Monday, March 31, 2014

Wrap Up for March '14

Recently I indicated that I wanted to start a monthly wrap up, but wasn't quite sure what shape it would take. While this monthly wrap will include random thoughts and musings, it also serves as a place to highlight some of my recent posts, and provide additional details.

At some points early in the month, I spent more time at the desk than was evident from what actually got posted then. Late in March, I finally started catching up on what are normal posting levels for me. There have been some recent changes in my scheduling and organizational processes, along with a few "tweaks" to the blog set up as well. However, this is one of those years when the home I live in will demand it's own "tweaks". That will likely slow down blogging, at times.

Hard to believe I'm coming up on the first year of blogging. One of the things I want to do is (finally) start reviewing early posts to see whether they need updates, rewrites and the like. Often I see where an early post has been recently read - yet I know it to be inadequate, in terms of what I wanted the title to explore! Perhaps at least a couple of times a month I'll be able to do some of those rewrites. Subject details in particular need to be worked out more clearly and linked together, where it is possible to do so.

Here is a quote which made me laugh when I came across it, because I wrote something about "idea theft" a while back: "Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats" - Howard Aitken. That also reminded me of some discussion a year or so back, when Roger Farmer seemed to be concerned that Paul Krugman may have stolen one of his ideas! In this same vein, Scott Sumner reminded everyone this morning that what counts is when good ideas get adopted, rather than appropriate attributions. I agree. Still, that's what we tell ourselves and believe on our "better" days!

Who doesn't particularly want capitalism to succeed...and yet, why not? I thought about that when I came across this quote by Ezra Klein, "A vegetarian is someone who doesn't eat meat. It's not someone who loves vegetables."

One early month posting I want to highlight is Let A Thousand Placebos Bloom. While it touched on healthcare, I also wanted it to serve as an illustration that the missing marketplace for knowledge use isn't just what we think is missing, i.e. more of the same care. Rather, we want "growth space" to include what we could imagine services to be. Or..just give our attempts to be "present" for one another, some credit too!

A series of posts also explained how lower income levels could compensate for service deficiencies, and add value to the marketplace in the process. While they weren't planned as such, these thoughts more or less started with An Economic World in an Hour, where I focused on the hour as a portal of entry for coordination in knowledge use.

Our time use is a fixed designation, and one post which considered this is Why Do Fixed and Random Designations Matter? Here, I considered time use from an entrepreneurial perspective and also looked at societal desire to fix elements in favor of certain interests. While this provides income flows and stability at the outset, ultimately it leads to economic gridlock. Before so much of the economy was given over to technology, sometimes it was easier to "get away" with fixing various definitions of the game and get real results, than it is in the present. When anyone hears me speak of deregulation, I mean in terms of allowing more participants back to the table.

I also want to mention yesterday's post, At the Intersection of Fixed and Random Resources, if only to indicate that the definition of "fixed" in this post is my most frequent usage of the term. The finite nature of our time is where deficits actually matter the most. Why so? Nations have many means and resources at their disposal to tend to deficits. But when society creates aggregate time use negatives by assigning prime value to a fraction of high IQ levels, they end up with - for instance - aggregate debt realities at family levels, which are often larger than family income. Those time deficits are one of the main monetary issues which skills arbitrage and knowledge use coordination, would seek to remedy.

Sunday, March 30, 2014

At the Intersection of Fixed and Random Resources...

...that's where the most vital aspects of economic activity take place. However, the strength of this intersection is not yet recognized for the potential stability it holds, particularly given its hidden potential for lower income level participation in the economy. Our time (economic participation in aggregate) counts as the primary fixed - or finite - resource we have. That makes time use the main driver of all resource use in economies overall: hence aggregate valuation levels.

Whereas most resources we engage with, exist all along a relative continuum of scarcity to abundance. Societies invariably run into problems if they try to substitute random resources for time use, without adequate understanding how fixed time capacity impacts lower income levels of participation. International monetary flows cannot assist lower income in the same capacity as higher income, because the flows simply cannot stretch far enough. I don't mean this in terms of innovation, where production can substitute for time use, but in terms of income disparities.

The reality is that a substantial amount of supply and demand is not even materializing in the U.S. marketplace presently, whether by time based services or product separate from time. Just the same, redistribution is not the answer to participation at lower income levels. Redistribution seeks not to make further participation possible, but to "make up" for lack of space in economic inclusion. Time arbitrage therefore needs to take place at a fixed access point of entry, so that lower incomes can also have ongoing access to what is widely considered as modern economic life. Coordinating for needed services could go a long way to reduce informal economies as well - some of which are more negative than others.

Fortunately, higher income sections of population can continue receiving random resource quantities to compensate for time - much of which occurs through international monetary flows. What that means is that their income distributions would not be substantially affected by greater knowledge dispersal. How do we know this to be the case? Knowledge use patterns in services closely follow the monetary valuations of international monetary flows. People can coordinate with time arbitrage for services, where real estate does not have these additional valuations That would allow higher income levels to depend on economic circumstances as they now exist. Indeed, much of the struggle between left and right is to force a  better distribution from the one percent to the top twenty or thirty percent - which is altogether a separate issue from the one I am addressing.

However, the discussion between left and right is not so much about further economic growth, as it is about particular forms of redistribution that are politically preferred. Even if either of those forms were to materialize, such "normalization" does not really address the breakdown between classes which still threatens societal progress. At stake is the fact that lower income levels need to establish a different form of economic equilibrium, which would also be capable of bringing further growth into the system overall.

Some of the terminology I use is a bit unfamiliar, and I'm still trying to learn how to simplify my thoughts. After beginning this post, I realized I needed to address some foundations which have been central to my ongoing project. What also needs to be emphasized, is that lower income levels can experience growth and sustainability without threatening the ways in which upper income levels experience knowledge use or wealth distributions. These two realms can be split into different production modes, so that they will experience their time use in different settings of societal coordination. This would also allow middle to upper income levels to prosper without the uncertainty they continue to experience now, as they try unsuccessfully to redistribute knowledge use down to lower income levels.

Consider for instance that land is also a fixed quantity. If skills and knowledge use can be maintained at all income levels (robots or no), land as a fixed quantity need not become problematic again, as it was prior to the Industrial Revolution. We have to remember that robot use with inadequate skills inclusion by humans, would eventually force people to become dependent upon land again, in negative ways. In developed countries, fixed amounts of land are not a crucial element as important as fixed amounts of time, for multiple reasons. The only reason prime land "appears" crucial now, is that knowledge use has yet to be optimized in non prime land areas.

Therefore - fortunately - land quantities still have a strong capacity to operate in developed economies as a random resource element. For the purposes of this blogger, most random resource elements always hold a secondary position to time use, because innovation of all kinds allows populations to overcome randomness. Thus monetary valuations and purposes of land, depend upon whether they gain exposure to the international economy.

This is one of the fundamental aspects of the present, which lower income environments will need to address in the near future. While lower income levels could also generate additional land value through coordination in the future, much of it would probably not reach the stratospheric heights in valuation associated with the most desirable real estate. Nor does it need to - the problem is disentangling prime knowledge use limitations from prime real estate locations, for a broader marketplace.

From the beginning of this blog, I have emphasized the finite nature of time use as anchor.  Those who have kept up with me, know that I like to explore the possible "whys" that give the nominal anchor its actual strength: that is, why does this measure have such tremendous capacity to provide monetary stability in the first place? Hopefully this post has given my readers additional means to understand how my beliefs "fit" into popular belief patterns of the day. While some of my beliefs are market monetarist in nature, there are of course additional elements which I utilize to address the problems of long term unemployment, in particular.

Supply and demand are everything, in terms of the actual engagement on the part of communities in the economies around them. The beauty of looking at economies in supply/demand terms, is that the whole can potentially be represented in economies large and small, and everyone can contribute to the discussion. When monetary policy elects to follow the intersection of resources with supply and demand, we gain the greatest degree of economic stability possible. What's more, we gain the capacity to integrate lower and higher income economic circumstances, while understanding the differences between them.

Thursday, March 27, 2014

What Comes First - Wealth, or the Idea of Wealth?

The designation is important, because there is a growing tendency to focus on already existing wealth as the source of the flow (Piketty), rather than active wealth creation as a driver of hard asset and real estate definitions. Indeed, the capital which is most associated with wealth, can often be framed in moral terms at the expense of a better economic understanding, as Ryan Decker noted in a review of Thomas Piketty's book, "Capital".

As a result, inequality is too often addressed in the partial equilibrium terms which Ryan Decker also spoke of. For instance, we are still trying to impose some forms of flow definitions (minimum wage increases as obligatory on the part of business) as if monetary flow capacity were somehow the same across all geographical points. One only need step outside thriving cities or various regions, to note that this is not at all the case.

Unfortunately, only certain geographic points operate with the wealth enhancement provided by the additional impetus of international monetary flows. And yet service institutions make the mistake of defining knowledge use terms within the maximal valuations these international areas generate. If that were not enough, citizens of rural and less prosperous areas are somehow expected to be "folded in" to this system of knowledge use valuations, which international settings unwittingly backed. This also translates into potential wealth creation being denied in less prosperous areas, which in turn are forced to rely primarily on fixed assets. Over time, further taxation appears as the only solution. No wonder governments of all sizes are increasingly stretched to their limits.

All of which forces the idea of wealth creation - in time use and nominal income terms - to rely mostly on the "special" valuations of asset pools from international monetary flow in prime real estate locations. What that means is that much of the knowledge use which once derived from geographic points large and small, now has little means for absorption into the larger economy. When societies are forced to rely on existing wealth for redistribution and nominal income, over time that only reduces the ability to generate the idea of wealth itself.

If only it were as simple as existing capital being capable of permanent redistribution! If this idea really worked as advertised, economic thought would not present the ongoing struggles one actually observes. Instead, danger lies in the assumption that more is always and forever possible, from the fixed elements which are already in place. It's not hard to tell that too much reliance on fixed assets is already happening, because of the backup process which began in the U.S. at the onset of the Great Recession, with interest on reserves.

Those reserves are largely responsible for the Wicksellian roundabout problem, which Nick Rowe considers in a post this morning. Presently there is a traffic jam of monies not really intended for ongoing consumption, but to provide ballast for already existing investments. Or, additional monies - instead of flowing through all parts of the economy, are mostly being used to shore up the "dependable" and"reliable" capital of the world.  Nick wants to know, how can the pile up in liquidity be addressed?

For me, the "pile up" exists for at least two reasons: 1) to maintain a single equilibrium of wealth to services valuation as best as possible, even if optimal use of said equilibrium is imaginary. 2) to have money "on call" if and when further flows become necessary, to maintain the artificial equilibrium. The problem is that even though entire populations are supposedly utilizing this circus, there still needs to be a bare minimum of services flows to those who are not still actively engaged (Obamacare, anyone?). Except, populations need to express consumption through a wider array of income and production possibilities than a sticky marketplace currently allows. Were this allowed, the issue of sticky wages could become a thing of the past.

The best way out of this logjam is to allow active wealth creation through time use to be representative of capital formation in its own right. Not for purposes of taxation, but for direct input in terms of service needs and coordinated activity so as to make taxation unnecessary. However, in a world still committed to supporting knowledge use within strict limits, it's hard to reintroduce knowledge use so as to allow broader economic activity to flourish. For instance, distasteful though interest on reserves may be - let alone the consequent distortions of primary monetary functions - it's not easy to just open that dam and let the excess flow back into a marketplace. Before money and knowledge use can once again be absorbed at multiple levels, communities need to coordinate so that it can happen.

By definition, interest on reserves serves as another excuse to short nominal income capacity as well. Why so? As production has been made possible with less input in terms of aggregate hourly participation, central bankers may be compelled to represent aggregates without the actual time element which serves as an anchor to production.

Even though time is nonetheless anchored in resource use at all levels (much capital exists in housing), central bankers are still less inclined to view the human factor as vital in the wealth of the present. That in turn gives less credence to the active aspects of economic life which create wealth. The result? People are downplaying the active components of the economy which defined GDP. But there is little point to be had in central banking, if it does not actually track active monetary flows in time based terms.

Any time a society becomes convinced the human element is not important to measure, the wealth they count on instead, can not hold up indefinitely. Indeed, the very idea of GDP as it was defined in the 20th century was a more positive affirmation of human potential than many recognize, even now.

Some may be confused by the way I present this, because it's not that knowledge is being downplayed in Piketty's arguments. Rather, arguments for the economic inclusion of knowledge are being presented in moral, rather than economic terms. While the moral argument is not all negative, it offers no solutions for sustainability in an overall sense. The problem is that knowledge use remains caught in a subservient - thus indirect - role, in terms of product creation. Under these conditions it cannot be considered as wealth in its own right. So long as knowledge use remains beholden to limited subsidies from other product creation, it can never fulfill the role of wealth creation which it actually deserves.

Wednesday, March 26, 2014

Where is the Balance in Knowledge Use?

Ideas for this post have been on my mind for a while, especially in regard to societal time use choices and a growing need for locally coordinated schedules. However, another aspect of all the present disarray, is dialogue or knowledge use in motion, and the degree to which it continues to splinter and polarize. This morning, Timothy Taylor posted about the hassles of homework, which - for me - does a good job of highlighting some seemingly unrelated concerns. He begins:
I have three children between grades 6 and 10, and I view homework as a plague upon the land. Family time is tight. The hours between dinner and bedtime are few. Weekends are often full of activities. It can feel as if homework overshadows and steals any available down time and flexibility. That said, I have to admit that the evidence about actual amounts of homework tends to suggest that it's not a problem for most families or students. Instead, my suspicion is that too much homework is a problem for one group and too little homework may be the problem for another group. 
Inquiring readers may want to know: what's the connection between homework "or not", and knowledge use in general? Differences in overall levels of high school work, tend to translate into the means of communication which individuals grow accustomed to at an early age: thus carry forward into discussions and reasoning thereafter. When I think back to high school, homework was indeed a small part of the evening, which I nonetheless filled with music related activities plus a once upon a time "passion" for sewing and pattern design. Of course the lack of homework in high school, translated into some quick adjustments in my first college semester - where I learned that homework would be a much higher priority.

As to Taylor's concerns about schedules, I was fortunate in that high school was just two blocks away. Even if a parent wasn't home during midday, timing would not have been an issue. But for many people who are faced with multiple activities in far flung locations, schedules and related logistics problems are very important, now. Whether parents end up late to work because of transportation issues, or students have to cross several busy intersections to get to school, neither alternative presents a very workable situation.

What is particularly striking is this: who - if anyone - is even in a position to address Timothy Taylor's logistics and studies imbalance concerns? If governments and municipalities don't have ways to consider multiple factors in larger context, to a degree it's because they're already stuck with what they've got. Students and parents either have abundant educational resources to the point of seeming excess, or they're left with what may be the opposite. That is...schools which prove insufficient for the level of aptitude needed, for the important public issues of our time. How can any nation's democracy be expected to hold up under such conditions?

Of all the problems that class polarization creates, work life balance and unnecessary IQ sorting are definitely at the top of the list. For some time I had been convinced that problems of economic inclusion and exclusion were limited to certain regions of the country. For instance, rural areas often lack significant knowledge use structure for needed services and economic access. But this quote from a recent article in New Republic made me a bit less certain, for it spoke of some very real limits to knowledge use in a place I didn't expect - Silicon Valley:
In one corner of the American economy, defined by its relentless optimism, where the spirit of invention and reinvention reigns supreme, we now have a large and growing class of highly trained, objectively talented, surprisingly ambitious workers who are shunted to the margins, doomed to haunt corporate parking lots and medical waiting rooms, for reasons no one can rationally explain. The consequences are downright depressing. 
The medical waiting rooms alluded to in the above quote, are in regard to men seeking botox and related medical means for looking younger, so as to maintain economic access. Is not Silicon Valley the place where individuals with initiative and drive can still make a life for themselves? If knowledge use is already being questioned here, then the case I've been making to provide equal time access for knowledge use of all kinds, feels all the more pertinent.

In terms of educational imbalance: what point in "forcing" some schools to increase homework, if a large segment of the population have already been deemed "non-essential" to the economy? As Timothy Taylor noted, the small share of students who have more than two hours of homework in after school hours, has basically remained constant for some time. Looks like there will need to be more places where education can truly be put to good use, before the rationale improves for more educational access.

Of course my readers know how I feel about this. Knowledge use does not do a society a lot of good in the long run if it is primarily limited to the few, who proudly write up the fruits of its use into their histories...until the "fortunate ones" can no longer do so. Then it seems to take hundreds of years before even a fraction of those histories are unearthed again.

When knowledge use is strictly apportioned to a realm where resources separate from time pay its bills, the knowledge which is discarded or discounted, only multiples. And people have to get serious about better dispersal of knowledge use in diverse settings, before they can reconsider the scheduling and logistical nightmares of the present. I know that equal knowledge use portals are not for everyone, nor need they be. But if portals such as these are not ultimately utilized and coordinated, too much knowledge potential and skills capacity will only die another slow and painful death. I, for one, do not want that to happen.

Midweek Market Monetarist Links and Summaries - 3/26/14

The Fed "inches" away from unemployment as policy benchmark and moves (!) towards...towards...
(Scott Sumner) "A wide range of information"
If someone wants to get through the morass of non solutions, is that boring, politically impossible or both?
The policy that must not be discussed  Also, the pertinent Econlog link
Low interest rates (can) create an expanding marketplace (demand for money), where a fixed monetary base would lead to deflation in the aggregate. Of course, market "certainties" assist this process. Low interest rates are deflationary (holding the base constant)
Giving the Fed the benefit of the doubt: Suppose the Fed always aims for 2% inflation
Money matters (as measured activity) when it fulfills functions in the marketplace...not when it is "resting" in a bank account. The definition of money doesn't matter (and there are no "wrong" definitions)
Currency still has a vital role: Our monetary system is becoming increasingly primitive
Perhaps the upcoming speaking engagements might even do some good: Now that Ben Bernanke is free to speak his mind...

Just the discussion as to taper, has increased  long term inflation expectations (Marcus Nunes) 
Needed: a more diligent FOMC -
Where is the wage inflation?
Kevin Sheedy notes the contractual benefits of nominal targeting:
This paper on long term unemployment received considerable attention at the Brookings Conference:
If only Japan's authorities had not focused on inflation:
Inflation targeting?
Marcus responds to a post by Scott at Econlog

"Oddly enough, most economists are not really educated to do forecasting." (LarsChristensen) Part I of what promises to be an interesting series -

David Beckworth is in general agreement with this Abenomics paper:

James Pethokoukis highlights an incisive article from Robert Bruska:

Nick Rowe explains an international macroeconomics dynamic:

Everyone is looking for a takeaway on labor market slack (Evan Soltas)

Why no date set, for a vote on the still available three seats for Board of Governors?
Of course, there may be good reason why the votes are still delayed...

Justin Irving has been working on an updated version of Efficient Forecast:

"It's the liquidity trap, stupid!"
How has the inflation rate fallen, when AD is growing faster?

David Glasner's take on the recent BOE article:

Also of interest:

"...only 5 percent of large federal IT projects in the last decade fully succeeded."

Don Boudreaux gets it: Who Licenses the Licensers

Tuesday, March 25, 2014

Who Still Has Faith in an Expanding Economy?

Oh my, what a question. Short of the Big Bang, perhaps, it's hard to decipher what sort of "expanding" anything inspires confidence right now. Mild and expected inflation which once provided inclusion for new workers and consumers, is now viewed as exclusion to serve mostly the participants who remain at the table. But if some of these are ready to scale back...what of the younger generations, which were just coming into a natural process of growth and expansion? Doesn't the decision to tighten monetarily, come at their expense? And if that doesn't matter, well why doesn't it?

The blogosphere has become a bit too quiet right now for my taste, in fact the silence is deafening. Just as I thought people would get serious in their search for pragmatic solutions - and it was obviously time to roll up sleeves and get to work, suddenly a lot of folk slipped out the side door and all but abandoned the work site. To be sure, the reports are still coming in - papers and statistics all around regarding people who may not be employed again. Some of the unemployed of course are older, thus expected to somehow coast into "retirement". But by no means is this necessarily the case.

Where are the actual, applied efforts taking place? Who has been "walking the talk" and how have I missed them, when I've spent so much time looking? Are they hiding in plain sight? The lack of enthusiasm on the part of employers to hire those who have been out of the marketplace for a couple of months, isn't just limited to older Baby Boomers such as myself. By no means are those over fifty the only ones who have been given up as dead, I mean ZMP.

Instead, doors are shutting on people of all ages, and no one is in agreement as to what can be done. In the absence of serious deliberation and response, we are getting...wage increases all around? That may indeed help some to pay a few more bills. But it is going in the opposite direction of the employment that will be further cut, not just in the months ahead, but also the years ahead as technology adapts by implementing more automation wherever possible.

Of course there is still dialogue to be had, but blame seems to have once again become the fallback position. For several years, some commonality was being sought, as people were willing to reach across both party lines and discipline specific language. But now, the whole situation increasingly feels like a full retreat. Even though older models were not sufficient to explain unemployment, new models did not arise which could provide more rational explanation or applicability. And who has the incentive to provide them now, when the event is mostly in the rear view mirror? In some ways, it's almost as if the Great Recession never even happened. After all, the consensus to pull back on the throttle is a sign of defeat, and yet it is hard to tell who is even willing to concede the loss.

As a blogger, granted - I'm not necessarily the "brightest bulb on the string". But you know something? Often times, that's not even what is necessarily to find solutions. What is necessary is trying again and again until something works. What is necessary is collective willpower that cuts across groups and self interest. Hell, if anyone was really self interested, they would be doing everything possible to ensure that as many as possible stay afloat right now. This is not rocket science and most of us don't have to be geniuses to devise methods for dealing with long term unemployment. Put people in close proximity to one another who need to create a better reality, and find out if there's enough human instinct left to adapt and improve one's life. I'm willing to bet there is.

Anyone such as myself who has spent too much time sorting through and clearing out the shopping sprees of earlier decades, can tell an economist: this does not have to be complicated. Give people multiple product formations which are interesting in some manner and in their affordability range, and they will freely choose among them, every time. What's more, everyone can be involved in the production of said product, and find ways to sustain the circle. We have spent far too much time pretending this is not possible.

Whose job is it to keep the faith in a still expanding economy? Janet Yellen? Everyone or no one? People are getting paid good money to discuss these things endlessly, but nothing is happening. In fact a lot of the discussion is repeats, from a time frame which hardly anyone today remembers. Sometimes it's in political terms, other times macroeconomic or journalistic terms. Or, it gets modeled with graphs or explained in statistics but the result is the same: nothing, so far as I can tell. I say this because the results have yet to be shown on the evening news, such as the results of a new cure for cancer or other disease.

I know, it's as if I've gone off the deep end in this post. But as Linda Ronstadt sang years ago, "I've tried everything I know" to figure out some practical applications to the problem we have no better way of describing than long term unemployment. The real issue at hand is, how do we keep people actively engaged in their lives and the lives of others? How do we make sure they still have reason to go beyond the doors of their own dwellings and take part in life itself - not just a facsimile?

Why are we still reasoning that it makes sense for people to just stop thinking, while continuing headlong with the notion of technology providing most of our mental effort in the future? If we were to go that far, what would be the difference between the rest of us and any unfortunate soul who is sitting in prison? One would think that with the proliferation of economic activity in the world and the constant activity that takes place, something encouraging would have happened by now. I'm as stubborn as a mule about this. Have I just not looked into the right social media? Who is actively working on applied and coordinated solutions?

Who would be aware of the ongoing efforts which I have been trying to track down? Who is looking for others equally intent on doing something? Even though I don't know how long I'll be able to do so, I'm still available now to help whoever is working on these issues. What's more, I'll set my mind to whatever or however I can help, free of charge. Just let me know.

Why Do Fixed and Random Designations Matter?

While there are plenty of ways to think about such a question, I'll take a somewhat entrepreneurial angle in this post. Whereas those with steady paychecks often choose to approach life in predictable capacities, the entrepreneur or business owner - on the other hand - wrestles with hard to quantify resources and product formations. Or, the entrepreneur seeks to arbitrage a positive result from random circumstance and environmental conditions. If some businesses use governments to rig for fixed certainties, that tends to leave even more random outcomes for others.

All of which can leave the entrepreneur's outcome along the extremes of the spectrum, in terms of income potential. These are the kinds of gambles that not just anyone wants to make, for understandable reasons. Hence there is not much appetite for real gambles in the present, even as the status quo continues to falter. Substantial innovation in the system itself just feels like playing with fire, in part because of the people who have already completely fallen out of the game itself. It's one thing to speak of those who gamble and win, and altogether another - those who gamble and lose. What are really the circumstances which cause them to lose? This is not an easy question to consider.

And yet, at many historical points, exposure to random economic elements has not been quite so harsh. Progress unfortunately includes the process of rigging certain elements in someone's favor. Indeed, people build upon earlier gains with gambles on multiple resource elements for extended periods of time. Are the falls from progress inevitable, when too many "certainties" have already been fixed in someone's favor? Democracy - even if it is not specified as such (how deep was the fall?) - is far more likely when there is still plenty of leeway as to resource use options. If democracy doesn't particularly appear linked with inequality, perhaps that has some bearing on the matter.

Some farmers still expect to manage unknowns much as entrepreneurs would, at least the smaller versions of farmer which (U.S.) government doesn't have adequate reason to help. It's easy to forget that entrepreneurs are just the most recent version, of those recognized for taking various elements of the landscape and rearranging them in new and unique ways - at least when they have a chance to do so. In a sense, when the entrepreneur has a guaranteed position, the original motivation for challenge disappears, and is replaced by the same desire for certainty that anyone with a steady paycheck desires.

It's odd, that when we do learn to manage time by our own expectations, how hard it can be afterward to turn around and conform to the time expectations of others. Indeed - once experienced - the freedom of optimal time management can be worth so much, that an individual will do whatever they can to preserve it. Even so, some are unwittingly thrust into that "do or die" environment, after years of relying on dependable checks and benefits: not an easy transition.

How can it be worth so much to create new patterns with random resources, which often leaves one with a life of few benefits and possibly no more vacations? It's not easy to explain. But when we gain the chance to experience life this way, often we don't really miss the former consumer weekends or vacations anymore. When we match our time use with our metabolisms and our challenges with our work environments, we aren't looking at the clock. We may not even be thinking about the clock, because the best time of the day is when we are dealing with the challenges themselves. I'll never forget how completely different the weekends felt, when I was working for a steady paycheck, versus taking the ultimate chance on my own skills capacities.

I won't lie. When the bills aren't easy to pay, or when one is faced with moving from fixed to random designations for the first time, it can be like staring into the abyss. It's not hard to associate my earlier fears with the fears so many have in the present, when they are repeatedly told how they need to move away from the idea of steady paychecks, to selling one's abilities on a regular basis. After all, no one has set up a marketplace yet where it's really possible to do, collectively. I've known plenty who have chafed at authority. Even so, they knew the dangers involved, re taking a chance on making the ultimate decisions, themselves. They were well aware of the hardships that came with the gamble, in spite of the positive aspects of managing one's destiny.

For this reason - among others - society attempts to "fix" as many economic elements, as possible. Certainty is a desirable commodity, even if it means sacrificing some degree of freedom. For one thing, even though slogging through said fixed elements can leave us feeling crazy at times, it sure makes consumerism a lot more fun. That's the point! By Jove, if one is going to continue tolerating the "nutty" workplaces or whatever rigged elements exist, the bigger and better the consumer rewards for doing so.

And for a long time, those consumer rewards for boring yet non scary workweeks, continued the fixed environments which generated ever more sameness and stability. Even as the process starts to break down, governments hold fast to that earlier dream - even when some consumers can no longer play the previous supporting roles for them. Governments "hold tight" as they give up on consumer spending capacity, by affixing their sights on as much random resource potential as possible. Meanwhile, citizens just hope their governments can hold it together.

But even governments have to stare into the face of the abyss eventually. Goodbye "boring", hello "interesting times". How to keep up the pretense of prosperity and educational reward, if there is nothing fixed or certain anymore about a college degree for the good life? After such a long run of fixed elements and fixed paychecks, it's hard to imagine life with many unknowns - even when the knowns are already MIA. Hence too much faith now in already existing buildings and asset formations, as if somehow they can fill in for continued vision and collective focus. But accounting tables are no substitute, for the vision and energy which represents product in motion.

How to consider the whole picture, rather than fighting battles on dozens of fronts at once? Think of how the entrepreneur has often been celebrated, for seemingly being able to divine what society could use at a given moment. What was it about those collective environments which gave entrepreneurs the chance to do so? What was it about environments that gave people a chance to live, whether or not paychecks "seemed" substantial? These are the parts of our lives which have been lost. Sure, it was tempting to rig as many economic elements as possible, when profitable certainties and salaries could result. But doing so has created patterns which now leave societies like deer in the headlights. And deer cannot just stand in the road indefinitely.

Once again, the public has a role which could assist entrepreneurs and much needed innovation as well. Domestic summits could begin the process of envisioning new economic environments, which would be less rigid than they are in the present. After all, it helps to remember that the entrepreneur could be any one of us. Thus, by helping the entrepreneur, we would in effect be helping ourselves. How might we face larger uncertainties head on, so that smaller uncertainties can find means for coordination? If we can do so, those who take chances on our behalf would not have to always end up at the far reaches of the income spectrum. No discussion about inequality is complete, if too few consider inequality of economic access.

Monday, March 24, 2014

An Economic World, in an Hour

What could be said about the potential of the economic hour? Suppose it could be envisioned as a matter of carefully orchestrated timing, for multiple (voluntary) economic ends and purposes. Just as actual roads lead to a marketplace for physical goods, the coordinated hour could provide roadways for the infinite diverse product of knowledge use. These individually scheduled hours could also provide means for local economies to function as true, self contained subsidiaries that also exist in a larger economic context.

For this marketplace path, the size of the "crop" (arbitrary skill valuations) being brought to market, is not as important as 1) when the crop is brought to market and exchanged, 2) how many in aggregate need the crop in any given moment, and 3) how many in that aggregate moment are prepared to provide it. No blinders on supply potential allowed. With no blinders - in knowledge based terms - the size of this particular crop can readily adapt to present realities in optimal supply and demand conditions. Knowledge as product in this context, becomes the environment we create in our interaction with its use - rather than an arbitrary and divisive component outside our circumstance.

Much economic value exists in timing, yet this vital factor is not always recognized - implicit though it is to the measure of all product in motion. For our purposes, the timing factor is also a fixed or known quantity which we all hold, in contrast to a world of unknowns which flash across an hour's "screen". It is our interaction with the resources of the moment, which could prove quite amenable to measurement in both both local and global terms.

This holds true both as a monetary equivalence for economic coordination, and the societal or intellectual equivalence as well. The better part of economic velocity in either aspect, mostly occurs when - and how - people can reasonably expect it to happen in the marketplace. A better alternative would be newly recognizable settings, in which otherwise random events gain understandable context and applicability. Said another way, we need more effective means for knowledge use arbitrage and the spatial relationships such cooperation would rely upon.

In similar fashion, a nominal targeting rule could provide a recognizable setting for spontaneous economic activity, where monetary expectations would have a better chance of matching ongoing realities. While both nominal targeting and marketplace design would  be considered normative economic activities, they are not normative in a specific sense but in terms of overall marketplace definition. This distinction is important. Because when "free market" voices are raised against normative economic action, results tend to be ad hoc normative action at various points in the system just the same. What's more, hidden "planning" tends to affect the whole in specific and unanticipated ways.

As to marketplace design: think of the economic hour as a portal, by which individuals have the ability to adapt unique time frames for addressing the more important concerns of the moment. Why should that matter? Think what happens when time use is standardized outside of one's personal domain. Not only does the individual lose the ability to manage time and individual ability (as an entrepreneur or manager would), but  the designated funds for standardized time use, may not be able to fulfill their intended purpose. This is why some fought hard against the idea of working for others a hundred years ago - they knew what the sacrifice of a steady paycheck entailed in terms of autonomy and possibly one's health.

What's more, the monetary limitations of the standardized hour, imply absolutely nothing about true skills capacity, incentive or motivation - nor should money be expected to fulfill these purposes. Time as an hourly portal of economic entry, requires taking back time management, and understanding one's personal limitations. The good news is we can seek out others who learn to properly manage their own limitations as well. By placing our time value into an immediate conceptual and social framework, valuations regarding the skills aptitude we hold as individuals, become far less arbitrary and counterproductive.

All those pools of money which organizations count on for standardized time use, don't just sit quietly unnoticed. And if undue claims are placed upon them, new rents are suggested as "solutions" in their place. The issue of rents has created a uniquely odd form of economic gridlock, in which the reasoning comes across as "just short nominal spending capacity, since the rent seekers would take it all anyway". Bonnie Carr wrote recently about the problems which aggregated money pools can create, and those pools were uppermost in my mind when I began this project years ago. Indeed, pooled monies can be one of the biggest issues that institutions face, in term of the supposed ends they are designated to meet. These monies constantly face competing demands, which especially impact the degree of choice in both human thought and action.

Whereas, the hour as a portal of economic entry for human potential, allows individuals to reconsider their preferred time choices in a broader context. It's not necessarily unfair when we are deprived of resources that weren't ours to begin with, but it is always unjust when we are deprived of the use of our own time which we need to tend to our own survival. In a world that relies on education, skills valuation hoarding is nothing but a thief in the night, as to the value of our own time. If people had real context for coordinating what is the greatest scarcity of all, more money might have a chance to flow to the areas where it is capable of doing the most good - that is, toward the random resource quantities which necessitated the use of money in the first place. In the space of a coordinated hour, a marketplace for diversity in knowledge use can be vastly increased.

The fact that our economic time availability is non random, means that it could be highly responsive to voluntary coordination patterns. In turn, that suggests more effective patterns for random resource use which reflects the actual use of our time. Such methods could reduce rent seeking, as well as dependence on pooled monies for ongoing daily activities. Wherever there is greater certainty as to services availability when it is needed most,  pooled monies are more likely to remain for the resources which best augment collective efforts. All of this allows greater diversity of outcome, and the ability to pinpoint measurable productivity gains in knowledge use settings. How so? By recording the aggregate activities which occur in a given population, with full knowledge of the time potential at their disposal, contrast with the activity results of the previous year.

In the space of a given hour, it is possible for each individual to find the work/life balance they need, and yet remain adjusted to the needs of other individuals in their midst. By using the hour as economic portal for knowledge use, it becomes possible to place the value of our time into a productive realm that equals or surpasses the productive realm one normally assigns to the production of product separate from time. None of this is easy to visualize in the present - that's a given. But once such coordination is utilized and measurable, the results could renew confidence that the future need not belong only to robots, the elite, or the fortunate few in terms of employment.

Sunday, March 23, 2014

Knowledge Use - Some Broad Strokes

For the past week or so, lots of blogging notes have accumulated on my desk while an unusual amount of "spring cleaning" has claimed my time - let alone allergies which have muddled my thinking! At the very least I want to pin down some recent thought processes, regarding the importance of knowledge remaining in dynamic motion.

Knowledge use is far too important, to remain in default positions where it gets reconsidered only when absolutely necessary. After all - whenever unimpeded - individuals seek to redefine and reconfigure knowledge on an ongoing basis. Importantly, this process also needs to be brought back into the open. In other words, knowledge use is vital, outside the walls of establishments which are not in a position to interact directly with other public access points. The fact these institutions are all but closed off, means that too many important marketplace elements have no way of being coordinated so as to take place.

Unfortunately, austerity measures also threaten economic options which individuals are still investing for. What's more, people are derided and judged afterward for taking on the "wrong" educational investments. And yet, those "wrong" investments could appear to be most anything, when economic conditions deteriorate - either in regions or nations. How many have closely followed educational advice for instance, only to remain unemployed or under employed? Test scores have fallen in the U.S. in recent years, as students doubt whether availability of opportunity still exists in the workplace.

Any time that some knowledge use is deemed far more important than others, more resources get delegated to the "special" areas - while other vital aspects of knowledge use eventually suffer the consequences. When this occurs, broad areas of knowledge use eventually lose their dynamism. When knowledge use becomes static, that forces people to think and act in ways which are not necessarily suited for their temperament. What's more, over reliance on the "winning" factions introduces unnecessary static elements in monetary processes.

However, important knowledge use can be brought back to the table by utilizing the recorded hour as an access point. Learning to coordinate knowledge use is a good way to bring important economic activities back into motion, across all parts of society. Consider the most basic and social aspects of our lives, which no one should have to expect robots and automation to accomplish in our stead. This is a potential marketplace where all could have a say in providing structure, in order to remain engaged in responsible ways.

We also need the use of knowledge in our personal work, if we are to be effective in our input regarding resource use as it pertains to us. Present day voting processes are no substitute for such needed cooperation, in that they were structured for simpler societies. In the 20th century, the use of knowledge became a primary product which also brought people together: people who otherwise would have had insufficient reason to do so.

While knowledge can be widely dispersed via Internet, the Internet also needs to be a mechanism by which people can start to make things happen through knowledge use outside the purview of specific institutions. That is, individuals need to be able to create specific sets of solutions via Internet, for problems that special interests don't have adequate reasons to solve. Knowledge use needs to be approached more directly across disciplines, for many reasons. What do we want to regain? What is optimal knowledge use really about?

  • Finding our identities, and approaching life through the identities which have meaning to us.
  • Getting things done, far more effectively than would otherwise be possible.
  • Creating better ways for people to live among one another.
  • Exploring practical answers and solutions, in a world that would otherwise become impractical.
  • Or, knowledge use is about our continued evolution.

Of course these are just broad brushstrokes, and yet they provide some rationale, as to what automation should not be expected to perform for us at every turn. Most importantly, societies need to move away from the artificial divisions which segregated individuals at a young age as fit for knowledge use...or not. The primary problem in this regard is that when we age, it becomes more difficult to maintain physically demanding jobs until what a nation expects to be one's retirement age. If only for health and retirement assistance reasons (often knowledge workers don't retire), we need to begin sharing the work that is most important to us. This is important for people not just as they get older, but for younger generations who are waiting for access to knowledge based work as well.

What of the issue of early disability, that some are now compelled to claim? Consider the outrage, when pictures surface that someone on disability is out enjoying a boat ride, for instance. How dare they dip into the public till for economic support, when they can still function! Even so, just because someone remains capable of enjoying life, does not necessarily mean they are still capable of exerting themselves physically for more than several hours in a given time frame.

For instance, one might be able to even build a house...for an hour or so. Or rebuild an engine, given a couple of months instead of days. But who would hire them, if they require twenty breaks to the young person's two? Appearances can be deceiving when it comes to health matters, especially after a certain age. This may be due to chronic pain issues, or - in my circumstance - simply a metabolism that allows me to do substantial work for a while but then says it's time to stop. I fought hard against those limits a decade ago, before I finally realized what they implied.

And yet people in this position are still held responsible for themselves and for others - as it should be. The fact that so many remain in what loosely translates into long term unemployment, needs to be addressed. That's true at least for financial and identity based reasons - let alone everything else. Only consider that the typical retirement planning of the day, simply does not apply for this category. Thus the suggestion for all individuals to share in (coveted) knowledge based work, is a suggestion for realistic long term strategies.

Granted, there are some who would scoff at the idea of taking part in knowledge based work. Indeed, I've known a few who turned down college educations for more physical work that was more appealing - who would still walk to the shop when they could scarcely do anything else. Even so, it needs to be easier for these individuals to teach others the physically demanding work they actively took part in, when they can no longer perform that work optimally. Many who look to disability as a "way out" now, would no longer need it if they had viable knowledge use options when physical work becomes too difficult. I have faith that if society is willing to share its most important work among all who wish to take part, that much good could come of the result.

Saturday, March 22, 2014

Thoughts on a Home Maintenance Services Marketplace

How might one think about the present informal marketplace, and the degree to which it is utilized in the U.S.? Even though we know it's there: who really stops to think how these services help populations and communities in general. A recent post by Scott Sumner at Econlog also includes some interesting back and forth in comments as to an existing underground marketplace for "unskilled" services. Hmm, some of that work I would scarcely have the energy to carry out over an eight hour stretch, unskilled though it may be designated. In this post I want to consider whether the potential for these kinds of services is being met, to the degree they are actually needed.

Many home maintenance services we now expect to provide or partake of, depend upon one's region, prevailing income levels and accessibility to urban areas. For instance, this is likely to be a much more dynamic marketplace if a major city is only an hour away. Rural areas might be practically devoid of retail options and yet still have home maintenance provisions available, because of transportation access to urban areas nearby.

Such fortunate environments translate into service provisions which can still be shared by locals and immigrants alike. Whereas when I lived in a rural area several hours from a major city, locals were more likely to engage in  "do it yourself" projects and routines. That anti-economic context (except for home improvement stores) applied not just for basic service applications, but more complex projects as well. Some of these do it yourself "outbacks" appear to be more racially segregated, rather than by class or income. In far flung rural areas, maintenance opportunities tend to come from either higher income households or bed and breakfast operations for tourists. This creates a situation where outsiders may be viewed as contenders for the work that exists, even if those jobs are as basic as home maintenance.

The main problem I observed re "hard core" do it yourself folk, was when a home was built by its owners without any mortgage. Unfortunately, the legal system can sometimes do little to assist a home's occupants, when a marriage fails. There's no dividing a solid home, especially when one's income won't cover the legal expenses! Oddly enough, observing this sad circumstance gave me what little respect I have for a thirty year mortgage: at least the mortgage gives both parties a chance to start over in their lives. When a home has a shared and unpaid obligation, people seem to act more reasonably - even if only because of the financial incentive to do so. And when people have a loan on their residence, there's a better chance that both of them remain in the workplace to tend to it, which allows them to pay others to build their homes for them.

Is there still room for growth in home maintenance services? I thought about that, after a long awaited repair job was recently completed. Decades of water damage had meant getting rid of sheetrock which never should have existed next to plumbing, and replacing it with water resistant board and new tile. The repairman did such a good job that I knew I'd want to hire him again in the future. And yet, he was hoping to gain work for his wife, who he promoted thus: "work around the home with a woman's touch". I felt bad that I would probably not be able to take him up on that offer.

Certainly I'm not alone in the compulsion to do as much as possible, myself. Let alone the fact that more people in their eighties (even nineties) still climb up on ladders than anyone really wants to think about. Unfortunately, homes tend to age along with their occupants. That means just about the time the occupants need to spend more money on care from others, their homes are often in need of the same. But depending on income, one's home may or may not get the attention it needs.

Considering how much of our wealth is tied up in homes, degraded capital then has to be factored in. That in turn affects not only the existing capital which communities rely upon for taxation, but how groups in general feel, as to their collective ability to meet ongoing challenges. This is one of the very real dangers of the present: expecting recognizable wealth to automatically generate income flows, just because it is there I suppose.

Will the marketplace for home maintenance needs be limited to mostly those with higher incomes and more "dynamic" regions in the future? If so, many communities stand to lose more wealth, than is presently recognized. Some forms of work subsidies could help, by making it possible for individuals to hire other individuals for needed work when they otherwise could not. The greatest need is for that of lower income individuals, to be able pay others for problems when they arise. Too often the possibility of hiring someone is ruled out - just as it is needed most - because so much income has already been delegated to ongoing health care needs.

Of course, there are many hurdles to overcome before government assisted wage subsidies could become a reality. Today we are going in the opposite direction: one in which companies and individuals alike are expected to pay higher wages in spite of a post recessionary environment. That means lower to middle income individuals in many regions will continue doing the work themselves, if in fact it is going to get done at all. Even though home maintenance work is a limited facet of the services environment, no one should ignore the importance it holds for the economy as a whole. This is a marketplace which needs to exist both for those who depend on it, as well as those who are quite willing to provide it.

Wednesday, March 19, 2014

Midweek Market Monetarist Links and Summaries - 3/19/14

What would be the right counterfactual for the economy, in the absence of this policy? (David Beckworth)
When 2% becomes an effective ceiling instead of a target range:

"In real terms the Dow went nowhere in 68 years" (for example) - Scott Sumner
100 years of excess returns: No, they are not (statistically) significant
Lack of a clear target rule is getting in the way of coherent discussions:
It's the policy regime that needs fixing
A recent BOE monetary policy report is fine - so long as one likes the interest rate approach:
Banking theory disguised as monetary theory?
Scott discusses how his view of macro has been shaped by Lucas and Fama

Some Econlog posts from Scott:

Nick Rowe has lots of fun with the BOE's (above mentioned) "lovely clear article"
"The supply of money determines the quantity demanded, and not vice versa"

Lars Christensen responds to Sumner's policy regime post:
Russia will likely go into recession:

Running out of ideas? Inflation adds drama (in charts) - Marcus Nunes
Supply siders have more excuses than solutions (Benjamin Cole)
Nominal stability is a Fed provision - not a government provision (Marcus)
Still close to trend:
Monetary policy settings are not loose. Rather, rudderless:
How might monetary policy affect labor across borders?

"Keynes argued himself into a corner, and in his review of the General Theory, Hawtrey caught him there and pummeled him" (David Glasner):

Kevin Erdmann provides a review:

What does "Everybody Know" about the global and financial markets? (Ravi Varghese)

Also of interest::

Jonathan Finegold offers a helpful summary of Paul Krugman's trade theory in this post:

Growing concerns as to copper as a signal of deflation:

If anyone missed these, Arnold Kling highlights some noteworthy labor market posts for contrast:

Now here's an idea that would make Main Street USA a lot more lively:
Unit 3 Micro: Pop Up Shops on the Underground

Sunday, March 16, 2014

How Did The Fed Get Its Reputation?

...That is, the one of reliability and leadership "worthiness" in a larger sense. While there is of course the more frequently told version of profligacy and irresponsibility, that's not the one I wish to (overly) emphasize in this post! Much about the Fed's influence is still taken for granted, which allows the U.S. to hold an important position for monetary matters in general. Granted, this position could readily shift elsewhere in the years ahead. But where and how that might happen is still far from obvious, by any means. Much of recent economic structure around the world still reflects what worked best in the 20th century. In other words, production wealth continues to be viewed in traditional terms, even as it begins to dramatically change in both orientation and focus.

As a result, no one really knows which sea to set sail in - hence inflation targeting is like drifting with the tide. Being the biggest vessel afloat only gets one so far. It's not hard to compare today's central bank operations, to the operations of physicians who will tell you without hesitation, "we're just practicing". Apparently that is what central banks have spent a lot of time doing as well: practicing this and that technique, tinkering with one approach and another to see what happens. "What works" of course remains in the eye of the beholder. Even so, reputations can be much easier to uphold, when the "patient" is quite healthy indeed.

All of this takes place in economic environments containing plenty of elements (circuses?) to distract one's attention. Oftentimes, central bankers were able to bumble along fairly well, until the Great Recession. After all, "piddler" and "pro" alike tend to perform reasonably when there's no emergency. But more recently, the fallout has been substantial - hence a need for more relevant expertise has grown. Except even the idea of relevant is up for grabs, unfortunately. In too many instances, those who have been charged with a heavy responsibility, have simply not been up to the task.

The ongoing fallout from recession is deceiving, in that it signifies changes in economic growth which few wish to closely examine. Important as the task is, it can be disheartening at times because of what is implied. There's no way of getting around the fact that more needs to be done, than significant numbers are ready to take on. Even though the Fed could adopt a nominal target rule which would greatly simplify its own efforts, the potential efficacy of a rule has yet to be seriously considered. In the U.S. at least, other aspects of the economy have been insisted upon as equally or more important, by those in a position to act.

Aggregate spending capacity is a stronger point of reliance than some realize. Its use signals that a nation has evolved to a point where it can depend on far more than natural resource capacity or assets, in order to achieve and define prosperity. Aggregate spending capacity indicates that citizens are considered to be a vital and integrated part of a nation's wealth.

This is why I am saddened, when central banks are reluctant in the present to adopt a nominal targeting rule. To step back from nominal targeting, is to step back from progress. To focus solely on hard assets or other preexisting capital is a static version of wealth. Not only does such focus have little room for vision on the part of populations. It also means that people are ready to start worrying about dividing up what they already have - instead of living to create anew. That is the danger any nation faces, when it loses faith in it's own aggregate spending capacity. And it is clear to all, that the Fed gained its strong reputation in the world, when the U.S. made human capital a central component of what wealth might become.

While central banks may drift further from any willingness to consider nominal target rules, most developed nations would do so at further risk of losing monetary stability. There is nothing about inflation targeting that serves the purpose of monetary activity either in the short or long run. To be sure, there are numerous factors which influence economic stability, which are outside the purview of central banks. But if no one else is willing to coordinate and tend to vital structural factors, central banks could pay the price just the same.

In short, the Fed gained a strong reputation - to a large degree - because of the ascendance of human potential in the U.S. To be sure, natural resources played a role, but it was the initiative and drive of capitalism in a twentieth century U.S. which gave the Fed a natural advantage for its larger role. There has to remain a central place for human capacity in economic systems, if faith in aggregate spending capacity is to be restored. Even though monetary stability could be maintained with only a small portion of the public actively engaged in economic terms, that is simply not a way forward which inspires confidence on anyone's part.

Saturday, March 15, 2014

Back To The Future - Piketty Versus the Mystery Of Capital

How might we think of recent inequalities in developed nations, when a rising tide has not lifted all boats? For one thing, agreed upon frameworks for growth which could increase aggregate wealth, are all but missing in action. Limitations in knowledge use settings mostly serve to make further redistribution efforts ineffectual. Plus, what appears as inequality is oftentimes pooling of resources around existing access points for skills use - something no amount of money really addresses. Over time, those access points have become too limited in scope, hence no longer provide the usefulness they were once capable of.

This post  picks up from the last one, where I considered elements of the first chapter in "Capital" by Thomas Piketty. I can't help but contrast a book about capital just published, with "The Mystery of Capital" by Hernando de Soto. Perhaps de Soto's book was inspiring - in part - because it was written at the turn of the century, prior to the Great Recession. At that time, few nations questioned the ongoing potential of economic growth. That level of optimism spilled from Wall Street to Main Street, and it could still be found even in the rural backwaters of the U.S.

It wasn't so long ago that inequality was not uppermost in people's minds in the U.S. After all, until recently, a reasonable amount of economic access still existed for lower incomes. Granted, such access was not as significant as previous decades, but at the turn of the century one could still easily take on an affordable fifteen year mortgage for some properties - for instance - even with a near minimum wage income.

What concerns me most about discussions of inequality, is that they are not really intended to address these kinds of changed realities. Most individuals need to own something that they can manage themselves, even if it is not structurally permanent in the sense of traditional housing. Often, rental properties are not good housing otions for lower income levels and they generate additional security concerns as well. Incentives are skewed for low income landlords in terms of maintenance, and housing provisions on the part of government are even worse.

This is why I advocate flexible housing components for lower income levels which can be purchased and sold individually, and adjusted as needed whenever circumstances change. Rent should be that of property, which contains sturdy forms for flexible housing components to exist on. That way each "property" can be maintained when no renter is using a specific form. Local recycling can create new components through 3D printing, as old ones deteriorate.

There is nothing inherently wrong with the idea of greater equality, especially equality of opportunity. The problem now is that the context for discussion is somewhat misleading, in that it is taking place in an environment of diminished economic possibilities. Few agree, as to the kinds of economic activities which could replace recent patterns of consumption led growth. Indeed, there have been no real discussions for local visions including the public (in the U.S.), as far as I know. Unfortunately, those who are convinced that little further growth is possible, still want to continue the old growth patterns which have proven so unwieldy - albeit in a diminished capacity.

Perhaps a lack of agreement as to future growth potential, is partly responsible for the heavy focus on inflation targeting by central banks. After all, inflation targeting is an indiscriminate cap which does little more than stop economic activity in its tracks. That could have had some bearing on Bernanke's reaction in 2008, when he severely shorted nominal spending for just a brief moment in time, in response to rising oil prices. But that brief moment was enough to trigger more widespread wealth loss and social instability, than ever should have happened. Indeed, the fact that it did happen, created a downward shift in the growth trajectory which only has a recent counterpart in the Great Depression.

For instance, look closely at a graph in an earlier post from Marcus Nunes, which shows the nominal growth trajectory for 1870 forward. Consider that even though the recent drop and loss of nominal output was not as significant as the Great Depression, a continued faith in spending capacity nonetheless created a strong rise in the growth trajectory shortly after the Depression began. That rise didn't happen this time in the U.S., and it remains to be seen whether lost output will be regained. Whereas after the Great Depression, growth finally returned to trend after a decade. What happened to faith in economic growth? Why have governments not convened their citizens to address this together?

That earlier faith in economic capacity was on full display, when Hernando de Soto published "The Mystery of Capital". His was the hope and certainty that the 20th century had offered, in terms of progress. Of course one might reasonably ask, "Didn't you disparage houses just a little, in your last post, as wealth? After all, a big part of de Soto's work was about bringing people's homes into the formal economy". Yes, and context is everything here, because of what these informal economy homes represented, as opposed to the homes which Piketty counts as real capital now.

Just as de Soto made clear, aggregate growth is not possible, if people are not willing to acknowledge the efforts to thrive, which the downtrodden actively make on their own behalf. Such initiative holds just as true for broader knowledge use and simpler home construction models in the developed world, as it does for the recognition of informal home building efforts in the developing world.

In the present, knowledge use needs the same role that de Soto assigned to housing, in terms of allowing a significant portion of the population to engage in economic activity at more formal levels. Only consider the difference in housing capital in the construct which Piketty highlights. He argues for further redistribution from a portion of fixed capital which derives not so much from production potential, as it does pre existing consumption. Such redistribution also lowers growth potential in the aggregate.

Whereas, de Soto advocated for what would in effect also create a higher growth plateau than had previously existed. Newly recognized housing created not additional economic elements of growth, but more concentrated areas of economic activity as a result. Just as newly recognized housing wealth led to stronger growth trajectories, recognition of  informal and in Piketty's description "non tradable human capital", could instead create new, tradable human capital. Doing so could go a long way to restore the growth trajectory which was lost in the Great Recession.

The human drive to succeed was inherent in the mystery, which de Soto sought to capture. More than anything, he wanted human motivation to count for economic purpose in concrete ways. Those homes were a representation of the quest of those outside the formal economy to make their lives count. In the same way those owner built homes become a part of developing nation wealth, today's developed nations could extend  a helping hand to all who wish to use the materials they have invested in - their educations and skills sets. Who wants to get back to the future?

Problems With Piketty

Even as his latest book has just been published in the U.S. (March 10th), I already have problems with Piketty's portrayal of human capital as not truly representative of wealth - something which is probably no surprise to my readers. The paradox is all the greater, in that he emphasizes the spread of knowledge as being more important than free trade, for the evolution of populations. Why would someone who believes the spread of knowledge is more important than free trade, insist just the same that it is only the assets and product producing capacities of free trade that represent capital? Hmmm, more homes and factories, please - I suppose. Why even bother with GDP measures if they don't really count?

At a time when dialogue is needed to move forward the ideas of what wealth represents, I'm not convinced this book is going to provide the kind of discussion that can take nations into more positive directions. The only reason that knowledge use time increments cannot be counted as capital in the present, is that people are not free to use them at such, in the multiple economic contexts where they are sorely needed at all levels. How could nations with low amounts of savings for investment overcome the problems of extractive governments or firms, otherwise?

Clearly I'm going to have to purchase his book and read the whole thing, before I really know how to respond to his portrayal of wealth capacities at length. But respond I will, and to no small degree. Thankfully I was able to get the Economist link this time, in which Ryan Avent provides descriptions of the first chapter of Thomas Piketty's "Capital in the Twenty-First Century".

It is vitally important to get past dialogue which - if given the chance - is going to get bogged down in needless bickering over inequalities. So long as knowledge use is treated as a hidden form of wealth that can be appropriated such as minerals or valuable destinations, we're going to be stuck with the worst inequality of all. That is, a static pie of wealth that everyone continues to fight over, instead of the knowledge of the 20th century which everyone had fully expected to grow and flourish in the 21st. I will continue to look at a number of aspects regarding this problem in following posts.

Thursday, March 13, 2014

What Purpose Knowledge Use?

...That is, in contrast to the act of acquiring knowledge. Knowledge matters most, when it exists as recognizable means to multiple ends, both experiential and practical. However, those are the environments that people need to consciously create for one another when they do not exist. This is sort of a back to basics post for me. Thinking about resets (yesterday's post) made me a bit weary, but I'll get over it! So, I'll use this space as an opportunity of sorts to reintroduce myself.

Some readers may be curious: why all the focus on knowledge use, anyway? What's the big deal with that? Especially from someone who did not finish their college degree, and never had the time earlier on to fully apply the logic of knowledge in their work...I know, it shows. Sorry. Some of the dots I "connect" as a consequence are nothing short of unusual, to others. I've spent far too much time over the years, answering my own sets of questions and musings.

Knowledge of all kinds can be most helpful in one's life. Just the same, without the ability to contrast, compare and utilize knowledge with others; knowledge gain can sometimes turn into a consumption activity of limited benefit. When no means exists for knowledge share and exchange - economic or otherwise - it's easy to lose perspective as to one's intellectual identity. No matter how many books one reads, or classes one takes: if the topic is not being actively discussed in one's environment, individual logic (knowledge applicability) as to what one attempts to learn, still exists as though an unused muscle.

After all - if little about what we study is relevant at home, among friends and acquaintances, or in the workplace; what we learn may not have a chance to matter beyond our own energy and commitment. We think of this as a problem mostly in relatively undeveloped countries, but it still poses a problem in numerous areas of developed  countries as well. Only consider the simplest example of taking a class in a foreign language, which turns out to be a book, tests and lectures. Without discussion in the language itself, not much may be recalled afterward, beyond certain words and easy to remember phrases.

Much reading on my part was of a solitary nature, in that there wasn't always the chance to discuss those books with others. Of course, like some avid readers, I can find the pace of lectures somewhat slow in comparison to reading speed. And yet I tend to be slower than normal in discussion, for it takes extra time to craft a thoughtful response. That also slows me down in internet discussions. Still, I've enjoyed keeping up with commentary in recent years, because economics blogs with added dialogue can be like books come to life. Some classes over the years didn't even provide that experiential element. The input of multiple perspectives at the same time can make a difference, thus it's something that any digital education of the future needs to consider.

Knowledge use in action, frequently requires more logic - hence concentration - than reading a book. In recent years I've learned to think of logic as a muscle that everyone needs to be able to use. How could life be otherwise? And yet too much of the workplace sorted itself as though some individuals would not need to think at all, to get through life. Hopefully that can change. At the very least, logic can still be developed even as one gets older and gains a chance to put it to use. In a sense, active knowledge use is like an Olympic sport. For the real competition involves overcoming one's own limited perspectives, in the company of others.

Wednesday, March 12, 2014

"Dream On"

...and some dreams can seem a bit "glamorous" for a while, at least until they're not, yet again. A word of caution for any unprepared readers: this is a rather "detached" and tongue in cheek post.

There's been a subtle shift of late, which took me a while to put into perspective. It almost feels like a reset, where one senses some factions remaining in place or moving ahead, while other factions revert back to the starting gate. Hopefully the latest round of "beginners" have still got plenty of energy for the race. Aahhh, now I know what it is...that's the sound of recently deflated unemployment concepts getting swept under the rug. It must not take long, historically, for such concepts to lose their practicality. What is it with the idea that everyone needs to be economically engaged, anyway? Or that it matters one way or the other whether statistics get it right, or don't?

What was all that hoopla about unemployment? Especially given the fact that even the president hardly noticed. After all, the real drivers now are to enact policies that increase unemployment, and many people are in full agreement about them. Prisons have always got room for a couple more unemployed, I suppose. And that's good money for certain Republican investments...Or just allow the Democrats to claim the unemployed as "victims" of the system - what harm is there in that, minimum wage hikes or no?

And yet it seemed as though something significant might result from economic access concepts, hence lots of dialogue and lively imagination ensued in recent years. All were reminded how vital the concept of unemployment "really is" as a base for economic thought, for instance. And politicians could be quick to take up the "cause", if it might sell their actually important messages. A few are still picking up broken bits of unemployment concepts and examining them, to see if any remaining political benefit is left. But the shine is already off the recent "belle of the ball", plastic surgery or no. Now, the hour is well past midnight (recovery), unemployment has mostly gone back wherever it came from, and the main dialogue fest is over.

For a while, unemployment concepts became the recipients of substantial "makeovers". Once picked up and dusted off, they "cleaned up" quite nicely and caught quite a bit of attention. One might occasionally find them being wined and dined in some of the highest places and the "right spots". Indeed, economic access concepts in general received a significant breath of life, or "wind under their wings" if you will, so long as people agreed that substantial output gaps remained. Therefore, quite an audience congregated, to see what might come out of the shake up. Was a real economic housecleaning in order? Inquiring minds wanted to know, and the ensuing get togethers had far more than the "usual suspects" in attendance.

Of course all the extra energy gradually gave way, like a slow tire leak. At least the moral equivalents provided some leverage for other goals. Supposedly, we are long past the point when it should be necessary to feign outrage, or express real outrage for that matter, as to the suffering which created the initial drivers of emotion. Or, this is the point in time when we're all moving on, if we know "what's good" for us. And yet a few onlookers had naively expected that somebody, somewhere, somehow, would actually do something. Were they disappointed when nothing really changed, and normal life routines finally intervened?

The lead up, the social engagement, the attentive focus of a larger percentage of the population: all seemingly the elements that would mean a new level of focused efforts after the storm passed. But the waters returned to calm, and it didn't happen. Just as Keynes worried about economic storms finally "blowing over" and - sure enough - no one really being the better for it. Nothing changed this time either, and one can almost feel the sigh of relief from numerous VIPs, that it didn't. Why did anyone bother with unemployment concepts in the first place? Better just to have left them in the gutter.

"Dream on, dream until your dream come true."

Clarification is in order, as to the intent of this post. It wasn't written from a place of "hot anger", and neither was Bonnie Carr's recent reaction which she explains in a related post. Rather, I'm experiencing some consternation that a lot of time which should have led to productive action, fizzled out unexpectedly. At least, unexpectedly to me. Some cynics would say, "what did you expect?"

At the very least, I would have expected concerted efforts with the larger ramifications of unemployment, to continue. Because the reset seems to imply a cancellation of carefully thought through arguments as to what might be done in years ahead. Who is really up for another restart? After all it's just "grunt work" left now, right? Even as macroeconomists are washing their hands of the matter, microeconomists should be ready to accept the passed torch...oh wait, what microeconomist should have to sacrifice a far more lucrative career for that?? Is this going to be like the last time when everyone tired so much of the the mundane and boring matter of economic access, that a U.S president ended up imposing a New Deal? Let's hope not.