he highlighted crucial differences between tradable sectors (including monetary flows) either intended for local consumption patterns, or the altogether different agenda of international trade. Even though the relatively closed economies of medieval cities provided more stability for (resident citizen) workers than the changeable cycles which international trade workers were exposed to, those patterns of stability were lost, once economic stagnation began to set in.

As nation states of the late medieval era gradually assumed greater roles, national governments also extended new privileges to rural areas. This process included a greater extension of production rights, which had been suppressed by medieval cities and towns that claimed those rights for their own citizens. Even so, the impetus for doing so was not solely based on a free marketplace ideal.

Rather, broader private property designations would strengthen national consolidation of economic power, through greater quantification of resource use. Even though it's easy for libertarians to be cynical re certain aspects of private property origination, negotiations such as this were nonetheless a win-win, for the flood of economic activity made possible as a result. The gradually emerging national governments knew they would gain from increased total output, by granting production rights to those who were struggling to participate in a changing economy.

Given what was made possible for tradable sectors centuries earlier, why not production reform for non tradable sectors in the present? Indeed, the primary argument against broad innovation for today's non tradable sectors, is that production rights (for rural and other areas) would need to be accomplished without diluting the value of the non tradable sector wealth now enjoyed by today's prosperous regions. Fortunately, by creating an internal loop between asset and time based services formation, knowledge use systems should not pose a problem for the non tradable sector wealth of prosperous areas. Still, knowledge use systems would not form a closed economic framework in the sense that was once the rationale of medieval cities and towns.

Production rights (for the alternative equilibrium of knowledge use systems) would hinge on the ability to quantify time value for services creation and asset formation. Why would any national government consider this possibility? By far the most important incentive for doing so, are the looming long term budgetary concerns which have yet to be addressed. Presently, there is no relief in sight, for the 21st century burdens of national responsibility - especially given the reality of economic stagnation.

By expanding non tradable sector horizons, governments could finally respond to what has become a growing lack of economic access - one which many nations face to varying degrees.  I don't particularly recommend production reform for today's non tradable sectors because it's the humane or moral thing to do. Nevertheless, my approach to reform must seem a bit dry, to some readers who are more accustomed to the arguments of the heart. I remain convinced just the same: addressing economic access is the economic thing to do.

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