Arbitrage and Collective Capacity: Part I

First off, how does one imagine or "plan" their way to better economic realities? Undoubtedly when some hear me express myself in this fashion, it may not be immediately obvious that I am basically a libertarian. Not only that, a libertarian who firmly believes that most convoluted tax strategies simply do not accomplish what they set out, to do. Another aspect of libertarians which may not always make sense to others: they may care about unemployment, too. They just think about unemployment in different ways than others, and until now such dialogue has not really been explored to a great degree. This is why, when even a staunch libertarian like Bryan Caplan (of Econlog) speaks of the burdens of unemployment, that matters to a lot of people including market monetarists such as myself. Bryan's recent posts discussing unemployment, among others including Tyler Cowen, suggest the time is right for better dialogue.

For me, unemployment is part of larger patterns in which economic access has become increasingly limited. A conundrum of our time is that the very part of economic life currently expanding in the developed nations (services) is - inexplicably - the one that's imperiled to some degree. Granted, not all services are the same: in this regard I would exclude retail and foodservices. Finance? Well that's a matter for another day...

Free markets for product configurations in physical commodities and resources - for the most part - develop and slowly adapt over time, so that the arbitrage constructs they rely on might appear to just materialize out of the ether, perhaps. Yet every time new wealth evolves, someone says: hey, what might we do with X that no one is doing now? Sure, such spontaneous moments (or perhaps years of effort) aren't exactly "planned" in a strict sense. And we know arbitrage to be something that moves from a point where it is perceived as less valuable, to a setting in which it becomes perceived as more valuable. Oftentimes that "something" is in considerable abundance before the human mind fashions it into greater meanings...just as skills are now. We have repeated arbitrage processes countless times over, for the products we call "real" wealth.

Why, then, has that process not actually happened for services in general? I know plenty of people may take umbrage with that assertion, but in many ways, services either tend to happen with "leftover" residuals of wealth for lower skill non-repetitive capacities, or else they tend to be "captured" by special interests in higher skill non-repetitive capacities (repetitive skills are increasingly given to technology). Some would say, "We arbitrage for knowledge skills every day! After all just look at the additional wealth which has derived directly from knowledge skills use." Yes, that much is true. However, settings for skills use take place in what could be called random mining settings, that is, basically picking up what is already lying on the ground. The fact that so much lies just under the surface means that no one dare apply the realities of wage flexibility to reflect what isn't actually being utilized. That drastic, deflating notion of ZMP is unfortunately there for a good reason.

The next logical question would be: why can't better arbitration processes just happen naturally? Well...settings matter. Sometimes we hear from inspirational speakers how wealth creation will be organized in new ways in the years ahead, and of course we want to hear more. But too often that's where the conversation stops. In the next segment, let's explore some of the possibilities for potential new organizational capacity: possibilities which we wanted those speakers to talk about in the first place.