Tuesday, June 13, 2017

Aggregate Time Value: Demand, Supply, or Both?

System imbalance between today's tradable and non tradable sector activity, is exacerbated by the lack of aggregate time value for supply, in the latter. An apt example of untapped labour abundance - given a demand dominated role for time value - is the consequent restrictions in housing supply.

Unless time value also serves as an active source of supply, individuals can gradually lose their ability to contribute to economic progress. Such an occurrence is more likely, if governments and special interests choose to limit the economic freedom of time value, as a potential supply function. While time representation as demand remains sufficient in tradable sector activity (via output gains for a full range of product), human capital supply potential is being lost, in today's non tradable sectors.

When human capital is mostly tapped via institutional demand terms, it can become incapable of contributing to full marketplace participation. Even though tradable sector activity achieves production gains via reduced time contributions (the Solow residual), non tradable sector activity inadvertently diminishes the marketplace, with this approach.

In order for time based services to contribute to a more complete marketplace, aggregate time value needs to move beyond the demand management functions it is presently assigned. While managed demand pools for institutional needs are quite valuable, they lose the ability to move economic progress forward, in historical time frames when secondary (wealth dependent) market activity is dominant.

The twentieth century offered ample opportunities to grow the marketplace through pooling for demand management of human capital - both in educational and workplace context. The main reason human capital was able to contribute to long term growth in this arrangement, was its association with tradable sectors which continued to expand output in relation to the increments of time involved. As output has come to be more closely associated with human capital than with tradable sectors, it becomes increasingly important to consider how growth can be achieved on human capital terms. A recent post from Tyler Cowen regarding the compound interest of learning, provides helpful ways to think about the process. He writes:
Compound learning occurs when your new learning, and your new analysis, builds steadily upon the old. Over time, learning is a bit like compound interest and it accumulates. When compound learning is possible, you wish to keep a relatively well-defined set of analytic pieces on the table. It is fine and indeed essential to add to those pieces, but then the new piece should be one that you may learn with it. Furthermore, it should be readily shared with other people...
I was glad to see Cowen highlight the fact that knowledge use accumulates as wealth capacity, through active sharing. However, it can be difficult to secure knowledge gains - even when individuals commit to steady work habits and schedules, when their personal circumstance becomes subject to stresses that make it difficult to maintain or share earlier time investment gains. An institutional framework is needed, which makes a productive knowledge continuum more likely for all who commit to human capital investment, in the course of their lifetimes.

It would be easier to recognize learning as economic processes capable of compound interest, if time were used as a vessel (economic increments) to create a knowledge continuum for individual and group participation. Time value works as a supply side component when the time of one person can build new wealth, through the purchase of time on the part of others - especially to reinforce education and learning as a part of workplace structure.

A time continuum of pooled supply management, much as the learning space of a given individual, gives opportunities for human capital compound interest which are not yet being tapped. Aggregate time as demand, gives opportunities for compound interest in the form of social capital for the group. Nevertheless, this process is associated with individuals who experience only a partial knowledge continuum with today's organizations.

For instance, formal schooling thus far has been a cut off point for an otherwise organized continuum of human capital. It stops precisely when individuals and groups need to start taking advantage of mutual learning gains with one another. Likewise, when firms require non compete clauses, they restrict the compound interest potential of knowledge gains in society - especially when firms can't fully utilize the capacity inherent in any given employee, beyond what takes place in normal workplace hours.

Even though today's institutions contain important elements of compound interest for learning, their present organizational capacity is too thin, to preserve knowledge use in the event of catastrophic events or political setbacks which often disturb important organizational patterns. Fortunately, knowledge use can be preserved via managed pooling for supply functions, to move progress forward, when human capital demand aggregates face the limits of secondary market dominance.

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