Wrap Up April '14

April - a month of warmer weather (here, at least), pleasant wildflowers and...unpleasant taxes, argh. One of the seemingly endless debates, is that of corporate tax rates in the U.S. as higher than much of the developed world. Given the free market rhetoric of the U.S. (compared to some nations) that statistic seems odd: how did it happen, anyway? Just the same, hope springs eternal. Thus, there are still proposals to change some aspects of the tax system.

Tax reform is a daunting political challenge, and the present circumstances which require heavy taxation seem as though "baked in the cake". It may be that the U.S. has to try different systems on small levels, to find what works better for those already on the losing end of redistribution. Of course, healthcare still plays a starring role, in the fiscal obligations of the U.S., which doesn't help. It's weird that even Walgreens considers a move to Switzerland, because they've been around since 1901 and are the largest drugstore chain in the country.

Too bad Washington didn't tend to hidden aspects of entrenched welfare for special interests, before corporations started getting such itchy feet. One can hand out goodies all day but when everyone else also gets goodies from the same government pile...Only consider the obligations of Medicaid which are paid directly to healthcare workers, even though this is part of the safety net. As Natalie Scholl of AEI indicated, (point 6) "Combined federal and state spending on Medicaid ($31 billion in 2012) is more than 5 times the amount on food stamps, and more than 25 times the spending on the federal cash welfare program."

Unfortunately, Obamacare does not change an existing knowledge use gridlock in the healthcare system, hence the whole mess should be broken down and begun anew. Since that isn't likely to happen soon, I simply recommend that lower to middle income levels be allowed to create marketplaces for themselves, with healthcare options as a centerpiece. Some regions would be glad to start fresh in this regard, especially if their existing healthcare comes up short compared to more prosperous regions. At the very least, some doctors are bypassing insurance payments and Medicare requirements altogether. Even so, this mostly provides more choices for middle to upper income levels.

A post from James Pethokoukis, "Thinking about government as a creator of platforms that allow citizens to solve their own problems", is also a reminder of potential for domestic summits. Would all that "big data" actually help at local levels? I still believe that much of what is needed for further growth, isn't being caught in any data, yet. Skills arbitrage could allow local "small data" to be encouraged and maintained. What's more, local activity would gain impetus from ideas in the cloud. These ideas - in turn - could be locally "adopted" by both educational entrepreneurs and the community as a whole. That would allow "free agents" in the cloud (no affiliation with existing institutions) to have real, geographic "homes" for their work. Through such a process, local communities could become natural "schools" for thought in numerous capacities.

Local knowledge use collections could benefit those in search of homes for their work, as well as the communities which gain further identity from the process of adoption. Local digital "libraries" would also include the skills based activities of local participants as they develop. Plenty of aspects regarding Internet "holdings" remain uncertain, and a geographic representative approach is one possibility for the preservation of knowledge and information. The above linked Pethokoukis post encouraged me to "think out loud" about some of these ideas. Let's substitute the word "problems" in his post title, with "aspirations", in regard to domestic summit proposals.

Apologies if my recent post regarding plenitude and scarcity, seemed unnecessarily pessimistic towards the end! I ended that post with the negative quote which "got my goat" in the first place. Those who emphasize plenitude, are right to stress where standards of living have dramatically improved from those of the past. It's just that there are so many ways plenitude can be more effectively managed, without having to constantly fill holes which developed primarily to catch the extra wealth.

Speaking of filling holes, some do need to be filled, but aren't getting any attention! There was a story in the news today of a 69 year old who - when the city didn't respond to weeks of calls regarding one pothole, got a shovel and proceeded to fill the hole, himself. Not only was he doing the work free of charge, but with a surgically repaired knee. That's inspiring.

P.S. I do feel that I owe Scott Sumner an apology, for the times I chided him about frequently referencing Paul Krugman. After all the ruckus over Piketty, and the fact he's already been mentioned plenty of times here, I can only say to Scott...now I get it!

Midweek Market Monetarist Links and Summaries - 4/30/14

Mark Sadowski ran some Granger causality tests to help out (heh)...(David Beckworth)
A New Monetary Policy Target: Per Capita Alcohol Consumption
Good example for maintaining (coordinating) velocity in the nick of time: http://macromarketmusings.blogspot.com/2014/04/observational-equivalence.html
Neo-Fisherism? Three strikes and...http://macromarketmusings.blogspot.com/2014/04/the-cure-for-neo-fisherism-history.html

"this debate is not about the Fisher relation. It's about what happens outside of the steady state." (Evan Soltas) http://esoltas.blogspot.com/2014/04/the-fishermen.html

"Retirement is weird, when you think about it." (Nick Rowe) Secular Stagnation and the End of Retirement
How does mobility matter in all of this? A question worth thinking about: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/04/meritocracy-mobility-and-optimal-taxation.html

How did the ECB target become the forecast? (Marcus Nunes)
http://thefaintofheart.wordpress.com/2014/04/23/when-medium-term-becomes-open-ended/
Presently we have stable growth, but not the earlier level path: http://thefaintofheart.wordpress.com/2014/04/24/markets-are-telling-where-ngdp-growth-is-heading-an-update/ 
Quite close to trend. How much luck was involved? http://thefaintofheart.wordpress.com/2014/04/25/sometimes-you-get-lucky-the-case-of-israel/
"Trust us." Populist parties. Hmmm...http://thefaintofheart.wordpress.com/2014/04/25/jurgen-stark-is-starkly-ignorant-about-monetary-policy/
Traders appear to be less optimistic as time goes by: http://thefaintofheart.wordpress.com/2014/04/26/how-to-make-a-great-stagnation-come-true/
What will Jeremy Stein's legacy be? http://thefaintofheart.wordpress.com/2014/04/28/using-interest-rates-to-get-in-all-the-cracks/

"The central bank can either adopt the rate of money growth consistent with the interest rate peg or they cannot maintain the interest rate peg". (Josh Hendrickson) https://everydayecon.wordpress.com/2014/04/28/on-pegging-the-interest-rate/

Good responses from David Glasner - it would have been frustrating to read Sargent's list, otherwise.
http://uneasymoney.com/2014/04/25/memo-to-tom-sargent-economics-is-more-than-just-common-sense/

Lars Christensen notes how close Israel has remained, to the original trend level: http://marketmonetarist.com/2014/04/24/how-stan-fischer-predicted-the-crisis-and-saved-israel-from-it/
Inflation targeting makes it more difficult for central banks to maintain floating exchange rates: http://marketmonetarist.com/2014/04/29/monetary-sovereignty-is-incompatible-with-inflation-targeting/

Scott Sumner's Econlog post, There's only one sensible way to measure economic inequality includes a follow up post at The Money Illusion, Capital income is taxed more heavily than wage income
Some tax theory cognitive illusions: Pandering to the public's ignorance
What happens when monetarist ideas are translated into Keynesian language? Noah Smith on the Neo-Fisherites
Some clarification is in order: If the Fed had a meeting, how would that affect inflation?
Among other things...it always helps to remember that the system is rigged! The case for 80% tax rates on the rich

Also, more Scott at Econlog:
http://econlog.econlib.org/archives/2014/04/a_pragmatic_vie.html
"The forces of both supply and demand explain real wages." Is it okay to reason from a (aggregate) wage change?

The UK had a productivity shock, starting in late 2007...(Britmouse) http://uneconomical.wordpress.com/2014/04/30/what-happens-if-we-screw-up-again/

"There is a big, giant wet blanket of a non-bubble." (Kevin Erdmann) http://idiosyncraticwhisk.blogspot.com/2014/04/a-very-basic-housing-post.html
The bad guy narrative is quite prevalent in financial contexts: http://idiosyncraticwhisk.blogspot.com/2014/04/the-peculiarities-of-mortgage-market.html
"I am considering being more bearish than Bill McBride on one factor, and that is the projected quantity of new home sales" (I agree) http://idiosyncraticwhisk.blogspot.com/2014/04/new-home-sales-and-prices.html

Also of interest:

The same mistake gets made over and over again (Deirdre McCloskey) Cafe Hayek, Quotations of the Day

"...is Piketty writing down a complete markets model or one in which there are incomplete markets for skill formation?" (Matthew Kahn) http://greeneconomics.blogspot.com/2014/04/human-capital-formation-and-capital.html

How Did Plenitude Overcome Scarcity?

Short answer: it hasn't actually accomplished this feat. At least, not in the broad sense of the term. Indeed, some "get" that scarcity is still real. After all, considerable poverty remains entrenched - even in places where it is least expected. Even so, some along the right of the political spectrum, imagine plenitude as endless digital options for consumers. Others envision plenitude as finance "magic" or fiscal "power", i.e. all it takes is for government to do the "right thing" and spread the wealth around. Even though fiscal activity is only one of many random elements, the plenitude it implies, can overwhelm the reality of economics as people based.

In the classroom of course, economics continues to be taught with scarcity as a basic tenet, to the dismay of those who are more than ready to implement the plenitude programs of their choice. While I'm not ready to jump on board with those plans, readers may suspect that I have a beef nonetheless, with the way mainstream economics approaches scarcity.

Why so? The scarcity of finite time has not been adequately considered, in the seeming plenitude of random resources. Even though the intersection of time and resource use provides an indicator of economic stability, this intriguing focal point has yet to be explored for the answers it might hold. Neither Keynesian or Austrian has real use for the consideration of economic time. A mistaken attribution of time as a side factor could explain this, especially given the ways in which labor became defined in the 20th century. It's easier to understand specific wages for instance, than how farmers, the self employed and entrepreneurs interact with their environments to generate additional spending flows.

The lack of consideration for finite time use in a context of random resources, also creates problems at the heart of tax and redistribution systems as noted in a recent post. In other words, the resource of our finite time, gets mixed in with everything from the minimal to the infinite - like so many scrambled eggs in a skillet. No wonder too many factors just aren't adding up.

By no means is this the first time that the idea of plenitude appears to be gaining ground. But acquiring wealth in the present does not hold the same meanings it once held, in material terms. Unfortunately, "extra" savings can be confused as economic security or even inappropriate behavior. Growing payouts to shareholders fit this category, and on first consideration, may make little sense. Let's think for a minute - in spite of J.W. Mason's ability to persuade in his New Inquiry article - about the fact that many companies are currently sitting on piles of cash. Sure it's easy to get indignant...how dare shareholders decrease productive activity on the part of a company! But would companies really be enthusiastic about this approach, if there were more reasonable ways to interact in the marketplace?

After all, most individuals would rather be doing something a lot more stimulating than money sitting, if and when there are ways to do so without undue risk. And if uncertainty holds back many undertakings, why isn't there more discussion how to change these circumstances? This is not the cozy and secure position that many might imagine. Ongoing economic flows are far more important than any "results" - which will remain in transition under any circumstance.

Just the same, Chris Dillow notes a growing belief that distribution of surplus is now the order of the day, and the quote he highlighted is worth repeating:

The central problem of economics is the distribution of the surplus, rather than the allocation of scarce resources.

Suffice to say, I don't agree. Before we know how far we can run, we need to know the starting line.

Taxation Can Fail in a Merit Based Equilibrium

Why might this be the case? Merit in the economic sense of knowledge based work, is not widely distributed enough for taxation to smooth (almost) empty valuation points. What's more, holders of knowledge use also do not have the ability to provide market density to the degree their salaries imply, unless they do so through association with product separate from time. However, overall equilibrium adjusts in valuation, as if those with exclusive knowledge use rights are able to provide full market density just the same.

This has bearing as to why redistribution ends up benefiting special interests, and further exacerbating inequalities. Too little balance exists, in terms of what vital forms of time use are now able to accomplish at aggregate levels. As a result, recent knowledge use investments remain caught in uncertain holding patterns. Unfortunately, the marketplace for knowledge use which should have evolved, is simply not there.

Given this scenario, further taxation cannot accomplish what is needed to repair economic inequalities and generate new growth. Calls for further taxation would mostly burden the existing consumer based scaffolding, which supports today's limited wealth formations. What's more, the scaffolding which supports a delicate merit equilibrium, represents consumer limits in several contexts. Indeed, housing faces lower valuations than rent, in part because it already carries an extra burden as a primary wealth designation (or supporting wall). While I have written about problems associated with merit, a recent post by Nick Rowe gives me a chance to put these thoughts into a more focused perspective.

Even prior to Nick's post, I had already planned a related response this morning, as to Piketty's assertion (page 244 of "Capital") that capital is always more unequally distributed than labor. In monetary terms, capital and related assets are nevertheless random supply side elements, in spite of the wealth they represent. To be sure, resources of all kinds contribute to sustainability. However, the capacity in which we are able to use our time effectively, is the finite and central component.

What matters is not where certain resources happen to exist or even what we may do with them in consumption terms, but the degree to which we can utilize our time to make resources matter in an overall capacity. However, when our time gets "cancelled out" by merit compensation which is far greater than our own, no amount of random resource compensation - or government redistribution - can make the difference at lower to middle income levels. Indeed, the attempt to do so within the confines of sticky markets, is like trying to fill a leaky bucket.

Merit "failures" (in compensation terms) mean losing more of our already finite time quantity. One could compare this to starting out with forty acres to farm (average workweek), only to end up utilizing one or two acres of land with something left for the marketplace. That leaves anyone with less "merit" or supposed intelligence, unable to contribute to the infrastructures and environments everyone relies upon. When everyone waits in line for the person or institution which dispenses the "appropriate" knowledge, too much of vital importance cannot happen at all. This is why high valuations inadvertently become time theft, especially given the fact monetary systems depend on aggregate time use to maintain equilibrium settings.

However, if our income is insufficient for expected consumption patterns, one way to compensate is by working and living in an arbitraged time use equilibrium. Coordination of resources with time use can not only smooth time value variations, but consumption preferences as well. Of course this is a long term solution, which requires focused learning and coordination patterns. However, comprehensive remedies are needed, because merit compensation distorts aggregate economic equilibrium so thoroughly, that taxation to remedy the differences in time use valuation, doesn't get at the underlying problems of aggregate time use.

These distortions would not pose such problems for societies if more participants were actually compensated for merit and knowledge use in relative terms. Instead, knowledge which applies for given situations, is too frequently applied for circumstance which deserve more thought and time than is generally provided. Even so, some income smoothing in aggregate remains possible for those who have relatively high valuations in merit based terms. Therefore, these groups might still gain compensation from the redistribution which is a result of taxation systems.

But as it presently stands, the higher valuations of the few, continues to subtract time use value for many into negative territory. Even the lower valuations of the many would be far more manageable in redistribution terms, if the sticky market equilibrium of upper incomes had not being imposed on all populations, regardless of merit valuations or compensation. As it is, sticky markets accurately reflect the consumption capacity of the upper levels, and expect the lower levels to adjust.

Increasingly, the missing component of the marketplace has been parked (by the Fed) in the interest on reserves. This policy decision was enacted, in lieu of maintaining the former growth trajectory which had been in place for well over a century. These reserves have their purpose in maintaining the delicate valuations which high merit created: I get that. What I don't get is that anyone imagines this to be a long term solution. The fact these severe structural problems have yet to be addressed, is why I have such problems with rationale for further taxation. It is also why I try to do an end run around present day taxation for lower income levels, in that redistribution for this group is massively inefficient for all concerned.

Fortunately, merit based time use problems can be approached head on, through time coordination and arbitrage for services of all kinds - including those of the highest nature. After all, many an individual needs to seek lifesaving measures in the course of a lifetime, even though few are presently authorized to provide them. What's more, local education for full services provisioning, would prevent intelligence from becoming even further fragmented among populations than it already is.

Part of why production has been so successful in recent centuries, is the fact that resources have been utilized as interchangeable components as needed. This allowed populations to adapt whenever some resources became limited, and it allowed society to accomplish more with less - time and again. If we gain the capacity to arbitrage our time use as an interchangeable component within social systems, the progress which seems to have fallen away, would have a chance to continue. It is primarily because of the limitations of merit, that no one imagined skills sets as a master key which could unlock the door of a brighter destiny.

Desk Notes with no Reasonable Title Whatsoever

...but not for lack of trying. Nothing worked. Hence, some thoughts in this post are even more "work in progress" than usual, and I've got to clear a growing pile of notes somehow! First, equal time use for services production and consumption is not for everyone - nor need it be. Anyone who accesses the lifestyle they desire from present day consumption options, can (hopefully) maintain those systems in thriving economic centers. After all, these centers include the best part of today's capital, and the best part of employment which our institution defined capital makes possible.

Creation of coordinated time use marketplaces need not detract from "alpha" markets, which gain higher valuations (particularly in real estate) from globalization. In some respects, there is also capacity for integration between alpha and beta markets - especially over time. This would especially be true as beta markets learn to "grow" their potential for wealth creation. Plus alpha markets would not be where "all the fun is". After all, NIMBY anything likes to settle down with "farmer" characteristics, in spite of the movement of international monetary flows. Beta markets can represent hunter gatherer flexibility and instincts. That would provide more stability overall, than may appear at first glance.

And why not "settle down" if one's chosen field allows a way to do so? Upper middle incomes allow services access without need of conscious coordination, on one's part. Access to international monetary flows (where they exist) allows exclusive and complete focus, in terms of skills and knowledge use. Indeed, this is one of the more positive attributes of an earlier capitalism, which gradually sorted divisions of labor at all levels of society. For centuries, many individuals remained in work which did not consist of specific incomes or designated wages.

Thus, endogenous wage adjustment also meant it took a long time for services inflation to enter the picture. No one had to closely consider how monetary flows took place between production and services, until designated wages became a larger component of the entire mix of economic activity. In general, how much inflation actually occurred - for instance - before people moved to the cities to find the work which paid wages? According to Thomas Piketty, not very much.

So long as plenty of options existed in agriculture and then manufacturing, those who sought knowledge use and service related options instead, were practically guaranteed economic entry - on what has turned out to be twentieth century terms. But even though the "bloom is off the rose", the rosebush is still viable...right? For instance, consider that Thomas Piketty has a more positive take on capitalism, than Karl Marx. There's good reason: a limited equilibrium is still in effect, for knowledge workers in the present exclusive designation.

However, if Piketty imagines declining growth over time, chances are he does not envision more space for aspiring knowledge workers. Might some measure of guilt exist (re closed doors), behind new calls for greater income equality? Unfortunately, potential flows from existing wealth are not as automatic, as Piketty imagines in "Capital". Among other things, discussion of income inequality serves to circumvent public discussion from the greater loss which has occurred: dashed hopes of participation in the economy, on the knowledge based terms which the 20th century seemed to promise.

Those "once upon a time" flows which used to neatly designate labor, aren't reliable. What's more, this earlier equilibrium has been shifting since it reached its heights in the seventies. Only look at Piketty's graphs of national wealth and ponder...what the hell really took the place of agriculture?? Out here in the real world, some of the "working" capital which Piketty hopes is productively producing away, is instead gathering dust in storage units across the U.S. (now there's some valuable rent!) In some instances a bonfire might be more efficient...Meanwhile, valuable educational investments of recent decades remain cut off, with no marketplace to represent them. How can the rate of return on any capital remain significant, if the capital which matters most is not recognized and set free?

While more repetitious and exhausting forms of labor divisions have been replaced by technology, some of the more challenging and knowledge based forms of labor divisions remain. Even as they decline in quantity, the competition for what remains, has intensified. What might still be replaced by technology? So long as knowledge use depends on production remains of the day, possibly as much as 90 percent. Anyone who invested in their skills as though they represented real capital, is uneasy about these prospects.

With the "bad news" now out of the way, it's a good time to acknowledge that all of my suggestions are somewhat of a letdown, in any short term sense. Why? It would take a lot of time to get started, and learn to do things differently. Indeed, optimizing gains from time use coordination could take decades, in order to generate comparable wealth such as populations are used to. And in many respects, those newer forms of wealth would feel and look quite different. Even so, starting points (beta communities) would offer simple clarification as to growth and production potential.

Part of the good news, is the fact that time use coordination on equal terms would alleviate services related inflation. While much of this would affect local settings, lessening demand on primary areas would greatly assist their services systems. It also helps to remember that lower to middle income groups have little access to international monetary flows. That is a primary reason time coordination is needed, so that a different services equilibrium can be generated.  Measurements of productivity gains all around, would become easier to determine than they presently are. How so?

Equal time access would allow well defined knowledge and services tracking, in local aggregates. By pooling knowledge use in measurable ways at local levels, all services activity can be recorded as it progresses through time. That would allow each community to form ongoing records of the ways in which their services evolve, which would also create unique footprints for knowledge use and services in general. The fact that this occurs within aggregated sets of time options, illustrates the gains. Whereas institutional gains for knowledge use have an ebb and flow which is not as readily measurable as a whole - let alone accessible or cumulative over time.

Another positive aspect of this scenario, is that time use would once again become the central component for economic activity. In other words, knowledge based communities would become active illustrations of time centered economic activity, rather than finance centered. How so? Citizens would be able to make their time use primary, through inclusive and ongoing adaptability. For example, resource use would be secondary in the sense that when any resource creates negative supply shocks, time centered methods would seek resource use options which alleviate pressure on time use. Whereas finance and all of its best buddies, prefer to treat given resource settings as though handed down on a tablet from above.

For instance, versatile building components of all kinds would be associated with community goals of leaving time use as free as possible: in terms of unnecessary expense, maintenance and silly complexities. That means more time left for both leisure and desirable forms of work, which one could then choose over difficult maintenance or "dull work" which accomplishes little more than paying rent or mortgage. Or - let's use technology where it frees our time for the work that counts - at all levels of scale. I like to think of these kinds of life options as hunter gatherer ownership, where people elect to hunt and gather the "harvests" they collectively agree upon in small groups. Knowledge use especially needs the basic monetary anchor of time, in order to flourish.

Another aspect: equal time use in services would make it possible for a nominal monetary target to achieve full employment in multiple areas. That would put a stop to the gradually rising natural rate of unemployment. And when citizens share what was once government sponsored services work, governments don't have to worry so, about fiscal constraints and operating budgets. With a nominal level target for monetary policy, it would come down to higher income levels maintaining the asset inflation they can "live with", in the globalized environments of primary cities.

How to sum up this admittedly wishful thinking, in growth level terms? First, this new marketplace could become a substantial part of what was never "filled in", re the massive hole that was the Great Recession. What's more, adding in these missing hours represents a one time bump in growth, in terms of societal economic participation.

In other words that would be the point or plateau, from which a longer term growth level target could ultimately be determined. The degree to which different groups interact with resource use in innovative ways, would determine future growth patterns. When innovation is placed into groupings which maximize multiple resource use options, production and innovations can once again be dispersed through entire populations. That alone, would promote a higher growth trajectory than might otherwise be possible.

Midweek Market Monetarist Links and Summaries - 4/23/14

All parts of the U.S. are affected by the same monetary shocks (Scott Sumner):
Aggregate demand and regional demand shocks
Unfortunately, success came at Sweden's expense: Swedish central bankers and Korean ferryboat captains
Disentangling financial crisis from monetary crisis: Reply to Delong smackdown
"...macro is not a zero sum game; all countries can simultaneously increase employment and output."
Let's all be Germans

Econlog posts from Scott:
An interesting contrast, between Scott's views and those of Larry Summers:
http://econlog.econlib.org/archives/2014/04/larry_summers_s.html
Industrial production looks good, however...
http://econlog.econlib.org/archives/2014/04/bad_news_indust.html
Some highlights from a George Soros interview:
http://econlog.econlib.org/archives/2014/04/quantum_finance.html
Even if the EMH is only approximately true, it is useful:
http://econlog.econlib.org/archives/2014/04/why_the_emh_is.html
Is German labor market policy success an "inconvenient truth"?http://econlog.econlib.org/archives/2014/04/german_success.html

Even though the S&P didn't drop, it flatlined...(Lars Christensen)
http://marketmonetarist.com/2014/04/17/the-cuban-missile-crisis-never-happened-or-at-least-the-stock-markets-didnt-care/
Lars presents a paper by Clark Johnson
http://marketmonetarist.com/2014/04/19/conventional-thinking-at-the-brink-by-clark-johnson/
Free banking discussions are back on the agenda:
http://marketmonetarist.com/2014/04/20/conference-free-banking-systems-diversity-in-financial-and-economic-growth/
Some highlights re Milton Friedman
http://marketmonetarist.com/2014/04/21/mark-perry-on-the-collected-works-of-milton-friedman-project/

The Fed never intended to fully offset the collapse in AD (David Beckworth)
http://macromarketmusings.blogspot.com/2014/04/this-one-figure-shows-why-fed-policy.html
"...Bernanke saw the crisis as a financial intermediation crisis where Friedman would have viewed it as a medium of exchange crisis." http://macromarketmusings.blogspot.com/2014/04/bernanke-vs-friedman-financial.html

Today's "moderation" is not like the other (Marcus Nunes) http://thefaintofheart.wordpress.com/2014/04/16/there-is-scientology-and-theres-also-great-stagnationism/
Why can't a stronger economy assist today's long term unemployed? http://thefaintofheart.wordpress.com/2014/04/18/the-easter-bunny-once-again-will-not-be-visiting-the-long-term-unemployed/
A response to Lar's Cuban missile crisis post: http://thefaintofheart.wordpress.com/2014/04/18/words-beat-weapons/
Banks fail after the monetary fact..http://thefaintofheart.wordpress.com/2014/04/22/the-anatomy-of-a-monetary-collapse/

Kevin Erdmann takes a closer look at minimum wage issues:
http://idiosyncraticwhisk.blogspot.com/2014/04/minimum-wage-hikes-hurt-job-keepers.html

Ravi Varghese offers highlights from a book by Bernard Connolly:
http://insecurityanalyst.blogspot.com/2014/04/the-rotten-heart-of-europe.html

What can I say...David Glasner, feisty as always!
http://uneasymoney.com/2014/04/18/ok-tell-me-please-tell-me-why-bitcoins-arent-a-bubble/

Also of interest:

I like Tyler Cowen's article title: "Why a Global Tax on Wealth Won't End Inequality"

The "burning issue of complimentary toy distribution", indeed! (Ryan Long)
What are we teaching our youth?

Domestic Summits and the Tiebout Example

Why put these concepts into the same post title? Basically, because of what they both suggest as to living options, in terms of services and lifestyle in general. When Charles Tiebout introduced his model in the fifties, his theorizing of population sorting as naturally occurring, made a lot of sense - for U.S. populations in particular. Hence, no political solution was needed for free rider problems and local governance. In that spirit, I suggest that no political "solutions" are needed, in order for domestic summits and their follow up workshops to occur.

What's more, Tiebout's portrayal of limited moving costs was fairly accurate for those times. However, service definitions were quite different in the mid twentieth century U.S., which somewhat limits the effectiveness of his example today. Moving from one place to another has become quite risky, as well. This is why some individuals need to look deeply into living options before making the leap, as one was once able to do. How could all of this be considered, in a context of domestic summit discussions?

I like that Tiebout presented population sorting as a naturally occurring phenomenon. For some income levels, this example works as well as before. Still - as my readers already know...yep, it doesn't work quite as well for the lower to middle classes, as it does for everyone else. In my last post I spoke of the need for infrastructure planning, but I didn't designate services separately into public or private context. There's a reason for that, because the lines would be blurred in any economy which utilizes knowledge use more inclusively and effectively than the present. In order to thrive, services need to move well beyond their late twentieth century definition, into a more coordinated and inclusive context.

One of the positive aspects of domestic summits, is that they have the capacity to be non political ways in which society might move forward. After all, they would not be imposing blanket solutions on the country as a whole. Indeed, what they would be capable of, is exploratory economic scenarios. What's more, they could provide momentum at local levels which can be measured and gauged. When something does not work, not only would it be replaced with other options, but the fact that it did not work well for local citizens could be openly discussed in non political terms. What's more "discarded" options could still be utilized at later points in time, or tried elsewhere. The point is not to rule things out, arbitrarily or unnecessarily, with needless legislation which is often just a hidden way to protect special interests.

How would free rider problems be avoided? One reason they can be such a problem in the first place, is that many local citizens have few means to translate their skills sets into viable monetary options. A sufficient marketplace for those choice sets does not yet exist. People need services and assistance. Yet they have not been able to offer their own skills capacities in return, unless they are actually needed by the public or private employee options currently in place. By translating skills sets into a more direct marketplace between individuals, new forms of economic - hence monetary activity - become possible.

One of the most important aspects of domestic summits, is that they would not be asking either for fiscal solutions or ongoing subsidies. Instead, what has previously been designated as public or private activities, would be taken on at individual levels. Individual time management would be utilized in the same capacity (equal use of time) to tend to activities which governments have struggled to provide for their lesser endowed citizens. Two matched hours "collapse" into a single hour of newly measured wealth. This can put our time use back into the heart of economic activity, where it belongs. In effect, by creating services product at the matched hour, these coordinated, matched and measured activities would be monetized in a direct sense.

Still, that raises another important issue. This represents directly created economic time use, which needs to be recognized as such. There is a remaining problem in this regard, in that the Fed has not yet adopted nominal level targeting as a rule. In other words, the Fed has not purposefully acknowledged the value of hourly time and aggregate spending capacity in its own models.

However, the Fed would have much to gain, by recognizing the new marketplace that domestic summits have the capacity to generate. It would become possible to place solutions directly into the hands of the public, where it is simply not possible for political parties to do so. These potential communities could also show the Fed, how central our time is, to economic processes as a whole. The dialogue of domestic summits could also show the importance of expectations, for economic outcomes.

All of this is a somewhat different scenario than total "exit" or splitting off, which I do not feel is helpful or constructive for any nation. At this point, how much difference really exists between our national leaders? What these newly energized communities could do is provide hope for people, if not political parties, which remain hopelessly caught in their own defensive positions. Rather than insisting on solutions at national or state levels, informal solution sets can be tried at local levels on a "game board" where the regulatory clutter has been cleared away, to see what can work in its stead. As Michael Munger aptly stated,

Poverty is what happens when groups of people fail to cooperate, or are prevented from finding ways to cooperate.

Therefore, local explorations and economic examples would provide incentive for our presently sticky marketplace, in terms of how it might rationally proceed. That is, instead of depending on consumer feedback, they would be more reliant on citizen suggestions as to how the marketplace might be redefined. In the aggregate, this would be far more effective for private industry than ties to Washington, because new product formations would come into existence which previously had not been possible.

These exploratory communities could show governments what presently works, yet still keep the capacity for flexibility if it appears some options don't "work". Just because something works right now, does not necessarily mean infrastructure laws or regulations are needed! Resource use changes, and so does life in general. Liberty is not just about freedom, it is about recognizing the fact that we need to be free to adapt to resource availability at all times - in terms of both skills use and commodity options. In the same way that a nominal target makes time use a central economic component, the energized  community would also make time use the focal point from which other resource options can be more readily understood.

The fact that these undertakings could be carried out with flexible and lightweight building components, would allow material risks to be held by the entire groups which undertake these economic projects. Rather than the risky component of exit alone, these summits and their follow up workshops, would provide far better options of exit and voice.

Why do we need these kinds of choice sets in the first place? We are moving into economic environments which increasingly feel wishful, yet passive aggressive at the same time. Some want to move money around more, so as to "increase" equality. And some imagine that technology will sort it all out with little help from the public, while others just throw up their hands and become resigned to bad endings. It does not have to be any of this. Economies can still be purposeful and innovative, especially given that the underlying resource base still exists to make it so. Let's make the best of the options we have.

P.S. Follow up workshops (for domestic summits) would allow like minded individuals with similar consumption patterns to organize and look into coordinated services creation, before making relocation decisions.

Midweek Market Monetarist Links and Summaries - 4/16/14

Too many students in the last 30 years have been encouraged to "ignore money" (Marcus Nunes)  http://thefaintofheart.wordpress.com/2014/04/09/smile-youve-been-secularly-stagnated/
A formal inflation target has not succeeded in coordinating expectations: http://thefaintofheart.wordpress.com/2014/04/09/the-target-has-become-a-barrier/
One recession is not like the other...http://thefaintofheart.wordpress.com/2014/04/10/on-breaking-bones/
"The United States economy had an unemployment rate of 4.5 percent..." (Benjamin Cole) http://thefaintofheart.wordpress.com/2014/04/11/i-had-a-dream/
Like Mark Sadowski, I prefer a more holistic and gentler approach: Re-breaking bones is the opposite of what should be done
Time to break out the bubbly, already? http://thefaintofheart.wordpress.com/2014/04/11/jason-furman-head-of-the-cea-also-falls-into-the-only-growth-matters-trap-forgetting-the-importance-of-the-level-path/
The trend charts are most helpful: http://thefaintofheart.wordpress.com/2014/04/12/technique-without-history/ 
If the job is really done...maybe Gavin Davies can retire! http://thefaintofheart.wordpress.com/2014/04/15/missing-the-forest-for-the-trees/
Until mid 2010 they were following in Australia's footprints: http://thefaintofheart.wordpress.com/2014/04/15/svensson-is-disgusted-with-the-riksbank/

Even the press is starting to highlight this (Scott Sumner): 20% of Americans are in the top 2%
What might a third option have been? Paul Krugman on monetary policy options
Labor income as a share of NGDP did better in Germany, than in the U.S. - The British Jobs Recovery
Marcus Nunes responds to Scott - Germany remained close to the nominal trend line: http://thefaintofheart.wordpress.com/2014/04/14/there-was-no-breakdown-in-the-musical-chairs-model/
Abenomics is a reminder that growth is still possible even in a declining population: Doing more with less

Some Econlog posts from Scott:
The focus should be on "jobs, jobs, jobs", not compensation for labor: http://econlog.econlib.org/archives/2014/04/germanys_myster.html
"The highest-paid 2 percent of doctors received almost one-fourth of Medicare payments: Inequality Among Doctors

"More generally, the problem is interest rate smoothing." (Bill Woolsey) - Interest Rate Targeting and Financial Instability

Why are the long term unemployed being stigmatized? (Bonnie Carr)
http://dajeeps.wordpress.com/2014/04/13/contributing-to-the-debate-about-the-long-term-unemployed-and-taking-a-walk-on-the-wild-side/

There's a world of opportunity under all that bias...(Ravi Varghese)
http://insecurityanalyst.blogspot.com/2014/04/you-can-profit-from-other-peoples-bias.html

Why have wealth effects become smaller? (James Pethokoukis)
The Fed, NGDP targeting, and the incredible shrinking wealth effect
Questions for Scott Sumner and John Makin: How to think about inflation and deflation

"What is it with you townies?" (Nick Rowe) http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/04/on-forgetting-land-in-models-of-secular-stagnation.html

Even Soltas notes that interest payments are set to grow faster in the next decade, than either mandatory or discretionary spending: http://esoltas.blogspot.com/2014/04/interest-to-deficit-to-debt.html 

Also of (Piketty) interest:

A post by Karl Smith back in February, which some of my readers may find a useful point of reference now: Piketty and the case for land capital  I only got through this FT paywall once, and I really miss reading Karl Smith, since he went to Alphaville.

Diane Coyle also provides a link to the lecture notes which Karl Smith used:
http://www.enlightenmenteconomics.com/blog/?p=3677

Speaking of reference points, Brad Delong breaks down the four r's.
http://equitablegrowth.org/2014/04/12/notes-finger-exercises-thomas-pikettys-capital-twenty-first-century-honest-broker-week-april-12-2014/

Piketty isn't measuring physical volumes, which presents a problem...(James K. Galbraith)
http://www.dissentmagazine.org/article/kapital-for-the-twenty-first-century

How Fragile are Our Governments?

Since beginning this project eleven years earlier, I have especially been focused on macroeconomic concerns. What's more, the Great Recession made monetary policy a primary part of public debate, where it has remained. And - in spite of the recovery - macroeconomic issues surrounding the onset of the recession, are far from being resolved. Just the same, there are days when an ongoing emphasis on the bigger picture, presents a problem for this blogger.

Numerous times, I have started posts with the intention of detailing more specific local options, only to end up - once again - writing about the broader version of the issues involved! Let alone the fact that these are also the posts which are most interesting to my readers.

Just the same, there are times when I need to delve further into frameworks which suggest ideas for better resource coordination, locally. These frameworks already need to be a part of active and ongoing discussion - hence widely understood - if and whenever larger systems falter. And a couple of posts this morning, made me wonder a bit more than usual, about impending fragility on the part of national government. The fact remains: when governments stumble, people need to figure out better means of social and economic coordination in a hurry. This is one of those moments when the micro and macro definitions people rely on, need to intersect through better application in the marketplace.

Today's most telling example of something gone wrong, comes from the Washington Post. Seriously, did Social Security and the IRS really have to resort to making the younger generations responsible, for decades old debts of their elders? It seems unthinkable that they resorted to this, yet amazing that this odd situation has only now come to light. I used to think it was crazy - how many second hand items had to be sold, before hospital thrift store volunteers could pay for some needed technology for the local hospital. How many low income people have to be bilked for old unpaid Social Security bills, just to pay for one Washington event? Optimization FAIL.

One of the things that was once touted as a major achievement for civilization, was the fact that people were no longer held responsible for debts or deeds of family members. Indeed, I remember well my sense of relief at a young age, that humanity had progressed to that degree. Fast forward to the recent present, and a circumstance which feels oddly related to the above link. Several individuals at Social Security couldn't seem to get the facts quite right, when my mother died last year.

In recent months they have taken further cuts from Dad's Social Security, and upset him needlessly by claiming the problems were his fault - when they were the ones making the mistakes! Until recently, the issue of stopping payments upon someone's death, was readily being tended to through the banks which deposited Social Security checks. Hence, no one at the bank could not understand why they were putting Dad through the ringer, unnecessarily. He's hard of hearing anyway, and has trouble making out conversation on the phone.

Did a Social Security employee decide to bypass the normal bank procedure for reasons I'd rather not have to think about? Were employees at Social Security taking advantage of the fact that elderly customers can't possibly know, if the procedure isn't done properly? It's little things like this that are really making people leery of government... minor aggravations which nonetheless add up over time. And the fact that it took five months to deal with a straightforward and simple matter, made me uneasy. Writ large, what is really going on? I was surprised, to see the Washington Post story also highlighted on the evening news.

Is Social Security the tip of the iceberg? Let's consider another chunk of that iceberg for a moment, which is the 73,954 pages of the tax code for 2013. Growth in this behemoth has slowed in the last couple of years - thank goodness for small favors. The other link which prompted today's post was a question which Timothy Taylor asked: Is the IRS Unraveling? Over time, already complicated tasks on the part of the IRS are becoming even more complex and difficult to carry out at the speed of the modern economy.

Part of what is so difficult is that we are fighting our post recessionary economic battles on two major fronts at the same time - macro and micro. Worse, so is the Fed - which makes little sense. That is, until we remember that there is no other organized dialogue to coordinate micro and supply side issues into what are still major macroeconomic concerns. This is why I have suggested domestic summits, to fill missing gaps for coordinated supply side efforts.

To be sure, a lot of voices need to be heard and considered, before a new consensus emerges for continued prosperity. Just as there are aspects of macroeconomics which look to what can be, microeconomic considerations can be future oriented as well. And both are needed, when governments falter.

Midweek Market Monetarist Links and Summaries - 4/9/14

I'm glad that when Lars Christensen was cleaning up his old computer, he came across this list:
http://marketmonetarist.com/2014/04/04/10-fallacies-of-the-great-recession/
A clearly written and telling example:
http://marketmonetarist.com/2014/04/07/currency-union-and-asymmetrical-supply-shocks-the-case-of-finland/

"Management" could mean lots of things but not necessarily helpful (Nick Rowe):  http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/04/what-is-a-managed-exchange-rate.html
The present punchbowl isn't much of a party: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/04/temporary-vs-permanent-money-multipliers.html 
The "weird" assumption: currency and deposits as complements, rather than substitutes
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/04/deflationary-banks.html

It's always good to remember that advocacy for a nominal target is not new (Marcus Nunes):
The Eurozone already has a high risk of deflation: http://thefaintofheart.wordpress.com/2014/04/03/no-one-ever-agrees-with-the-imf-even-when-it-asks-a-countryarea-to-do-more-stimulus/
Inflation seems to be going extinct:
http://thefaintofheart.wordpress.com/2014/04/04/there-was-nothing-solid-about-the-employment-report-its-the-same-old-same/
Still using the wrong tool: http://thefaintofheart.wordpress.com/2014/04/05/it-or-ngdplt/
And yet likely a size that few will "wear": http://thefaintofheart.wordpress.com/2014/04/05/the-new-one-size-fits-all-4/
Marcus responds to a recent NYT article by Tyler Cowen:  http://thefaintofheart.wordpress.com/2014/04/07/why-are-so-many-people-out-of-work-indeed/
...as if there weren't enough re the economy, to worry about already!
http://thefaintofheart.wordpress.com/2014/04/08/asymmetric-effects-of-us-growth/

Scott Sumner also highlights a recent post from Marcus Nunes, in  Let's Play 1960s-era Fed
Unfortunately, Obama thinks monetary policy is credit policy: Fed hawk who helped implement Obama's tight money policy announces resignation
Nominal wages are the correct measure of inflation for monetary policy purposes: The March jobs report
Scott clarifies some misconceptions in a Joe Gagnon post: Joe Gagnon on what the Fed got wrong
Why wasn't it good enough for Obamacare to eliminate voluntary uninsuredness?

Michael Darda makes his case (David Beckworth)
http://macromarketmusings.blogspot.com/2014/04/financial-stability-converns-are.html

James Pethokoukis isn't thrilled with the "new normal" - The March Jobs Report: Is The Great Recession Finally Over?

Non-mortgage debt is insignificant compared to mortgage debt (Kevin Erdmann)
http://idiosyncraticwhisk.blogspot.com/2014/04/economic-growth-was-not-fueled-by.html

JP Koning takes a look at the Rowe/Glasner debate: http://jpkoning.blogspot.com/2014/04/rowe-v-glasner-round-33.html

It's a war between professional traders (David Glasner):
http://uneasymoney.com/2014/04/08/the-real-problem-with-high-frequency-trading/

Also of interest:

Josh Hendrickson reviews Piketty:
http://everydayecon.wordpress.com/2014/04/07/what-is-fair/

Long term unemployment was at 45% during the depths of the recession (Tim Harford)
http://timharford.com/2014/04/why-long-term-unemployment-matters/

"If people advocate intervention, it's to strengthen markets, not replace them." (Jonathan Finegold)
The Capitalist Mentality

Mark Thoma explains deflation: http://www.cbsnews.com/news/explainer-why-is-deflation-so-harmful/

A Nominal Targeting Rule Provides a Starting Line

...that is, for a more positive take as to what economies are still capable of. Regular readers know that I back the use of a nominal level targeting rule by central banks, for optimal monetary stability. For all practical purposes, this is where a lot of monetary discussion should be taking place. Even so, it's not quite clear, whether market monetarists are getting closer to this goal. In a recent Econlog post titled "What We Are Up Against", Scott Sumner noted that political realities led to a lot more "if only" comments through the course of the Great Recession, than to actual constructive changes.

As a result, sometimes the need for a clear starting line, remains far from obvious. Just the same, maintaining economic activity to a reasonable constant in nominal terms, continues to be one of the most important activities that any central bank can provide for the public. This would be the case even if only for the most obvious reason: i.e. the majority of economic damage occurs when policy makers decide to veer away from the general level of aggregate spending. That in turn affects both contractual obligations and overall patterns of resource use, which both rely on consistency over time.

But there is considerable rationale for the nominal target besides what is immediately obvious, and further rationale suggests places to apply more strategic perspectives. No one can forget that expectations represent public confidence, or that the public needs to take active part in the growth that is possible. This is why expectations for long term growth potential have a strong exterior, or exogenous component. Thus, expectations for the future also exist beyond the money that central bankers manage at any given moment. As David Beckworth suggested in a recent post, the endogenous activities of the central bank represent a present and ongoing fulfillment, of a broader set of societal expectation.

In the meantime, central banks could be reluctant to count the aggregate time potential of nominal income as central, because financial interests do not see it that way. One of the odd aspects of credit is that as a concept it seems to say to the borrower in aggregate: "I don't trust you. Yes, you may have something inherent in your makeup that says you are good for a loan now but that could change at any time." Hmm. If credit were a central component of the economy, this would be like the fruit tree saying to the (would be) harvester, "Die, fool, because tomorrow you will not have the strength to reach my branches."  If we can't trust human potential...what exactly can we trust?? Do robots need loans? Unfortunately, the fact that few agree on who the "race" even belongs to right now, makes it difficult to commit to the best starting line.

And yet, stray too far one way or the other from a level target of economic growth, and public perceptions regarding future possibilities are readily affected. Just as extended deflation over time impacts how individuals respond to time commitments and resource use, too much inflation over time can create a disconnect between price levels and the level of commitment which participants actually need for their investments and life strategies.

For instance, the inflation of the seventies allowed more individuals to fully participate in the economy in a certain sense, but it did so in ways which put the "practical frugality" lessons of the Great Depression, too much in the rear view mirror. More specifically, I was fortunate enough to learn frugality from one parent who experienced the Great Depression directly - indeed I even refused to borrow money for college education. However, I "forgot" my lessons for a couple of years in the seventies. A combination of steady work "certainty", easy money and easy credit provided plenty of consumer temptation. Even though I utilized credit again for a while afterward, it was with a different perspective.

Since then I have learned to think of credit availability as a fickle temptress (I'm not kidding, at all) which does not deserve a central role in anyone's life - let alone a central role for nations in prosperity based terms. Credit and anything finance based in general are especially to be avoided if possible, for anyone who relies on a small income. This is part of why I appreciate the practical nudge aspect of nominal targeting for the consumer, and also why I constantly promote specific means of incremental ownership creation.

The pragmatic thought process behind nominal targeting serves as a reminder that one's life is best built upon incrementally, gradually and carefully - not just in big jumps forward (and backward) as changing credit availability would define us. Credit use forces us to make bets with our lives which many cannot always remain certain about - especially as we get older. Even as people are admonished not to use credit extensively for everyday purchases, too much about primary life investments has become defined on credit based terms. How to be rational in the one respect, if it's impossible to remain rational in the other? The worst part about the present day finance realm, is that it sees all wealth and human potential through it's own crooked and myopic lens. The recent increased focus of inflation targeting is little more than a hangover, of the idea that the best is already behind us as a society.

Even positive outlooks can be tinged with unnecessary negatives in this regard. For instance, Brad Delong in a recent NYT article looked at the possibilities for five areas of work in the near future, and I want to expound a bit further on his "positive" take:

The optimistic view is that our collective ingenuity will create so many things for people to do that are so attractive to the rich, that they will pay through the nose for them and so recreate a middle class society. 

Think about this for a moment. When we had the kind of middle class which typically comes to mind for boomers, that earlier middle class was spread out across the better part of the U.S. In other words, for a long time it was not vitally important to live close to primary economic centers. And yet it is life near those primary centers, where middle class life continues to migrate towards a newly defined upper middle class existence. It is the lack of the previous middle ground, which many municipalities now need to be planning for. They are the ones asked to get more out of less with taxation, as desirable and needed services still seek migration to places more amply able to reward them.

Herein lies the problem, in expecting the future to consist of serving up tempting entrees for the rich. The rich are not always in the communities where people are actually able to live! Even as many areas would like to rely on the partnerships between government and finance for their futures, it is not as easy to do so, as before. In my next post, I will look at some possible ways that local economies might be able to break free of the government and finance dependent cycles. Those dependency cycles benefit neither the citizens or the governments, which expect those still engaged to run ever faster, just to stay in place.

For one thing, vital services and knowledge based aspects of work life, do not have to be compromised to the degree Brad Delong implied in the above linked article. To be sure, some will continue to provide services for the rich on exclusive terms that suggest "the high life". However, others could seek out a more rational context, where lower income levels become capable of providing services for one another. Doing so is not as impossible as it may seem. Reciprocity need not be strictly about paper shuffling, and innovation need not be strictly about fun gadgets for all. There are ways to return to these positive attributes - once again - more effectively and meaningfully.

Between Here and Full Employment

What would it take to generate full employment...really? This is murky territory, even with the best of indicators and monetary conditions. Were the Fed to adopt a nominal targeting rule tomorrow, unemployment would be less of an issue, than it is now. Still, there would be plenty of remaining concerns. Among those are numerous supply side issues which have contributed to sticky wages and contracts, let alone a sticky marketplace in general. Therefore, much depends on what one means by full employment, and what populations expect of employment outcomes.

Often, unemployment is spoken of as if it were easy to quantify. If only it were that simple! The fact that it's not so...perhaps why lingering questions don't really get answered. But this translates into awkward and ongoing realities. How can people be responsible for their inevitable roles as consumers, if they have no participation? What's more, participation happens in what essentially are both producer or "harvester" roles. In this sense, the economy is no different than earlier points in time, when survival meant having access to any good which could be gathered or otherwise processed for use.

In more personal terms, unemployment can leave people unable to either reach out to others or continue planning for their futures. Even though a similar process is a bit inevitable for boomers who lose their work roles before retirement , unemployment should not be happening to the younger generations. They are of an age when work is a tremendous part of one's life. These folk are far too young, to be feeling failure, so keenly. This kind of failure is not as easy to overcome, as many of life's setbacks.

This is one reason I took an "economic access" perspective, which can also remain in play once an economically defined natural unemployment rate has been reached. That is to say, "full employment" could be reached in economic terms and yet I would still have ample reason to continue this project. Another way to think about it: how can any society achieve better economic integration? With this vantage point, it becomes easier to consider what appears as inequalities and related lifestyle illusions at the same time. Let alone the fact that excessive quantification, means inequality is presently winning the battle for attention in public dialogue. Unfortunately that only leads to more confusion, and fewer solutions.

There seems to be a growing struggle between government and other representatives of the marketplace, as to which should lead the way out of stagnation. Here lies the real danger of an ongoing lack of supply side efforts for positive structural reforms. I continue to prod them, because I have a bad feeling what might happen in their stead, if they do not make real efforts on their own for economic growth. If representatives of the marketplace do not step up to the plate in the months ahead to make positive changes, there's a real chance that government will try to further define the marketplace, for those who actually take part in it. That also means fiscal measures could still win out over monetary measures, in spite of the efforts of market monetarists such as myself to show the greater effectiveness of monetary policy.

Some aspects of present day unemployment are different from in the past, and many who are confronted with unemployment have found themselves in this predicament through no fault of their own. History is replete with examples of populations coping with economic exclusion, such as wandering "hordes" and mass emigration. Sure, a few brave individuals will still go out into the wilds to tend to needs of food and shelter. But if people pull a stunt like this - particularly if they include children in the great experiment - they are quickly brought back to civilization, when found. And yet they may have had an easier time in the woods. Why should it remain more difficult to provide food and shelter for one's family in civilization, than it is in the wilds?

It's hard to admit that we haven't yet figured out, how to create full economic participation. But more blaming all around, definitely isn't going to help us now. Thus, the task remains: how to expect people to act human and responsible, when they may not necessarily have realistic ways to do so? How do we account for the fact that it is no one's job, to tend to full economic participation? As long as this question is not adequately answered, people will still resort to prisons for those that no one can figure out "what else to do with". What's more, statistics tell an important part of the story, but not the whole story.

Even the realities can feel different from the statistics, depending on where one lives. For instance, consider the averages of lifetime expectancy. There's something I never expected to see at this point in my life: many a baby boomer has already let go of the struggle to survive. Newspaper obits (let alone the evening news) tell the story how harsh these realities can be - especially for those in their fifties. Who stops to consider, how many don't get close to the median age we expect people to live? There's little question that meaningful work in one's life, plays into life expectancy. Statistics get really irritating for instance when a commercial airs with a self assured baby boomer proclaiming "I expect to live a long time", thus blah blah. Oh yeah, how do you know?

A couple of years ago, I was foolish enough to engage in a little online teasing with another commenter. I say foolish, because teasing doesn't come naturally for me! As a result, one of the other commenters let me know that I was not only a rabble rouser - I was a dangerous rabble rouser as well. I had to back up, apologize to him and explain that my perspective in terms of ideas, was from a place of unemployment. He too backed up with an apology and then basically said, not to worry - just leave this important matter to the experts.

If only I could! The experts remain split along ideological and political lines, which also means continuing confusion at the Fed. Sometimes I have to remind myself to just remain remain peaceful and focused. Because the message still comes through loud and clear that I'm not "supposed" to be "helping" - i.e. nothing about my life offers the responsible kind of position or authority that is required to do so. But ultimately we all have to help ourselves in order to survive - we can't really expect others to do that in our stead. There is just too much fear involved, when I consider what could still happen to others such as myself, who have already been told their efforts are not needed. This also impels me to continue in my own work.

Unemployment is only a part of what any central banker is expected to consider. And yet oddly enough, the primary conversation around unemployment continues to exist in the macroeconomic realm which of necessity only assigns it a partial priority. Why has no other segment of society surfaced to take on a vital responsibility, which never should have belonged solely to macroeconomists or central bankers? After all, if such efforts had previously been in place, I would never have needed to raise the kinds of questions and issues which on some days simply bother everyone.

Recently, David Beckworth wondered how many "Fed watcher" bloggers would still be at it, if the Fed had not taken on what has become an ad hoc agenda. Several commenters assured him there was still plenty to write about! In the meantime, the fact that nominal targeting is wrought with political issues, just makes it all the more difficult for the Fed to contribute the monetary stability which would at least indicate the level of employment presently possible. The fact that the Fed is not doing its part now, as David Beckworth indicated, "does not bode well for future economic crisis." This is why the average layperson also needs to contribute to the ongoing debates (and likely will be needed indefintely), as Bonnie Carr noted in a recent post.

Advocacy can be difficult at times, because we live in a world which is not readily amenable to compromise. I can see where market monetarism ties into other important aspects of life, plus there appears to be any number of applied circumstance in which market monetarism could prove its value. Hopefully in the years ahead, I will remain able to provide my contributions and thoughts.

Midweek Market Monetarist Links and Summaries - 4/2/14

The latest round in a friendly feud (David Glasner):
http://uneasymoney.com/2014/03/27/the-uselessness-of-the-money-multiplier-as-brilliantly-elucidated-by-nick-rowe/ (Also here)
Nick Rowe's response to David Glasner:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/03/there-can-be-an-excess-supply-of-commercial-bank-money.html
Scott Sumner follows up (at his "home" site): The real problem with the money multiplier
Poor Nick..."alone" again! http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/03/two-first-year-multipliers-their-truth-beauty-and-usefulness.html
At Econlog, Scott reassures Nick that he's not completely alone...
One multiplier to rule them all! (apologies to Nick Rowe)
Another Econlog followup: http://econlog.econlib.org/archives/2014/04/marshalls_sciss.html

Something about the model is hard to pin down (Nick Rowe)
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/03/liquidity-pile-ups-on-the-wicksellian-roundabout.html

Scott Sumner and David Beckworth on BoomBust, March 27
https://www.youtube.com/watch?v=kWC1h8jNo8U
David has two posts which provide further detail for his segment:
http://macromarketmusings.blogspot.com/2014/03/ad-hoc-monetary-policy.html
http://macromarketmusings.blogspot.com/2014/03/market-monetarism-and-endogenous-money.html
How to think about the last FOMC meeting? David contrasts some opinions and offers his own: http://macromarketmusings.blogspot.com/2014/03/should-we-be-worried.html

Lars Christensen continues his forecasting series:
http://marketmonetarist.com/2014/03/27/a-framework-for-applied-macroeconomic-forecasting-part-2/

At least some nominal targeting has occurred (Scott Sumner)
Could we have had a severe recession without the 2008 financial crisis?
There's plenty of contradiction: What do the VSP think about the current economy?
"Even though MM is winning we aren't given credit. But that's always the way things work. What matters is that ideas get adopted." Academics are rapidly catching up to market monetarists

Econlog posts from Scott Sumner this week:
http://econlog.econlib.org/archives/2014/03/central_banks_d.html
http://econlog.econlib.org/archives/2014/03/fracking_boom_w.html

Marcus Nunes: http://thefaintofheart.wordpress.com/2014/03/27/57-months-into-the-recovery-and-the-economy-is-still-depressed-why/
Charles Evans has the causality reversed: http://thefaintofheart.wordpress.com/2014/03/28/ho-ho-ho/
Among other things, a price level target is not the same thing as a nominal target:  http://thefaintofheart.wordpress.com/2014/03/29/more-debate-with-mian-and-sufis-house-of-debt/
Too bad the public isn't more aware of these graphs. Maybe then her remarks would not be taken so seriously: http://thefaintofheart.wordpress.com/2014/03/30/esther-george-needs-a-new-lens-prescription/
Catherine Johnson explains What Jeremy Stein Really Meant
Can Abe and Kuroda "keep the flame burning"? http://thefaintofheart.wordpress.com/2014/03/31/will-the-increase-in-the-consumption-tax-derail-abenomics/ 
The Fed is still "navigating without instruments" http://thefaintofheart.wordpress.com/2014/04/01/what-does-extraordinary-commitment-mean/

Ryan Avent wants to know, What's wrong with the Fed?

Heh. (James Pethokoukis) Is the US economy unable to grow as fast as it used to? If so, maybe this is why

Also of interest:

From the Tax Policy Center: You Could Owe Capital Gains When You Spend Bitcoin

Noteworthy also, when lower incomes eventually coalesce for economic design in domestic summits:
http://blogs.wsj.com/economics/2014/03/28/home-builders-bidding-up-best-lots-ignoring-outskirts/?mod=WSJBlog

I'd like to see this particular participation in graphs:
http://www.economicthought.net/blog/?p=5928

What We Mass Produce (or Don't), Matters

Why so? Look around at what frequently generates profits locally, and it becomes apparent that mass production in the developed world has become marginalized. After all: if the factories are elsewhere, "who needs" the goods of mass production...right? To be sure, some institutions still utilize mass production as needed for profits and sustainability (dollar stores, anyone?), but many mass production consumer options have not remained open across multiple product categories. The fact that society opts out of mass production prematurely when it is still frequently needed for lower income levels, is an important productivity issue.

Indeed, the primary wealth equilibrium between services and real estate valuations, scarcely utilizes the benefits of mass production to any real extent. It's easy to forget that mass production potential is still a driver of societal progress. In the U.S. for instance, mass production is mostly thought of in terms of various digital components, food production or basic commodities. These product areas comprise a mere fraction of developed nation monthly expenses. Think of the potential gains still lying on the sidewalk, for producers and consumers alike.

Certainly, many people no longer carry product diversity into their homes on a 20th century scale, which is partly why any manufacturing renaissance can only go so far. But why limit the idea of mass production potential to what goes on inside homes and living/working environments? Much is at stake in terms of exterior definitions - let alone the fact people get bored and enjoy rearranging environments on a regular basis. Flexible and interchangeable components would allow lower income levels to imitate upper income levels in terms of custom design, only for a much more reasonable cost.

Even so, this new marketplace would not replace traditional housing or the kinds of employment which are associated with it. After all, those who would still opt for traditional housing (and its associated finance) are also the ones with disposable income to hire for traditional maintenance and construction. Much of the marketplace for mass production and greater innovation would be geared towards those with less disposable income. That's not to say that mass production methods would not also prove useful for commercial options and areas where traditional building options are not always possible.

Some communities no longer have the additional wealth, that is necessary to maintain outdated rules and regulations. Many of those outdated rules keep building codes unnecessarily complicated and innovation resistant. Unfortunately, some communities ended up reaching for success signals, when they could have thrived on more innovative and practical terms. The fact that people don't really have clear choices in this regard, continues to limit potential value for the inexpensive education models of the near future. Why so?

Before inexpensive education models can gain practical value for knowledge use services, people have to be free to use services more efficiently and locally. Unfortunately, moving beyond credentialed education, means moving beyond the extra compensation which the "right" credentials create. Before people can benefit from greater knowledge use, they need to establish the environments which also allow them to thrive on less income. All of this could become part of a lower income equilibrium which utilizes knowledge in coordinated systems.

Lots of potential good deflation in local economies has already been lost. But most individuals aren't used to thinking how rent seeking limits product definitions and adds unnecessary complexities. Why don't we recognize it as such? For one thing, what occurs in both residential structures and knowledge use in this regard is not all bad, in that regulations also provide multiple forms of quality control. No one wants a dangerous hodgepodge of a flimsy house next door, or a dangerous surgery for that matter.

However there are better ways of organizing these processes, which can involve entire communities and provide more accessible means for individual responsibility. This is not about government interventions, but about ways for people to coordinate knowledge use and skill so that everyone's time can contribute to local services outcomes. Not only is production reform possible in regulations for local construction, but also the ways in which healthcare outcomes of all kinds can be managed by local teams in ongoing educational efforts. Again, when I suggest deregulation and production reform, it is not so that people can just throw up any contraption to live in - or put up with any kind of quackery that pretends to offer knowledge use solutions for that matter.

Rather, people can refuse to let quality control put extreme limits on how they choose to live. Presently there are so many forms of quality control, that both entrepreneurs and consumers are running out of economic options in multiple areas. One of the first ways out of this economic quagmire, is to allow nationwide contests for flexible building components of all kinds. They can be created to standards which recognize needed practicality and durability for low income, yet also be desirable enough for any income level. The prime issue is to bring incremental ownership back into the picture. By doing so, more knowledge use can also be brought to the table in economic terms, providing new hope for lower income levels and the long term unemployed as well. Too many people have not had work, because they couldn't afford to live where work could be readily found or created.

 Living on incremental ownership terms does not have to be about conceding defeat. Not at all.  Not only would incremental ownership options give individuals better ways to start out their adult lives, it would also give older individuals a chance to start fresh when the need arises. Let alone the fact that incremental ownership would allow millions to avoid needless financial quagmires and the moral judgments that come with inevitable failures. In some instances, incremental ownership would assist individuals in rising to levels of success they might not otherwise achieve. The ability to buy, sell and divide individual building components would allow millions to avoid bankruptcies and related legal problems. This could be particularly meaningful, in a time when success seems to be all or nothing. It doesn't have to be that way.

In short, mass production is a given or a base that society can allow for all of its members when they need it. One thing to remember in all this, is the degree to which so many aspire to more than the base. Even though we can't create a livable base in monetary terms, we can always create a base for basic survival in innovation based terms. Think of what society collectively achieves, calls "mundane" and then - as is human nature - immediately aspires to more. What is not as widely recognized, is that much of the "more" gets defined in terms which don't work out for the whole. There will always be those who aspire to the "more" that is traditional housing, and no builder would need to worry that those with disposable income would abandon the luxuries and the extras. It's just pointless to force those things on individuals who don't have the means for them.

Mass production could have provided excellent options for living shelter a long time ago, and many local economies created needless struggles for themselves by not acknowledging this reality. And yet many communities which elect to allow innovation, would find that their own citizens often want more than a base means of survival. Even those of the least income will add to basic elements, if there is adequate means to do so. It's better to allow a simple base level of survival, than to force arbitrary points which people are "supposed" to achieve.

After all, most everyone will gladly move up the ladder of innovation and prosperity without force, when they are able to do so. Just don't assume everyone can move forward all the time, and don't force them to do so through hurtful regulations. Already we know full well what mass production is actually capable of, if we allow it once again to perform its magic.