Monday, April 24, 2017

Be Careful When Designating Scarcity

Economics is sometimes said to be - more than anything - studies in scarcity. When something is designated as scarce, it becomes more valuable. Yet how do we know that the scarcity in question, is actually a natural constraint?

Often, the products of tradable and non tradable sectors are subjected to artificial scarcities, so as to ensure greater profits. While artificial scarcity in tradable sector product may translate into limits for discretionary income, this scarcity result isn't necessarily problematic. Alas, artificial scarcity results are not always so benign, when they apply for time based product. In recent decades, the artificial scarcities of healthcare time based product, have become a major contributor to growing protectionist and nationalist government tendencies. Indeed: perhaps one reason why libertarianism has not proven as popular with the public as one might expect, is that too few economists have highlighted the problems which artificial scarcities can create, for participation in today's economy.

Perhaps we need more studies which illustrate how artificially derived product scarcity can affect redistributional flows over time, especially as resource capacity is gradually reallocated to different forms of sector output. There is a particularly good example (the Great Compression), how Washington benefited in terms of fiscal policy discretion in the mid 20th century, during a historical period when wealth creation was closely associated with tradable sector output. Was it the fact this additional fiscal revenue was not yet required for extensive entitlement benefits, which made it easier to address inequality via fiscal means?

Nevertheless, given the reality of non tradable sector supply side limits; governments are slowly, but surely, losing the ability to use fiscal policy to assist the coordination of time based product. Unfortunately, the wealth of time based product is not available for redistribution, in the same manner as tangible product which exists separately from time value. As it becomes more difficult for governments to shoulder the costs of time based product, the artificial scarcities of knowledge use will need to be reevaluated.

The fact that governments can have additional leverage via fiscal discretion during historical periods of tradable sector dominance, but not necessarily at other times, certainly deserves attention. Because once non tradable sector activity begins to dominate, different resource use options come into play. Some of these options include greater knowledge use permissions than are now possible. If governments take on extensive entitlements during the "good years" they will eventually need to look beyond money driven strategies for the benefit of their own citizens.

Fortunately, there are ways to make knowledge product a more tangible form of good. Even though allowing for this would not provide the same investment gains as traditional tradable sector output, the process would still provide output gains which help to rebalance aggregate output towards tangible output gains. Better management of aggregate time value, would eventually mean greater clarity in terms of actual output. This, in turn, would gradually make government budget reductions more feasible.

Ultimately, the object is to seek fewer restraints on the product of knowledge and time value, so that income variance need not be so problematic for those who lack access to knowledge product in today's marketplace. In the mid twentieth century, greater equality was possible because of the prevailing degree of tradable sector output in relation to other forms of output. Even though it is not possible to restore this circumstance to a services dominated economy, it is imminently possible to restructure portions of services economies so that those who participate, also have the option to do so in settings that provide a role for the egalitarian use of time value.

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