Wednesday, June 26, 2013

Shake It Up! (Turn Over Pyramids, Zero Bounds and Various Bloated Bottoms)

Who remembers The Cars song by that name, from 1981?

Not long ago I wrote a post which referenced Maslow's pyramid structure (should have included "Maslow" in labeling system...can't find the link!), and afterwards thought about the fact that he exaggerated the bottom of the pyramid, thus implying a limited importance of the upper portions. Of course, that might have been his impression because of a research focus on successful individuals. Still, those designations of aspiration (which also matter for happiness in general) didn't necessarily appear to extend to the overall population in any aggregate sense. Ouch!

However, through both formal education gains and the digital realm, a greater appreciation of the upper portions of the spectrum is now commonly acknowledged, which probably accounted for multiple takes of Maslow's hierarchy of needs pyramid in these images. I especially liked the one where someone scrawled Internet on the bottom portion! Some pyramids in those images had been reconfigured in such a way (a less bloated "bottom"), that various attributes were spread much more evenly throughout the entire form. Not only does debate continue as to what is particularly relevant in the Maslow pyramid - but in a related note, U.S. food pyramid issues never really got "resolved", either. For instance - until 2005 - one version had a bloated bottom which my metabolism considered to be way too much bread. Finally, USDA replaced its 19 years of pyramid with suggested portion sizes (now called My Plate).

Of course, one problem for us is that we don't have much room for the upper portions of a Maslow hierarchy of needs in a monetary sense, which represents human skill potential. At the very least, this neglect of happiness factors might not be an especially new problem, as civilizations have often taken advantage of especially stable periods of prosperity to "build out" as much as humanly possible. There are a fair number of ancient pyramids around the world which attest to such prosperous periods in time. For all we know, people are happier in time frames when such obvious prosperity doesn't exist, but for now that's just one of life's mysteries...

Now there's a paradox...why would people crowd out "upper quadrants" of happiness potential with overwork (and under technology) for the more basic components of life such as housing? This paradox of  "more than necessary" housing also accounts for one Keynesian mystery of the present: why didn't the need for work disappear, as society prospered?? (hint, giant mortgages to pay) And, of course, for those on the other end of the spectrum, why haven't we benefited more from good deflation by now? Hint, the "inflation" that dared not speak its name, in the form of lifestyle grandeur for paupers and all...

How, then, does all this tie in with the zero bound? Perhaps one might think of the one percent as the top of a "pyramid scheme", but it's really about the fact that today's interest on reserves took up more "parking spaces" than ever should have been necessary on the first floor. Where once adequate flow existed throughout the entire monetary system, the zero bound was also able to capture a tremendous amount of basic life needs, all wrapped up with a bow as though they were societal upper aspirations. Healthcare - as it is presently defined - certainly counts for this summation, in that it presently "eats" money in ways not unlike housing itself. Nominal targeting is one way to think of making the bottom less bloated, so that money becomes freed up for all the activities that make up our lives.

In a way, the last food pyramid, with its vertical wedges, made me think of the greater balance which NGDPLT implies. However, the same confusion which existed as regards to that previous food pyramid, seems to exist now whenever the fluidity of actual components are taken into account for nominal targeting. To shift the pyramid to a smaller base, we can focus more on the entire structure, and less on the moving parts near the ground floor. Let's "shake it up" and get money back into motion.

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