What happens when money is really fiat bling?
"The Fed's inflation-targeting framework has forced monetary policy to be too tight for the better part of a decade."
The Spring issue is out for the JEP. (Timothy Taylor)
A standing repo facility would benefit from a corridor system.
It's still slightly more difficult to find a job now, than it was at the peak of the last business cycle peak in 2006. And job finding probabilities are still lower than in 2000.
"Five Myths about Federal Debt"
"Slow productivity growth is hugely consequential."
Iowa remains a testing ground for presidential hopefuls. Yet they are stymied as to what can be done.
This may turn out to be the best news of the year...
"Scientists from Berkeley Lab have made a next-generation plastic that can be recycled again and again into new materials of any color, shape, or form."
Democrats are increasingly the party of the young.
Ricardo Hausmann exposes the danger of merit and the prestige equilibrium.
Diane Coyle provides some highlights of a flourishing discipline.
Just finished reading A Godly Hero: the Life of William Jennings Bryan by Michael Kazin (2006) and found it unexpectedly fascinating, both as a biography and history of his times. For one, my knowledge of the early Progressive movement has been somewhat limited. Hence I was surprised how much of its origins weren't necessarily secular and urban, but also rural and religious in nature. My previous knowledge of William Jennings Bryan was mostly limited to his advocacy for silver, at a time when the gold standard had quite a negative impact on farmers. Many a monetarist for instance, recalls Bryan's Cross of Gold speech from his younger days.
Remembering Alice Rivlin:
from Brookings
Timothy Taylor
Arnold Kling
David Henderson also highlighted an oral history.
Increasing non discretionary demands on income have made rising wages less "freeing" than was previously the case. Even without wage stagnation, births are still at a 32 year low as of 2018.
Speaking of birth rates...
"Even after three decades under the ban, Romania's birth rate had not increased."
In the U.S., "17 percent of all 18 to 24 year-olds" are out of work.
Sebastian Edwards notes mistakes Latin Americans have already made with MMT. "In each case, the central bank was controlled by politicians, with predictable results."
"Nine ways to prevent future recessions."
"Big business is not running the show. If big business was running the show, President Trump never would have been elected."
Trade hawks are not doing the U.S. and China any favours.
It's no simple matter to give up what is known, for the unknown.
"...our visions of past collapses are typically seen through the eyes of its most privileged victims."
And, "Modern civilizations might be less capable of recovering from deep collapse than their predecessors."
Even though doctors may not be statistically in short supply, their skills are still needed in rural areas.
"If a house was designed by machine, how would it look?"
"Monetary policy ten years after the crisis"
It's time for Harriet Tubman to replace Andrew Jackson on the $20 bill.
A thirteenth consecutive year of decline in world freedom.
Why do holidays provide more memories?
Neighborhood amenities can make a positive difference.
"Why are the prices so d*mn high?"
"It is great when we can substitute a good from the progressive sector for one from the stagnating sector, but we should not confuse statements about substitution with statements about productivity growth." (page 41)
In contrast with other developed nations, "US home prices declined sharply after 2007."
I too was dismayed at the recent outrage over currency manipulation.
David Beckworth "goes back in time" with Robert Samuelson to discuss the great inflation.
Even though Robert Samuelson isn't related to Paul Samuelson, they both had long writing stints at Newsweek. Incidentally, I recently read the latter's "Economics From the Heart: A Samuelson Sampler", which reprints nearly half the articles Paul Samuelson wrote for Newsweek between 1969 and 1981. There was plenty of discussion about the constant inflation problem during those years, which made Beckworth's recent talk with Robert Samuelson all the more interesting for me. Robert Samuelson worries that should high inflation once again become a problem, people might adjust to the point of rationalizing it. Indeed I noted some of that tendency in Paul Samuelson's later articles for Newsweek.
As it turns out, that old Paul Samuelson paperback gives me added perspective for his 11th edition of "Economics" (1980), which is one of my summer reads. I'm only 45 pages in, and already surprised how many text examples have been "revisited" of late. For example, Eric Helland and Alex Tabarrok explain the production-possibilities frontier (guns and butter) in the above linked PDF, "Why are the prices so d*mn high?"
Federal debt is not a popular subject right now!
"...more immediately, higher interest costs would force a political budget squeeze."
"Three-fourths of the decrease in labor share in the United States since 1947 has come since 2000."
What is meant by a precise inflation indicator?
"Aggregate implications of changing sectoral trends"
"Understanding weak capital investment: the role of market concentration and intangibles"
Summer is already upon us, and thankfully I haven't fallen too far behind with my writing schedule. Just 20 more subheadings to review in the last chapter, before starting the final edit. With a little luck, I'll have this first book ready to publish, sometime in early fall.
Thursday, May 30, 2019
Friday, May 24, 2019
Supply and Demand Still Determine Equilibrium
Supply and demand are conceptual basics not only in microeconomics, but also for economic activity at the macroeconomic level. However, Raj Chetty recently returned to Harvard with a different introductory approach in mind, than what Greg Mankiw has taught. Mankiw's basic emphasis and textbook contributions have likewise been utilized by other universities for some time. Interestingly enough, Chetty also aims to make his course a model for other schools. An article for Vox by Dylan Matthews, explains:
If introductory economics students aren't acquainted with the basics of supply and demand in the near future, it may only become more difficult for the average individual to envision the less than optimal trade offs between sectors which are presently occurring at system wide levels. Lack of understanding in this regard, further inhibits the potential of public policy responses as well. Given this reality, a stronger emphasis on supply and demand is needed, not less. Already, non tradable sector dominance has considerably altered how many aspects of supply and demand play out in the marketplace as a whole.
What also encouraged me to write this post was a recent conversation between Tyler Cowen and Ezekiel Emanuel. Their discussion provides an apt example of supply and demand dynamics in general equilibrium, for high quality services which are dependent on other sources of wealth origination. When Tyler Cowen pressed him on physician shortages, Ezekiel Emanuel noted the existing human capital investment burden, and why it's better to task shift going forward instead of adding more doctors:
In the meantime, worsening budgetary realities for healthcare compensation, suggest a different approach is needed for applied knowledge in general. In recent years I've suggested the horizontal patterns of time arbitrage, which would make it feasible for services to more directly align as wealth creation, rather than budgetary burden. Symmetric organization of time as an economic unit, could also make it feasible to integrate healthcare with other high skill services activities via deep learning AI.
Even though we don't yet know, whether more physician supply might be deemed "necessary", the real issue for many physicians is to be able to preserve human capital investment in its current form. Indeed, a horizontally aligned knowledge use system would likely pose less of a threat from without, than the internal reforms of traditional healthcare that could make it difficult to preserve the integrity of human capital value for physicians today. When services markets such as healthcare are dependent on other sources of wealth, societies can only generate supply side high quality human capital, up to a point. I remain convinced that since this point has basically been reached, given today's low growth economy, it's time to pursue more direct means, for the continuation and preservation of high skill knowledge in the 21st century.
The courses could hardly be more different. Chetty has made his name as an empirical economist, working with a small army of colleagues and research assistants to try to get real-world findings with relevance to major political questions. And he's focused on the roots and consequences of economic and racial inequality...
There's little discussion of supply and demand curves, of producer or consumer surplus, or other elementary concepts introduced in classes like Econ 10. There is no textbook, only a set of empirical papers. The material is relatively cutting-edge. Of the 12 papers students are required to read, 11 were released in 2010 or after. Half of the assigned papers were released in 2017 or 2018. Chetty co-authored a third of them.Is econ 101 broken across the university system, as some now believe? Granted, students aren't being well prepared for a world in which markets do frequently fail. But what if markets function poorly because they have gradually become less complete, not "broken"? If so, it would seem that supply and demand remain as relevant as ever.
If introductory economics students aren't acquainted with the basics of supply and demand in the near future, it may only become more difficult for the average individual to envision the less than optimal trade offs between sectors which are presently occurring at system wide levels. Lack of understanding in this regard, further inhibits the potential of public policy responses as well. Given this reality, a stronger emphasis on supply and demand is needed, not less. Already, non tradable sector dominance has considerably altered how many aspects of supply and demand play out in the marketplace as a whole.
What also encouraged me to write this post was a recent conversation between Tyler Cowen and Ezekiel Emanuel. Their discussion provides an apt example of supply and demand dynamics in general equilibrium, for high quality services which are dependent on other sources of wealth origination. When Tyler Cowen pressed him on physician shortages, Ezekiel Emanuel noted the existing human capital investment burden, and why it's better to task shift going forward instead of adding more doctors:
once you train a doctor, it's basically a million dollars or more.That's quite a societal burden! And since today's healthcare is organized as a market which is dependent on general equilibrium dynamics, adding more doctors would only drive up the cost for all concerned, in ways which subtract other aspects of general equilibrium potential. Yet even though the supply side would appear relatively more adequate, this general equilibrium dependence on a limited revenue pie, dilutes salary potential. In other words, a lose lose scenario. Hence Emanuel adds:
Medicine is a classic case of supply-induced demand. Doctors write orders, and they have a certain income in mind, and they will do things to get to a certain income, and especially on the margins, where what's called unnecessary care, or low value care.He would like to see more tasks assigned to other health professionals, even as physicians remain in control of the outcomes. That said, hierarchy is vitally important for how healthcare is currently structured. Which means the desire of physicians as a group to maintain control over both income and the processes of patient diagnosis and response, could make task shifting somewhat difficult. This poses a problem, given recent changes in demographics and also healthcare losses in regions without sufficient economic activity.
In the meantime, worsening budgetary realities for healthcare compensation, suggest a different approach is needed for applied knowledge in general. In recent years I've suggested the horizontal patterns of time arbitrage, which would make it feasible for services to more directly align as wealth creation, rather than budgetary burden. Symmetric organization of time as an economic unit, could also make it feasible to integrate healthcare with other high skill services activities via deep learning AI.
Even though we don't yet know, whether more physician supply might be deemed "necessary", the real issue for many physicians is to be able to preserve human capital investment in its current form. Indeed, a horizontally aligned knowledge use system would likely pose less of a threat from without, than the internal reforms of traditional healthcare that could make it difficult to preserve the integrity of human capital value for physicians today. When services markets such as healthcare are dependent on other sources of wealth, societies can only generate supply side high quality human capital, up to a point. I remain convinced that since this point has basically been reached, given today's low growth economy, it's time to pursue more direct means, for the continuation and preservation of high skill knowledge in the 21st century.
Friday, May 17, 2019
GDP and the Reciprocal Volunteerism Factor
Volunteer activities are important for any community. Yet many take forms which make them impractical to designate as formal transactions that include monetary compensation as a part of GDP.
That said, there are important exceptions which might gain validation in the near future. From a wealth creation perspective, the greatest economic significance of social interchange is due to specific voluntary transactions between individuals which can be directly reciprocated. After all, these activities may contribute to the personal welfare of both participants, since both are included in the identity enhancement process of voluntary provision.
The most beneficial social exchange for economic purposes, consists of two participating sides in specific and timely transactions. By way of example: While the positive nature of "pay it forward" processes could be loosely considered a two sided voluntary exchange, its tendency in groups is infrequent in nature, while providers and recipients are not directly reciprocal. This helps explain as well another name for paying it forward: "random acts of kindness". Consequently, paying it forward may not occur frequently enough to strengthen trust or group cohesion. What's needed are regular and ongoing patterns of reciprocal volunteerism, for mutual assistance to become a replicative and spontaneous process.
Many who have felt powerless at some point in their lives, instinctively understand the value of mutually agreed upon negotiation for the supply and demand of time based services. Well designed platforms for services supply and demand, could help individuals go beyond efforts they might normally expend for their own families and friends. People especially need such patterns when they lack employment which encourages negotiation and social interchange in the workplace. Yet too much of this activity has been assigned to rigidly formal patterns in present day institutions. When specialists and professionals do most of the negotiating on behalf of the average individual, there are few remaining possibilities for voluntary reciprocity, or the identity reinforcing nature of mutual assistance which keeps us civil and humane.
What about forms of volunteerism which continue to function best informally - especially insofar as GDP is concerned? When we volunteer to help someone without a request on their part, we also (generally) don't expect them to reciprocate. While our assistance may still have positive results, random services supply without expectations on the part of recipients, can make it difficult to discern whether group social circumstance are positively evolving over time.
Also, domestic responsibilities in the home tend not to be the best candidates for the measure of GDP. Indeed, much of this activity revolves around personal preferences for spending time in one's own home environment. In other words, while work is certainly involved, it is generally of a much freer nature than most workplace norms, even to the extent of functioning as a form of positive experiential product. Fortunately, home for most individuals, at least during many stages of life, continues to be the main place where people actually have the most freedom to do as one wishes. The better part of home obligations today are choices, rather than absolute necessities.
Nevertheless: As more aspects of production continue to shift towards automation and technological support, societies will need to reconsider the relatively informal terms by which neighbors might provide voluntary services for one another. For that matter, the more that mutual assistance is spread among as many participants as possible, the less likely that anyone ends up taken for granted in such exchanges. It's easier for everyone concerned, when maintaining one's self respect is feasible in services exchange. Only recall that when individuals lack social norms re reciprocating for assistance, many will refuse to ask or accept - sometimes even if they are in dire need.
Another factor in terms of potential reciprocity, involves economic options such as guaranteed jobs or a basic income. Guaranteed jobs present problems in terms of external decision making as to what "needs" to be done, or what is "worthy" of being done. Without adequate input and negotiation on the part of all participants, guaranteed jobs miss the point. For instance, when external decision making determines the jobs provided, few are going to be willing to give up their own meaningful work, just so that others might have employment.
Likewise, some assume that a basic income could allow recipients to "do their own thing". Alas, while this approach could help in the short term for unexpected emergencies, long term it would be little more than an existential path to despair. Being expected to "do "one's own thing" indefinitely, is still social isolation, with little hope of returning to meaningful interaction with others. Indeed, the basic income approach would mean the least amount of group alignment among all possible economic options, in terms of local supply and demand for mutual assistance.
Granted, it would take considerable effort to decipher the supply and demand possibilities which individuals might seek to voluntarily provide one another. But once such processes are set into motion, the rewards could eventually prove worth the effort, for it would give individuals the chance to rediscover their natural inclinations for mutual exchange.
That said, there are important exceptions which might gain validation in the near future. From a wealth creation perspective, the greatest economic significance of social interchange is due to specific voluntary transactions between individuals which can be directly reciprocated. After all, these activities may contribute to the personal welfare of both participants, since both are included in the identity enhancement process of voluntary provision.
The most beneficial social exchange for economic purposes, consists of two participating sides in specific and timely transactions. By way of example: While the positive nature of "pay it forward" processes could be loosely considered a two sided voluntary exchange, its tendency in groups is infrequent in nature, while providers and recipients are not directly reciprocal. This helps explain as well another name for paying it forward: "random acts of kindness". Consequently, paying it forward may not occur frequently enough to strengthen trust or group cohesion. What's needed are regular and ongoing patterns of reciprocal volunteerism, for mutual assistance to become a replicative and spontaneous process.
Many who have felt powerless at some point in their lives, instinctively understand the value of mutually agreed upon negotiation for the supply and demand of time based services. Well designed platforms for services supply and demand, could help individuals go beyond efforts they might normally expend for their own families and friends. People especially need such patterns when they lack employment which encourages negotiation and social interchange in the workplace. Yet too much of this activity has been assigned to rigidly formal patterns in present day institutions. When specialists and professionals do most of the negotiating on behalf of the average individual, there are few remaining possibilities for voluntary reciprocity, or the identity reinforcing nature of mutual assistance which keeps us civil and humane.
What about forms of volunteerism which continue to function best informally - especially insofar as GDP is concerned? When we volunteer to help someone without a request on their part, we also (generally) don't expect them to reciprocate. While our assistance may still have positive results, random services supply without expectations on the part of recipients, can make it difficult to discern whether group social circumstance are positively evolving over time.
Also, domestic responsibilities in the home tend not to be the best candidates for the measure of GDP. Indeed, much of this activity revolves around personal preferences for spending time in one's own home environment. In other words, while work is certainly involved, it is generally of a much freer nature than most workplace norms, even to the extent of functioning as a form of positive experiential product. Fortunately, home for most individuals, at least during many stages of life, continues to be the main place where people actually have the most freedom to do as one wishes. The better part of home obligations today are choices, rather than absolute necessities.
Nevertheless: As more aspects of production continue to shift towards automation and technological support, societies will need to reconsider the relatively informal terms by which neighbors might provide voluntary services for one another. For that matter, the more that mutual assistance is spread among as many participants as possible, the less likely that anyone ends up taken for granted in such exchanges. It's easier for everyone concerned, when maintaining one's self respect is feasible in services exchange. Only recall that when individuals lack social norms re reciprocating for assistance, many will refuse to ask or accept - sometimes even if they are in dire need.
Another factor in terms of potential reciprocity, involves economic options such as guaranteed jobs or a basic income. Guaranteed jobs present problems in terms of external decision making as to what "needs" to be done, or what is "worthy" of being done. Without adequate input and negotiation on the part of all participants, guaranteed jobs miss the point. For instance, when external decision making determines the jobs provided, few are going to be willing to give up their own meaningful work, just so that others might have employment.
Likewise, some assume that a basic income could allow recipients to "do their own thing". Alas, while this approach could help in the short term for unexpected emergencies, long term it would be little more than an existential path to despair. Being expected to "do "one's own thing" indefinitely, is still social isolation, with little hope of returning to meaningful interaction with others. Indeed, the basic income approach would mean the least amount of group alignment among all possible economic options, in terms of local supply and demand for mutual assistance.
Granted, it would take considerable effort to decipher the supply and demand possibilities which individuals might seek to voluntarily provide one another. But once such processes are set into motion, the rewards could eventually prove worth the effort, for it would give individuals the chance to rediscover their natural inclinations for mutual exchange.
Tuesday, May 14, 2019
Is Targeting Productivity a Good Idea?
Would it be reasonable for the Bank of England to have a productivity target alongside its inflation target? Probably not. In response to a recent report which suggests a productivity growth target of 3% per annum, Frances Coppola offers explanations why attempting to target productivity in this matter could present problems:
There's probably little that central bankers can do directly, to encourage productivity gains. It's up to participants in the real economy to make this happen, and differences in organizational capacity will also be needed before significant productivity changes are likely for some non tradable sectors. In any event, central bankers aren't well positioned to positively impact present levels via productivity targets.
Alas, mature economies do need productivity gains in the near future, if living standards are to continue improving for future generations. But what can be done? Presently, a non linear approach might be necessary, which is another way of saying much of the low hanging fruit for productivity potential has already been picked, via more obvious linear means.
Any non linear approach would also benefit from a broader framing re general equilibrium dynamics. Toward this end, aggregate output potential can be considered through a total factor (or multi-factor) productivity lens. For instance, how much of today's time based product in non tradable sectors could be likened to a knowledge production factory?
Once we envision inputs and outputs on these terms, one problem quickly comes into focus. Unlike the direct alignments of tradable sector supply chains, many non tradable sector inputs which could translate into applied knowledge settings, are mostly haphazard and partial. Processes of learning in this regard, presently extend across a wide range of diverse institutions which are only indirectly linked to other institutions, if at all. Plus, it's difficult to discern what supply and demand for time based product might actually consist of, since much of the alignment is from individuals to multiple institutions, instead of individuals to individuals in group settings with a knowledge continuum.
Consequently, inputs which hold potential for use at most skill levels, greatly outnumber the outputs which are actually gleaned from the time based product of these supply chains. Imagine the problems this would create for the supply side chains of tradable sector activity, if only a mere fraction of their intermediate processes were useful to other parts of the supply chain!
Just as tradable sector activity has often combined many separate activities into long term knowledge continuum, an institution is needed which can perform a similar function for diverse high skill services in the present. Fortunately, it's possible to turn many aspects of formal education and human capital investment into input which could simultaneously function as output. Instead of attempting to target productivity in an effort to achieve long term growth gains, why not turn time value into an economic measure which provides greater focus for input, even as output is simultaneously increased. Time value as resource reciprocity could ultimately mean more productivity gains, than has been possible thus far with the input/output imbalance of today's high skill non tradable sectors.
This target is extremely challenging. A footnote in the report notes that labour productivity growth since 1950 has averaged 2.4%, and describes the proposed uplift of .06% above this average as a "small increase". Forgive me, but an increase of 25% in the rate of change is not by any stretch of the imagination "small". It's an absolute whopping hike, particularly when you take into account the fact that in the 1950s and 60s the labour force was much smaller due to lower immigration and female participation, and the UK was rebuilding after WWII. In a mature economy which is 80% services and which has nearly full employment of both men and women, that 3% target looks well-nigh impossible.There was also lack of clarity in the report, what aspects of productivity might actually be targeted, hence Coppola noted labour, capital, and multi-factor productivity as possibilities. What about capital, for instance?
The fact that the rate of return of capital has been falling for the best part of forty years could suggest that capital is not being deployed efficiently.However: Recall that as returns on capital have fallen, the services component of the economy has been rising, and has only recently stabilized at present levels in mature economies. Chances are the decades long shift in dominance between tradable and non tradable sector activity, holds considerable meaning for how capital potential translates into marketplace realities. After all, time based services in particular face not only natural scarcities but also artificially imposed scarcities, which further limits aggregate output for applied knowledge. Since much of today's capital investment is closely linked with human capital investment, non tradable sector output includes higher levels of professional income, rather than tradable sector profits which tend to be more widely dispersed among key staff, employees and shareholders.
There's probably little that central bankers can do directly, to encourage productivity gains. It's up to participants in the real economy to make this happen, and differences in organizational capacity will also be needed before significant productivity changes are likely for some non tradable sectors. In any event, central bankers aren't well positioned to positively impact present levels via productivity targets.
Alas, mature economies do need productivity gains in the near future, if living standards are to continue improving for future generations. But what can be done? Presently, a non linear approach might be necessary, which is another way of saying much of the low hanging fruit for productivity potential has already been picked, via more obvious linear means.
Any non linear approach would also benefit from a broader framing re general equilibrium dynamics. Toward this end, aggregate output potential can be considered through a total factor (or multi-factor) productivity lens. For instance, how much of today's time based product in non tradable sectors could be likened to a knowledge production factory?
Once we envision inputs and outputs on these terms, one problem quickly comes into focus. Unlike the direct alignments of tradable sector supply chains, many non tradable sector inputs which could translate into applied knowledge settings, are mostly haphazard and partial. Processes of learning in this regard, presently extend across a wide range of diverse institutions which are only indirectly linked to other institutions, if at all. Plus, it's difficult to discern what supply and demand for time based product might actually consist of, since much of the alignment is from individuals to multiple institutions, instead of individuals to individuals in group settings with a knowledge continuum.
Consequently, inputs which hold potential for use at most skill levels, greatly outnumber the outputs which are actually gleaned from the time based product of these supply chains. Imagine the problems this would create for the supply side chains of tradable sector activity, if only a mere fraction of their intermediate processes were useful to other parts of the supply chain!
Just as tradable sector activity has often combined many separate activities into long term knowledge continuum, an institution is needed which can perform a similar function for diverse high skill services in the present. Fortunately, it's possible to turn many aspects of formal education and human capital investment into input which could simultaneously function as output. Instead of attempting to target productivity in an effort to achieve long term growth gains, why not turn time value into an economic measure which provides greater focus for input, even as output is simultaneously increased. Time value as resource reciprocity could ultimately mean more productivity gains, than has been possible thus far with the input/output imbalance of today's high skill non tradable sectors.
Thursday, May 9, 2019
Does Price Making Lead to a Zero Sum Economy?
Normally, price making in aggregate should not lead to this result. However, price making may imply not just a lack of resource coordination among private firms, but also economic activity which benefits from taxpayer support. Ultimately, much depends on the relevant sectors.
Likewise, economic dynamism may be reversed when societies overreact to perceptions of "ill gotten" gains. Venezuela provides one of the strongest warnings of our time, as to what might occur when citizens and governments overreact to existing prosperity by breaking up firms. All too often, such intentional destruction does little to preserve markets, for the products supplied up to this point. There is danger in placing excessive blame on the dominant tech firms of our time. Should these firms be broken up, it could lead to the loss of valuable product, especially for those who lack sufficient access to other platforms for knowledge and information dispersal. Whatever weariness or disillusion society may have with social media, it would be far better to create new economic patterns and systems for face to face interaction, instead of holding social media accountable for problems which in many instances it only bears partial responsibility.
Why do so many believe we are living with a zero sum economy? For one, non tradable sector dominance tends to lack the level of output that occurs during periods of tradable sector dominance. Unfortunately, price making as a way to reimburse extensive overhead costs (in lieu of limited output), can negatively impact aggregate output if practiced to excess over long periods.
Of course, economists and others regularly remind us there is no such thing as a zero sum economy in the long term, in aggregate. One observer put it this way:
Is the supposed "product dumping" on Mexico's part a form of price making? Even if it was, low prices for commodities such as these, lead to a positive sum circumstance. There's more fresh food consumption than would otherwise be the case for lower income levels, more income for growers and workers and also retailers. Affordable produce for all income levels means more economic dynamism, not to mention health benefits. Seriously, is anyone really being hurt by tomatoes from across the border? After all, many tomatoes grown commercially in the U.S. are already slated for canning and other processing, instead of grocery store produce sections.
The price making that causes a structural possibility of zero sum circumstance, is when price making occurs in ways which pose clear limits for supply side potential. All the more so, when the production processes correlate with product linked to space and time, which only sets up additional negative ripple effects. However, the best way to ensure as much economic dynamism as possible, is to respond to price making by ensuring that price taking is also possible in the same markets that already contain natural scarcities. In other words, continue to provide real economic options, instead of destroying what continues to function in the here and now.
After all, creative destruction is not due to purposeful destruction. It's about the potential for societies to make new choices, not just in terms of both consumption, but also production.The best way to make certain we don't end up with zero sum outcomes, is to always leave room for the full coordination and market enhancement of price taking. All the more so, when product and services are already subject to the natural scarcities of space and time.
Likewise, economic dynamism may be reversed when societies overreact to perceptions of "ill gotten" gains. Venezuela provides one of the strongest warnings of our time, as to what might occur when citizens and governments overreact to existing prosperity by breaking up firms. All too often, such intentional destruction does little to preserve markets, for the products supplied up to this point. There is danger in placing excessive blame on the dominant tech firms of our time. Should these firms be broken up, it could lead to the loss of valuable product, especially for those who lack sufficient access to other platforms for knowledge and information dispersal. Whatever weariness or disillusion society may have with social media, it would be far better to create new economic patterns and systems for face to face interaction, instead of holding social media accountable for problems which in many instances it only bears partial responsibility.
Why do so many believe we are living with a zero sum economy? For one, non tradable sector dominance tends to lack the level of output that occurs during periods of tradable sector dominance. Unfortunately, price making as a way to reimburse extensive overhead costs (in lieu of limited output), can negatively impact aggregate output if practiced to excess over long periods.
Of course, economists and others regularly remind us there is no such thing as a zero sum economy in the long term, in aggregate. One observer put it this way:
In a capitalistic economy, in aggregate, there will always be more winners than losers. This is because the economy is growing in the long run and both parties benefit from an exchange.Let's keep the faith in long run positives as best we can, since the short run has plenty of uncertainty. Even small examples of protectionism and zero sum thinking can cause further problems. Recently, zero sum thinking on President Trump's part, prompted him to impose a 17.5% tariff on tomatoes from Mexico. Many of us in Texas have already faced rising prices on fresh tomatoes for months, as it has gradually become more difficult for deliveries to cross the border in timely fashion. And given the lengthy wait those truck drivers face, by no means are tomatoes the only fresh produce being affected.
Is the supposed "product dumping" on Mexico's part a form of price making? Even if it was, low prices for commodities such as these, lead to a positive sum circumstance. There's more fresh food consumption than would otherwise be the case for lower income levels, more income for growers and workers and also retailers. Affordable produce for all income levels means more economic dynamism, not to mention health benefits. Seriously, is anyone really being hurt by tomatoes from across the border? After all, many tomatoes grown commercially in the U.S. are already slated for canning and other processing, instead of grocery store produce sections.
The price making that causes a structural possibility of zero sum circumstance, is when price making occurs in ways which pose clear limits for supply side potential. All the more so, when the production processes correlate with product linked to space and time, which only sets up additional negative ripple effects. However, the best way to ensure as much economic dynamism as possible, is to respond to price making by ensuring that price taking is also possible in the same markets that already contain natural scarcities. In other words, continue to provide real economic options, instead of destroying what continues to function in the here and now.
After all, creative destruction is not due to purposeful destruction. It's about the potential for societies to make new choices, not just in terms of both consumption, but also production.The best way to make certain we don't end up with zero sum outcomes, is to always leave room for the full coordination and market enhancement of price taking. All the more so, when product and services are already subject to the natural scarcities of space and time.
Thursday, May 2, 2019
Build New Realities That Reflect Where We Are
And by extension, what society already has, not to mention previous accomplishments on the part of individuals and groups alike. Continued economic prosperity need not be as difficult as some are inclined to make it out to be.
Ultimately, our economic settings are about much more than participation and contributions at the cutting edge of applied knowledge. For that matter, the biggest part of our working lives is composed of what we've already learned and done - albeit in new contexts. How might we ensure that the profits from the the cutting edge don't always have to be redirected for the ongoing maintenance of utilitarian knowledge and skill? If shared workplace activities are to be sustained wherever people choose to live, those activities need to contribute more directly to wealth creation. New organizational methods which combine workplaces in more accessible settings, could help ensure we remain able to pursue our life objectives and intellectual challenges well into the future.
Alongside the new knowledge of cutting edge endeavour, we also all have the good fortune to be "standing on the shoulders of giants". It's this wealth of preexisting knowledge and skill, which could revitalize so many communities that lack the ability to contribute at the level our most prosperous regions now experience. The earlier efforts of untold millions who came before us, hold plenty of relevance for what we continue to pursue in the here and now.
What's more, much of what we've already accomplished as individuals, could often be useful to others as they pursue their own paths in life. How might we make our own self improvement efforts more relevant to others on economic terms? Economic inclusion is not about forcing everyone to certain forms of skill and ability which present institutions may not even need, it's about exploring the possibilities of what we already have. Further investments in human capital for what we assume workplaces might need, aren't necessarily the human capital others would seek from us in a better aligned economic framework.
Formal aspects of human capital investment in particular are being questioned, as the bar for social and economic inclusion continues to be pushed ever upward. Today's definitions of quality product tend to come with assumptions that our already existing attributes are somehow "never enough" to take part in society as we are now. Still, when our time value is only allowed as exclusive quality product, even the most routine of services based activities are expected to transpire on these terms. In the process, societies end up budgeting for these forms of quality product in ways that further exclude those who don't meet the qualifications as they presently exist.
For these reasons and more, I sometimes find myself overwhelmed by posts and articles which call for higher wages as supposedly the most important guarantor of continued prosperity. Granted, substantial wage increases have been with us for a long time. But how much of these wage increases were actually derived from the output gains which resulted from centuries of tradable sector dominance? Is it not time to design environments which more accurately reflect the forms of resource capacity we presently hold? Because much of that capacity is now more closely aligned with the experiential nature of scarce time based product, instead of the output gains associated with tradable sector activity.
What prompted this post was an article from Daron Acemoglu for Project Syndicate, which left me somewhat deflated. In "Where Do Good Jobs Come From?", he writes:
How can we build more flexible environments which are more responsive and better suited to changes in output scale, during times of non tradable sector dominance? Today, continued progress depends on a better alignment of overhead costs and gains from scale in applied time, alongside what money can contribute in terms of ongoing output. Much of this process means creating physical infrastructure and building components on more lightweight and flexible terms. By way of example, walkable communities will definitely need to include building elements for living and working needs which are transportable by means other than automobiles and trucks.
Fortunately, it is also within our ability to create good work with meaning, even when such work does not come with well compensated salaries. Importantly, however, meaning is subjective. What is fulfilling to one person might just be an aggravation to the next, and selection processes need to be more closely aligned with individual preferences. Time arbitrage in particular, should always be a voluntary process for flexible forms of work association.
In his article, Daron Acemoglu noted that "no known human society has created shared prosperity purely through redistribution". I would add that redistribution isn't just about money, because we can't redistribute applied knowledge from those whose time based product is among our most scarce resources. The only way that knowledge can be increased in society is through active dispersal via time increments - not just via education but in terms of actual use and economic validity. As to the latter, increased participation is necessary, if it is to happen.
Economic inclusion means less judgement as to what is "supposed" to take place in time based experiential product. Indeed, if we can come to terms with this possibility, there could consequently be less emphasis on lifetime education as means to survive a demanding society, and more emphasis on lifetime learning as one of many ways to meaningfully live in a society. With a little luck, this approach could lead to communities which accept widely diverse levels of knowledge and skill as valid paths to economic participation. Let's build stronger economic realities based on what we have already become.
Ultimately, our economic settings are about much more than participation and contributions at the cutting edge of applied knowledge. For that matter, the biggest part of our working lives is composed of what we've already learned and done - albeit in new contexts. How might we ensure that the profits from the the cutting edge don't always have to be redirected for the ongoing maintenance of utilitarian knowledge and skill? If shared workplace activities are to be sustained wherever people choose to live, those activities need to contribute more directly to wealth creation. New organizational methods which combine workplaces in more accessible settings, could help ensure we remain able to pursue our life objectives and intellectual challenges well into the future.
Alongside the new knowledge of cutting edge endeavour, we also all have the good fortune to be "standing on the shoulders of giants". It's this wealth of preexisting knowledge and skill, which could revitalize so many communities that lack the ability to contribute at the level our most prosperous regions now experience. The earlier efforts of untold millions who came before us, hold plenty of relevance for what we continue to pursue in the here and now.
What's more, much of what we've already accomplished as individuals, could often be useful to others as they pursue their own paths in life. How might we make our own self improvement efforts more relevant to others on economic terms? Economic inclusion is not about forcing everyone to certain forms of skill and ability which present institutions may not even need, it's about exploring the possibilities of what we already have. Further investments in human capital for what we assume workplaces might need, aren't necessarily the human capital others would seek from us in a better aligned economic framework.
Formal aspects of human capital investment in particular are being questioned, as the bar for social and economic inclusion continues to be pushed ever upward. Today's definitions of quality product tend to come with assumptions that our already existing attributes are somehow "never enough" to take part in society as we are now. Still, when our time value is only allowed as exclusive quality product, even the most routine of services based activities are expected to transpire on these terms. In the process, societies end up budgeting for these forms of quality product in ways that further exclude those who don't meet the qualifications as they presently exist.
For these reasons and more, I sometimes find myself overwhelmed by posts and articles which call for higher wages as supposedly the most important guarantor of continued prosperity. Granted, substantial wage increases have been with us for a long time. But how much of these wage increases were actually derived from the output gains which resulted from centuries of tradable sector dominance? Is it not time to design environments which more accurately reflect the forms of resource capacity we presently hold? Because much of that capacity is now more closely aligned with the experiential nature of scarce time based product, instead of the output gains associated with tradable sector activity.
What prompted this post was an article from Daron Acemoglu for Project Syndicate, which left me somewhat deflated. In "Where Do Good Jobs Come From?", he writes:
Historically, no known human society has created shared prosperity purely through redistribution. Prosperity comes from creating jobs that pay decent wages. And it is good jobs, not redistribution, that provide people with purpose and meaning.Articles such as this seem to come with underlying assumptions. One would expect that wages "must" go ever higher for all concerned, so that we as taxpayers might continue covering the ever increasing costs of our governments and maintenance of our environments. It won't be easy to dissuade these high cost expectations for the sum total of our living and working environments, even though ever higher wages are only feasible up to a point, especially now. Plus, these expectations stemmed from centuries of tradable sector dominance which made extensive and costly forms of building capacity/infrastructure possible in the first place.
How can we build more flexible environments which are more responsive and better suited to changes in output scale, during times of non tradable sector dominance? Today, continued progress depends on a better alignment of overhead costs and gains from scale in applied time, alongside what money can contribute in terms of ongoing output. Much of this process means creating physical infrastructure and building components on more lightweight and flexible terms. By way of example, walkable communities will definitely need to include building elements for living and working needs which are transportable by means other than automobiles and trucks.
Fortunately, it is also within our ability to create good work with meaning, even when such work does not come with well compensated salaries. Importantly, however, meaning is subjective. What is fulfilling to one person might just be an aggravation to the next, and selection processes need to be more closely aligned with individual preferences. Time arbitrage in particular, should always be a voluntary process for flexible forms of work association.
In his article, Daron Acemoglu noted that "no known human society has created shared prosperity purely through redistribution". I would add that redistribution isn't just about money, because we can't redistribute applied knowledge from those whose time based product is among our most scarce resources. The only way that knowledge can be increased in society is through active dispersal via time increments - not just via education but in terms of actual use and economic validity. As to the latter, increased participation is necessary, if it is to happen.
Economic inclusion means less judgement as to what is "supposed" to take place in time based experiential product. Indeed, if we can come to terms with this possibility, there could consequently be less emphasis on lifetime education as means to survive a demanding society, and more emphasis on lifetime learning as one of many ways to meaningfully live in a society. With a little luck, this approach could lead to communities which accept widely diverse levels of knowledge and skill as valid paths to economic participation. Let's build stronger economic realities based on what we have already become.
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