Sunday, October 9, 2016

Of Food Banks and Equilibrium Patterns

Some of my readers may have noted a "feel good" story about food bank efficiency gains, after some organizational adjustments which led to greater free market choice. These adjustments - in turn - made better use of available resources at a national level. But when is coordination such as this more difficult to carry out, in a general equilibrium setting? From a recent NYT Upshot article:
In a free housing market, for example, big houses generally do not go to those who need them most but to those willing and able to pay the most...but it turns out that when you analyze objections to free markets on those terms, they contain two basic issues. First, goods go to the highest bidder; second, bidders possess different amounts of wealth. Disentangling these two factors is important. When markets produce outcomes that seem unfair, it is usually the second factor - the wealth disparity - that is to blame.
Place bidders on an equal footing and the superior efficiency of the market becomes evident. When two similarly well-off families vie for a large house, for example, the family that places the greater value on the property will outbid the other one.
In all of this, housing valuations face thornier general equilibrium issues, than the much simpler tradable commodity coordination which proved amenable to all concerned. The non profit group Feeding America was able to enact a bidding process, which in turn put food banks on equal footing. This allowed food banks to bid in ways that reflected regional variations in supply and demand. The pricing features that were noted, led to surprising discoveries about variance in value assigned to goods - indeed, it turned out that some donations were not actually wanted.

Unfortunately, some general equilibrium components - particularly for national level non tradable sectors - aren't really amenable to coordination on a broad scale. Non tradable sector activity reflects both local labour market factors and local/international wealth holdings, which are quite different from one region to the next. This wide variance would distort many general equilibrium bidding processes that attempt to place participants in an equal framework. In particular, the costs of housing and time based services often correspond to the degree of access for local employment. Housing can be expensive if it reflects real property scarcities, even though employment scarcities may be artificially imposed. In these environments, most attempts to place participants on more equal footing for economic access, run headlong into local efforts to keep economic conditions as they already exist.

Even though general equilibrium conditions include wide income variance for time value, not all labour markets have to exist on these terms. New employment templates would be possible, via alternate equilibrium conditions in which local price coordinates aren't so dependent on externally driven employment factors. In these settings, time value could serve as an equal starting or bidding point, by which equilibrium corporations would create their own internal economic access. Labour market scarcity can be alleviated through knowledge use systems which generate a mutual employment market structure. Eventually, the high rents which now accrue to areas with the most economic complexity, would be offset by growing markets for time value and knowledge based services in new regions.

Part of today's general equilibrium coordination problem, is due to the need for money to bear the entire burden of representation for all resource capacity. In times when money is in high demand, other resources can appear as though too abundant. And yet some of these resources would be capable of assisting the circumstance of individuals and groups which may otherwise lack economic access, were the coordination in place to make this happen. It is possible to link resource capacity and time value to monetary representation, so as to strengthen local economies.  Ultimately, this approach could extend economic access to those who need it most.

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