Monday, September 5, 2016

The Case Against Insufficient Economic Complexity

In "The Case Against Cash", Kenneth Rogoff writes:
I am not advocating a cashless society, which will be neither feasible or desirable anytime soon. But a less-cash society would be a fairer and safer place.
Note that despite the disclaimer, it appears that Rogoff "agitates" for a cashless society just the same. Yet what would such a measure actually provide, in terms of more positive circumstance? There's a chance this reasoning on his part ("a fairer and safer place"), is wishful thinking, in terms of the proposed "solution". I've argued against a cashless society in earlier posts for a number of reasons - not the least of which include the inconvenience factor, for anyone such as myself with limited income.

What I wish to emphasize here, however, is that efforts to massively reduce cash holdings are a backward approach, to the informal economies beyond government's domain. Unfortunately, these conditions thrive, due to a lack of formal economic options for individuals. Plus it's a problem which is only getting worse. Hence instead of a case against cash, why not address the lack of productive economic complexity, in places where it is most needed? How does anyone expect a massive reduction in cash to cripple a vast underground economy - one which primarily exists because too many people have too few options to make a good life for themselves?

And without more positive economic choices, people in the underground economy would quickly find means to circumvent a lack of cash, should governments take this route.The best way to provide incentive for people to participate in formal economies, is to formalize more means of generating economic activity for all concerned. When policy makers spend far too much time going in the opposite direction, the economic underground will remain strong as ever, regardless of restraints on cash formation.

Positive formal economies which provide sufficient economic complexity, are - first and foremost - a result of individual empowerment. David Henderson encourages us to honor the laborer as an individual, in this essay for Labor Day:
To honor laborers, you would have to respect their right to make choices for themselves.
Presently, people lack sufficient economic context by which to do so, and much of the earlier reliance on cultural norms for economic coordination has been outmoded. When individuals and groups alike lack context for mutual organizational patterns, unions and underground economies can be counted on to fill the void. However, in spite of pro/con arguments regarding unions, Timothy Taylor reminds us that unions do not have the presence in today's society which existed only decades earlier:
About 30% of the workforce belonged to a union back in the early 1950s, compared to barely more than 10% today. Union workers do earn more, but at least in part, this is because their employers know how to compete with a mixture of higher-priced labor, fewer jobs, and more capital investment. Are there alternative institutions that might represent the modern needs of US workers?
His concluding question could be considered as a challenge. Indeed, in an earlier post on unions, Taylor noted that when workers don't have a voice in the workplace, they turn to politicians instead. How might institutions respect the right of individuals to make choices for themselves, without giving in to excessive demands?

One possibility for 21st century workers, is an institution which allows individuals to take (economic) credit for the abilities they already have, so that they can continue making progress acquiring new skills, without undue risk. Via mutual employment, individuals would likely not be so inclined to take advantage of one another, because mutual employment would also mean an ability to learn stronger means of negotiation.

Also, mutual employment would more often mean "being okay" with "good enough". How so? Consider what has already occurred, as society has become ever more insistent on creating the best standard which everyone is "supposed" to follow. When societies insist each time on going for the best, the most efficient results, non human algorithms are going to beat us at our own game. Indeed, this is already happening.

Why not respond to encroaching automation, by embracing local "closed loop" services capacity, via the local creation of time based product. This form of hive mind hardly needs to provide the "ultimate" or the "latest and greatest" in knowledge use. Instead, it's a process which would make it possible for individuals who don't live in prosperous regions, to also have a good life. Otherwise, automation and the economic underworld may continue to encroach on the employment of our less prosperous regions, in spite of the cashless society which economists such as Kenneth Rogoff are keen to imagine.

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