Wednesday, June 8, 2016

Conceptualizing a (Shifting) General Equilibrium

There's plenty of uncertainty about general equilibrium conditions. Is the economy stable? Will the marketplace even function recognizably in the decades to come? Ahh, just dish it up straight: are people coming unhinged? If so, it's not so hard to figure out why. A Vox article prints yet another variation, on a loosely thought through argument:
Lessons from the IT Revolution are that firms with relatively low-skilled employees are likely to be affected negatively by the new industrial revolution, and those with highly skilled employees tend to reap benefits.
My concern is the takeaway this reasoning implies. Does that mean everyone still needs to prepare for high skill work, all the while making certain that they don't end up with the unfortunate signal of lower skill work, instead? Good luck with that. Oh, the horror and social stigma, that it's become necessary to distinguish today's work "lottery" as such! Hence Andre Spicer of The Guardian:
The idea of the knowledge economy is appealing. The only problem is it is largely a myth. Developed Western economies such as the UK and the US are not brimming with jobs that require degree level qualification. For every job as a skilled computer programmer, there are three jobs flipping burgers. The fastest growing jobs are in the service sector. One-third of the US labor force market is made up of three types of work: office and administrative support, sales and food preparation.
The majority of jobs being created today do not require degree-level qualifications. In the US in 2010, 20% of jobs required a bachelor's degree, 43% required a high school education, and 26% did not require even that. Meanwhile, 40% of young people today study for degrees. This means over half the people gaining degrees today will find themselves in jobs that don't require one.
Of course this doesn't stop employers from expecting their employees to have college degrees, whether or not they are truly warranted. Perhaps these facts are also on the minds of those who are coming out in support of UBI. Granted, the rational solution of government subsidies for low skill workers is only a partial one as well. Why? Government low wage subsidies would be limited to existing jobs, i.e. those of today's prosperous regions, given today's high bar of economic engagement. However, one person's idea of what a UBI "should" be, is possibly another person's nightmare. From Charles Murray at the WSJ:
...the UBI is an idea whose time has finally come, but it has to be done right...A UBI will do the good things I claim only if it replaces all other transfer payments and the bureaucracies that oversee them.
Murray's vision of a UBI might be thought of as a "gotcha!" moment, for long term budget issues which most people have been sane enough (unlike myself) not to address, directly. Murray's "let's not think too hard about this" approach would also threaten some of the aforementioned administrative service jobs, which often make college degrees so lucrative in the first place. Equally important, is that a no holds barred UBI would be the next logical step from block grants to the states. Just add one part political gridlock to one part economic stagnation, mix well, and watch budget minded policy makers gradually unwind government obligations beyond that of police and the military, it would seem.

So the question remains: Are policy makers and the private sector committed to supporting broad prosperity, should national government gradually reduce itself to a bare minimum? Are there sufficient means to include widespread knowledge use, as part of a vital marketplace? If a radically minimal government seems preposterous, one can't help but notice how the private sector is too quiet about aspects of austerity which aren't being replicated for free markets, even as their subsidies are threatened. Imagine a devolution to "government services: there's an app for that", or people completely opting out of education or healthcare because of marketplace deterioration.

While digital platforms have the capacity to transform economic outcomes, personal time and consideration must remain integral to the process, for those platforms to matter. However, knowledge use as a central component of the economy, is in no position to be taken for granted right now. Indeed, limits on knowledge use continue to raise the bar for economic entry. A consequent reasoning of college degrees as poor investments, is unfortunately not too far off the mark.

Even though I identify as a libertarian, I'm not averse to all aspects of centralized government. Just the same, nation states don't realize the extreme harm they continue to cause their own citizens, who resort to taking out their frustrations on one another. The concept of freedom should mean being able to freely choose one's activities with others in the marketplace, on economic terms. Governments and private interests took a hierarchical approach to services in the twentieth century. Not only is this approach outdated, neither governments or special interests can expect the time/knowledge based marketplace of the future to be supported through fiscal means.

Hence governments don't have the capacity to build upon and protect knowledge use for the long run. This prerogative belongs to the private sector, for better or for worse. Which is why it is so unnerving, that the fact knowledge use potential actually belongs to the private sector, has been completely missed in the dialogue about automation and the workplace of the future. Will the private sector accept the challenge? One can only hope.

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