Thursday, April 25, 2013

Arbitrage and Collective Capacity, Part II

In the first segment, I compared knowledge skill capacity to widely available resources: thus only randomly mined or simply picked up off the ground. Another analogy might be that of trees in a landscape which some arbitrage well, while others think useful primarily as shade. However there's an ironic twist: that's some expensive shade!  People require considerable monetary resources to "grow". One might say, well, the cost of "growing" those individuals simply went back into the economy and provided real wealth in the process. And communities have always invested in their youth over the millennia. There's just one problem this time: lots of individuals don't have optimal means to recoup that investment. They don't have the monetary equivalence to pay back the efforts which went into their own destinies. One has to wonder, does that circumstance affect a nation's overall debt obligations more than other supposed tipping points? A nation's debt may actually be low compared to previous historical standards, for instance, when people nonetheless decide to worry about it. What long term economic circumstances do citizens actually hold, when measurements of national debt take place?

Let's back up briefly, to consider what led to the current state of affairs at local levels: limitations that deal a hammer blow to those seeking economic access now. Adam Smith would scarcely recognize economic activity today in many places, especially in rural areas where "income" tends to be some form of government redistribution and people no longer work for pay (in the U.S.). As previous categories of economic activity migrated to the cities, those in rural areas were often left with little more than formal educational settings as the primary local activity. How could Adam Smith know that divisions of labor, as they became associated with internal business structures which quickly migrated elsewhere, would cease to be a realistic component of local economic activity? To be sure, divisions of labor continued on in cultural and familial expectations, but these were not actually included in measured activity, nor should they have been.

In other words, the very processes which gave people additional freedoms after the Industrial Revolution, tended to ultimately reverse their freedoms, as options for realistic divisions of labor disappeared at local levels. No longer does it make sense to rely on familial wealth structures of the past i.e. before this long chain of events, and yet some scaled back visions of economic life imagine going back to such a reality. Not only is it in the best interests of local communities to find new ways to capture wealth, it also makes sense for individuals with limited opportunities (otherwise) to make that happen, as well.

What might be different from economic and social arrangements in the present? For one thing, some needless complexities could be simplified without significant loss in GDP, because there would be far more connecting points in which economic activity can take place. Let's consider why, in the next segment.

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