Sunday, February 5, 2017

When are Divisions of Labour an Adaptive Strategy?

One reason this question is important, is the fact that, since Adam Smith's time, divisions of labour are central to the stories we've told ourselves about progress. For tradable sector product, divisions of labour have meant greater productivity over time, in the form of both increased output and product quality. Nevertheless, something has been missed in this recounting: labour divisions for non tradable time based product, don't translate into the same productivity gains.

Consequently, even though divisions of labour contribute greater quality to time based product, they have not generated output gains in time based product formation. This current institutional reality, in turn limits services complexity to the most productive regions of the world. Worse, some non tradable sector labour divisions are so investment intensive, that their knowledge use restrictions contribute to polarization and societal division.

Why has this occurred, and what might be done? First: product which is directly linked to time, is incapable of self replication. The output gains which are possible are those which exist elsewhere, by which other individuals contribute to the creation of more time based product in a similar capacity. However, as the reimbursement of time based product is currently structured (via secondary market formation), participants depend on the same pool of potential revenue, for time based service formation in a given equilibrium.

Since the present organizational capacity of time based product remains revenue dependent, its representative associations are often reluctant, to approve separately existing replication that results in expanded output. After all, if revenue cannot be internally generated (to expand output), expanded output mostly means diluted revenue to compensate those who already provide important knowledge and time based services. Perhaps due to the focus on product quality by only the "most qualified" providers, output loss has been treated as an inevitable result, by all concerned. Nevertheless: for the time based product of non tradable endeavour, hard divisions of labour have proven to be a poor strategy for the preservation of valuable knowledge and skill.

This form of non tradable sector activity inadvertently divides labour in ways which - instead of promoting societal progress - increase class divisions for knowledge use which only grow wider with the passage of time. Yet the intent of labour divisions by tradable sectors was never "set in stone". From the beginning, divisions of labour were intended as flexible tools by which institutions could adapt to changing consumer preferences and needs. Indeed: if management or workers had insisted on hard and specific definitions for knowledge or skill to produce tradable sector product, it's difficult to imagine how the Industrial Revolution would have ever taken place.

Divisions of labour are not an adaptive strategy for institutions to evolve and grow, when quality is demanded by extensive investment which in turn limits the quantity of time based product that is possible. Fortunately, the divisions of labour which contribute to time based product, could become more flexible in the future. But in order for this to occur, personal time value needs to more closely reflect the resource capacity which people actually have at their disposal. Symmetric compensation and coordination, sets the template for aggregate time value to operate as a true marketplace: one in which individuals can discover the time based product they are most comfortable with.

Best: the fact that wealth can be internally generated through symmetric compensation processes, is actually a side benefit. By placing the possibility of time negotiation on a common platform, individuals can use time value for evolutionary and adaptive gain, much as divisions of labour have been utilized in tradable sector activity for as long as anyone can recall.

When there is no marketplace in which time value can exist in relation to its own resource capacity, time aggregates must be compensated from other system components. As asymmetric compensation proceeds apace, individuals often find themselves compelled to rely on debt, as the sole means to honor time based commitments and responsibilities.

So long as economies grow rapidly, it's possible for individuals to adjust for vast differences in asymmetrically compensated time value, through additional debt loads. But when economic stagnation sets in, the "more output for less labour" Solow residual, acts like a slowly tightening noose, gradually undermining the possibility of full employment, social inclusion and continued growth. Even though the Solow Residual means production benefits for tradable sector activity, there is no "more output for less labor" equivalent for time based product. If there are not enough individuals participating in the output potential of time based product, ultimately there are too few consumers for either time based product or tradable sector product.

It's time to begin thinking differently about the present organizational capacity which insists on hard divisions of labour for time based product. Otherwise, non tradable sector activity will not be able to adapt and evolve in sustainable ways. The global economy is in desperate need of nations looking inward, to see what they have been doing wrong at home, instead of obsessing over the industries that have succeeded by putting flexible divisions of labour to good use for the right reasons. A marketplace for time value would not only protect domestic employment at home, but also the vast quantities of knowledge use and skill which are part of the present day global economy.

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