Cities, and other Nominal Targeting Possibilities

To a degree this post follows from my previous post: however this one will hopefully make sense on its own, if readers don't have time for the above link. In the midst of a summer lull, some Market Monetarists such as myself feel a bit wistful for "what could be" (i.e. how different Fed activity would be right now if only NGDPLT were the rule) and of course I'm stubborn enough to keep thinking about it, even in the middle of some folk's vacations. As to the recent actions of the Fed and subsequent reactions to now inevitable tapering: it's not hard to tell that markets want more growth than Main Street is prepared to "serve up", so another goofy analogy is that I'm not afraid to remain in a hot kitchen in spite of it all, with more thoughts of future growth...

This morning's links provided some fun in the form of good news and bad news stories. First the "bad" news (hehe), HT to The Browser and a recent quote for the day:

Only someone miraculously innocent of history could believe that competition among ideas could result in the triumph of truth - John Gray

Tell me when it's over! Seriously, perhaps it's a good thing I've not had time to read enough history, because I'm just enough of a dolt at age fifty eight to have a bit more optimism that that. Now I'm not completely sure which John Gray was despondent enough to give up on humanity, but looking through various John Gray quotes online, this was far from the only one that sounded fatalistic. To put it simply, I believe that with a bit of organization, cities still have the capacity to utilize and capitalize on good ideas, even if their institutions are not in a position to be able to do so.

Now, for the (actual) good news, and this time the HT goes to Ryan Avent for the link. In "Trans-Atlantic Trade and Its Discontents", the authors indicate that in spite of the problems which finance, housing and mortgages created, "...the euro crisis never became a trade crisis, in stark contrast to the 1930s trade wars (italics mine). In fact, one of the key conclusions to be drawn from the balkanization of the European finances and divergent euro growth over the last three years is that the European Union's single market needs to be deeper." Now there's a perspective one doesn't hear a lot of, lately.

Of course, the authors of this article also point out that political factions make the possibility of further trade improvements less realistic, than they should be. But what remains encouraging - even now - is that setbacks for trade in both the developing and the developed world are not so great, where production efficiencies do in fact continue to exist. What's more, we can hope that people are careful not to lose too many of the gains from trade this time, so that no one has to repeat the losses of multiple markets at the same time: just one of the unfortunate results of the Great Depression. Not to say that some trade won't fall prey to protectionism - but with a little luck, globalization won't break down the way it did in the thirties. Because of the vast differences in how tradable and non tradable goods production are conducted in the present, local economies in any number of nations definitely have a role, in how this situation ultimately plays out. Often it will mean starting over with a fresh template that challenges plenty of old assumptions all around.

In developed nations; even though the main problems still appear as primarily finance related, they nonetheless stemmed from a similar series of events at local levels, where real estate as wealth became a prime impetus for additional services provisions in many locations: a process which finally became like a dog chasing its own tail. In order for any city to move away from this self-defeating cycle, there are two primary structural components to be considered.

First, local economies need to envision greater mobility and flexibility in both living and working circumstances. In part, that means establishing new varieties of zoning options, where individuals also have the ability to manufacture lightweight building components and supporting infrastructures. Another important aspect of such zoning is the inclusion of those who wish to live and work in closer proximity to one another, than automobile use allows. How might citizens envision such environments with flexible building components, which can be pulled apart and reconfigured for different economic settings as the need arises?

Cities also need to create more inclusive social structures for knowledge based skills and services, which are slowly being scaled back over time in traditional terms. One way to think about the process itself: allowing skills sets which are often non tradable between institutions, to become tradable goods through diverse arbitrage settings . How so? This goes back to the above refutation of the John Gray quote: by coordinating knowledge use across multiple disciplines and forms of economic activity, cities and indeed towns as well, can create greater competition amongst ideas, by allowing their imprints in multiple places, whatever the "truth" is. The more we are able to bring knowledge use processes into our economic lives, the less we have to fight over what the truth is, in the first place.

One reason nominal targeting is questioned as optimal in the present is the fact that some assets and resources presently appear to be of relatively greater important than the actual use of our time. By learning how to match time to economic life in more optimal ways, it also becomes easier to convince others that time measurement of nominal targeting is in fact the best anchor for monetary stability. While there is a learning curve involved in making knowledge use a more central aspect of wealth creation, once it is coordinated into recognizable and practical forms, many aspects of services will become far simpler in organization as a result. Such simplification would also go a long way to reduce the need for taxation - except for the taxation of tradable goods which, as the above article indicates, still do not suffer from the problems of finance in general, and services in particular in parts of the Eurozone.

Part of this process also involves citizens refusing "business as usual" to the financial entities which often "dictate" austerity now. It is simply wrong that any nation's citizens' receive all the blame for profligacy - that of which was the very terms the bankers and construction interests brought to citizens, to begin with. People can create their own incremental approaches to ownership and business formation, if and when their financial institutions refuse to help them. There are only so many people who can go back to the earlier sets of expectations, and local economies need to be creative in finding new ways for their citizens to thrive, instead of hoping they will locate elsewhere. For that is indeed the problem: no other "elsewhere" presently exists, as too many cities and towns have became bogged down with the old formulations of wealth creation and services provisions which no longer work as before. Greater inclusivity is not just a "feel good" measure for cities in the present, it is really the main option cities now have, to regain economic stability.