the intentional marketplace: July 2014

Thursday, July 31, 2014

Wrap Up for July '14

Finally, a month in which I was able to return to more regular posting - with a little luck I can continue! Figures for second quarter 2014 growth appear more positive than expected, but like other market monetarists I will take these with a grain of salt and wait for the revisions. In some respects, the figures seem less about real growth and more about adjustments in the process.

A series of interesting maps in the WSJ, illustrate how healthcare - as a dominant sector - has surpassed manufacturing in many states and of course, retail in the interim. In particular, the retail story was a significant factor for many baby boomers such as myself. http://blogs.wsj.com/economics/2014/07/30/maps-health-care-social-assistance-top-industries-in-most-states/?mod=marketbeat
The map from the Bureau of Labor Statistics shows how this change actually plays out: http://www.bls.gov/opub/ted/2014/ted_20140728.htm

Even though his "tight" viewpoint regarding monetary policy is unfortunate, David Merkel of The Aleph Blog has posts which can be quite helpful. A recent post about the limitations of disability and social security is certainly on target. Such discussions serve as a reminder that new services systems need to be organized sooner, rather than later. Eventually, coordinated service strategies could partially replace local services which function poorly (or sometimes not at all) due to funding difficulties.

While David Merkel bemoaned the fact that social security and disability had not been "properly" dealt with decades earlier, I continue to hope of course there is still ample time to do so. Better coordination of skills sets - in some instances - could become a direct replacement for a sizable portion of today's taxation systems. As Tim Harford noted, taxation has become like Martian algebra and seemingly impossible to decipher. Simpler systems are definitely needed, but getting there also involves a certain degree of complexity in putting something together which works well.

The more time one spends online, the more thought goes into how to approach ongoing dialogue. For instance, if I'm going to complain about someone...context matters! How general - or specific - is my "gripe"? Have I listened to what are sometimes "opposing" arguments at length, or not? Having said that, one reason I perhaps "get away" with complaining about Thomas Piketty: he's working within an ideological spectrum which often stands in contrast to my own. Thus, arguments "against" his can be somewhat general in nature at times. Indeed, counterarguments have played out in an intellectually diverse and varied fashion, since Piketty's recent book was published in the U.S.

Whereas if I have something to say about someone less ideologically driven, I'm not as likely to know whether they even oppose something I could accidentally assume. Hence it's best for me to pay attention to more of what they say or write, in order to find out. Heh, maybe that's why many of us follow Tyler Cowen fairly closely - we're trying to figure out what he really thinks! Sometime it's just easier when someone is nuanced, to mostly highlight their thoughts in a positive context. That way, it's not necessary to challenge someone in a way that could be construed as needless!

Wednesday, July 30, 2014

We Are Our Own Safety Net

Where does the line between a services economy - and a safety net - begin and end? These divisions aren't easy to determine, particularly since many of the same services are still utilized along the entire income spectrum. As a result, political attempts to cut off the "undeserving" (whether defined by left or right) are often incapable of reaching their targeted audience. Ultimately these circumstance come down to all of us, regarding what is possible to maintain in services spectrum, and what is not.

If we want "exclusive" results as the primary defined product, then the nature of our product tends to (impartially) exclude more of us over time. These decision making processes regarding service product definition, need to be addressed. In many instances, services need to become directly compensated wealth, through the equal time use of skills arbitrage. Indeed, much about societal interpretation of total factor productivity is on the line.

Tradable goods have brought such wealth to the world, that it's easy to forget how specialization serves completely differently ends in services (for both providers and recipients), than in traditional production. Because this is not yet taken into consideration, time use has been increasingly segmented into concentrated high end use and low end use, wherever time use is even deemed "necessary" at all for productive purposes. If services can continue to prosper in the developed world, the different paths and means of specialization that services require, need to be recognized and honored.

Traditional manufacture and its related production gain can still support present day service formations, to some degree. However, the Great Recession - in some respects - represented a tipping point. For real growth to remain possible in developed economies, vital service formations need to be rebuilt so as to contribute to progress under their own steam. This is particularly important, for the time use coordination which would still allow knowledge use to thrive well into the future.

Indeed, tradable goods still provide the primary lens through which the "real" economy is envisioned, and for understandable reasons. Don Boudreaux provides a quote from "The Rational Optimist" (one of the best "feel good" economic books to date), and it focuses on tradable goods:

Trade, says Johan Norbert, is like a machine that turns potatoes into computers, or anything into anything. Who would not want to have such a machine at their disposal?

Boudreaux continues:

If you doubt or otherwise do not see the truth of this claim, just look around and ask yourself, "How much of what I see around me - my computer, my cell phone, my shirts, my jeans, the automobile parked in the driveway...did I make myself? How much of what I see around me could I possibly make myself?"...Your answer to each question (if you are not intellectually blind) "None of it."

Certainly, Boudreaux has a point. Just the same, we can be misled about our ongoing ability to specialize in the production of goods separate from our time. That in turn leaves us in doubt about the ultimate trajectory of our time use. When it comes to the product which consists of our time use on service based terms, "None of it" no longer applies. Indeed, our focus and attitude can often be the main takeaway on the part of the customer or the citizen, depending on the environment of our time use.

Why is it so hard to think of today's services - in all their complexity and variety, as an actual component of progress and overcoming scarcity? While we capture "special" time use fragments (fought over knowledge components) as capable of replication for production, the aggregate time use continuum - in and of itself - is understandably viewed as a detractor to production gains.

Economic access still appears as though a "taker" of productivity, because local group optimization methods in services have yet to be tried. Instead, services have depended on either political good will or fortunate residuals. In other words, we "mine" the knowledge which is quite evident on top of the ground - not what is hidden beneath the earth. Hence, aggregate time use as production gain is difficult to fathom. But without it, no reliable safety net is possible.

Consider an ordinary definition of productivity which makes sense: GDP divided by total employment. We gained economic - hence at least a partial degree of social freedom, by applying this process to product separate from time, in which we generated wealth by utilizing fewer hands for specific ends. In services, the goal would be to preserve economic (hence social) freedom by engaging time use toward individually agreed upon ends. Otherwise, services tend to regress into distinctly "unfree" realities and limited markets. Equal (coordinated) time use turns the unknown realm of services residuals and transfer processes, into a known and measurable quantity for knowledge use and real growth.

These different types of specialization need to work in sequence with one another. The primary difference is that a labor residual still applies to generate product separate from time, whereas equal time use coordination generates direct wealth and economic freedom, in the latter. A close application of these separate processes would make it possible to measure production gains for the long run.

Midweek Market Monetarist Links and Summaries - 7/30/14

Tuesday, July 29, 2014

Basic Incomes and Time Use Value

Sadly, this blogger isn't good at math. That's a shame and one I would rectify if I were a few decades younger. After all, math visuals would be a tremendous aid for explaining the point I make repeatedly, about the importance of equality in time use value in aggregate terms. For the life of me I can't figure out how to explain what's in my head so that my patient readers can easily understand, but I will continue to try as long as I am able. After all, the handwriting on the wall is all too evident, when it comes to the wishful thinking of basic income concepts and the simplicity they seek in complex realities.

Thankfully, a basic or otherwise guaranteed income would at least be capable of buying tradable goods, so long as the world remains capable of avoiding depression (in which case tradable goods would decline). Someone who is dependent on others for living circumstance could still "have a life" in marginal consumer terms. But basic income - hopeful though it may be as a political "solution" - is just not equipped for local and/or non tradable sectors of the present.

In many instances, local service sectors - alongside the asset formations they require - have distorted true monetary capacity at fundamental levels. Non tradable goods and many of their environments have become brier patches of obfuscation, extreme variance in time use value, and a tendency to constantly exclude more and more of what does not fit in the reigning equilibrium. The compensated variance in time values alone, is like a factory no longer capable of operating at full capacity, because too many factory components are single purpose rather than multiple function.
.
To achieve economic simplicity, time use value equalization is far more important, than the monetary "equalization" which basic income would promise with an income for all comers. Not only would equal time use value make a true services marketplace possible, it would do so on sustainable terms. However: in order to reach economic balance for time use aggregates, no more limitations in either healing or educational options would be possible, in regions which already suffer from limited economic access. Otherwise, low income populations would eventually learn to avoid the existing services marketplace. What's more, aggregate life expectancy would eventually suffer, as more citizens rely solely on self medication to avoid cost uncertainties.

At the very least, implementation of basic incomes would quickly highlight the primary issue of extreme supply side limitations. Lest anyone think basic income isn't really a possibility, many on the political left and right would likely agree to it in some form, once government budgets face greater difficulties catering to special interests. What's more, the limited marketplace devised by those special interests would still be in place. Even though many might consider basic income a "best" outcome in such a scenario, it is a total non solution, in the sense that human potential is still not being tapped for the solutions it holds. What's more, this scenario only continues the low growth trajectory which was initiated after the Great Recession.

Government redistribution for services is - and has been - complicated. However, reducing complications for low income consumers by scrapping welfare programs alongside basic income limits, does not reduce remaining supply side problems at all. Hidden costs still remain in terms of the taxation and redistribution services require, at local, state and national levels. Indeed many of those costs would remain, even if the present day services marketplace exists solely for the rich. In other words, we certainly need consumption simplicity at the consumer end. But the only way to get there without destroying the marketplace, is by generating real simplicity at the supply side end.

For instance, consider the population levels with unpaid debt which has gone to collections. The main problem in this regard is not stagnant wages or inflation, but the nature of service structures in the marketplace. Not only do these structures place undue demands on all aspects of budget capacity, but they limit marketplace formation as well. Institutions related to health and education in particular, have shaped multiple asset structures and hidden redistribution channels. These have considerable bearing on the ability of lower income levels to remain responsible in a money related capacity.

In Timothy Taylor's recent post about universal basic income - for instance - the poverty level of $18,000 for a family of three was mentioned, and he considered what could be a base income of $6,000 per individual. In some respects - particularly for the kinds of tradable goods that international markets remain adept at providing, this amount of money would indeed go a long way for ordinary ongoing expenses. The thorny issues arise when basic income capacity is aligned with non tradable services needs or local living requirements. Indeed, this is when human capital in aggregate, is desperately needed as a tradable good.

Let's look at a few aspects of that $6,000 income with ordinary services needs. In some states (Texas for one) $2,000 a year is an ordinary obligation for local property taxes. That's already one third of the basic income allotment suggested by Taylor, and no one need have a child in school to face that obligation. Also, think of the costs of many "garden variety" surgeries, and realize $18,000 seems as though "getting off easy". But in Taylor's example, that is a year's income for a family of three!

Giving everyone a basic income is little more than wishful thinking, in that it just doesn't solve for the problems which are most evident. Identity, economic access, the ability to reciprocate with others - all these elements are still missing. Any time society considers major changes to existing services structures, human capital and human aspiration need to be a real part of the equation.

Monday, July 28, 2014

Let's Ditch Education Reform for Production Reform

Who is tired of education reforms...raise your hand! Something about this quote from Andrew Ferguson resonated with me, although (heh) he would likely be aghast at the solutions I propose:

For nearly 40 years, it's pretty much been all reform, all the time for the nation's public school students, teachers and parents.

No question, Ferguson's quote is an exaggeration. Just the same: over the course of the forty years he references, it's been difficult to tell where one "reform" begins and another ends. Instead of a thriving, exciting marketplace of ideas which hold potential for knowledge and resource use, education comes in neat packages tied up with glittery bows and hard won assertions.

Many of those packages are no longer able to deliver on the earlier "glory days" as they were once understood. Even so, educators aren't the only ones at fault, for a discipline which desperately needs to be integrated with the fabric of our daily lives. What do we want education to accomplish, anyway?

More answers needed please, for scarcely any time has been spent deciphering what that question is really about. Everyone keeps trying harder and harder to force the square pegs of education expectations into the round holes of reality, with diminishing returns. If nothing else, consider what local, individualized education used to be about - becoming more skilled at tending to resource use in one's own environment, where it often still counts the most.

Primitive though earlier local concepts may "appear" in a modern world, they nonetheless have become relevant again, as 20th century patterns refuse to replicate themselves in the 21st century. Knowledge use, environments and the human condition suffer the consequences, when vast swathes of information are deemed worthless or inapplicable for daily options. What's more, there is little to gain from threatened regional divisions, when the hollowed out structures of centralization are the remains of the day.

Sure, there are core aspects of today's education which are important for every student, especially in the sense of basic skills. But we are still utilizing a system with massive overhead which is no longer needed to do the job in aggregate. Not only is that structure excessively demanding on property tax systems, many of the educational options that any student of life might desire the most, tend to get lost in the mix. Worse, much of what could help students to navigate life's ongoing concerns is not part of the curriculum, either.

But most importantly, today's education is not structured so that individuals can generate fluid concepts of production and innovation at rudimentary levels. That is, the student is still expected to gear one's efforts toward the imaginary will of an unknown employer with the predefined product. While this can be helpful in the right circumstance, it does nothing for the times when the ability to make sense of and adapt one's environment for productive ends, matters the most.

Entrepreneurs are celebrated for the adaptations and improvements they are able to bring about in our lives. But the reality is that too little remains, which is not already expressively defined as though etched in stone. This leaves many a student ill prepared to utilize resources which are actually within reach, when they are not called to take on the work of others. It's time for production reform.

Sunday, July 27, 2014

Libertarianism: Consequentialist, Deontological or Something Else?

Certainly there are wide variations and interpretations in libertarian thought. Just the same, a recent post at Bleeding Heart Libertarians (HT Ryan Long) brought my attention to an argument I scarcely could have imagined on the part of a libertarian: proposed licensing of parenting!

While I don't think of my libertarian tendencies as anarchic, perhaps a free form services marketplace appears that way - oddly enough. Particularly in terms of coordinated provisions which don't need to be taxed in order to be inclusive, if and when time use is equally approached. And yet some among the discussion at BHL, were effectively arguing for limits to a human activity which is more basic than economic access. How much more distrustful of fellow humanity do any of us need to become?

Would it not be a better approach, to allow people more complete rights to their humanity? Okay, enough rant! First I want to consider the Wikipedia definitions, but I also want to touch on economic rights which have yet to be provided: rights which could help both in economic and social terms.

Consequentialist libertarianism and what is also referred to as natural rights libertarianism don't seem as clear cut to me, as they are delineated in the Wikipedia examples. From the consequentialist link:

...refers to the libertarian position that is supportive of a free market and strong private property rights only on the grounds that they bring about favorable consequences, such as prosperity and efficiency.

Efficiency? Hmm. Part of the problem in this regard is that both physical and social elements of environment have been compromised - in terms of the experiential element which adds so much to both product and environment definition. While "favorable consequences" are certainly a consideration, the framing here can be awkward when it is left too wide - particularly in terms of national "rule making" one size fits all patterns, rather than local paths for economic and social activity. The more centralized the outlook, the more that rules over discretion tend to be sought. Indeed, parental licensing feels like that kind of approach.

One part of the problem regarding planned environments: what are the expectations behind the thought processes, as to what human nature might consist of (in aggregate) in the future? For instance: will the split between knowledge use and base skill sets only widen? Let's hope not - hence plan so it doesn't. In all of this, something does get planned, according to the expectations which "win" the day.

And if the negative interpretation of human capacity "wins"? Those on the short end may increasingly opt out of family formation just the same. Without the possibility of a meaningful life path, family formation may serve little purpose. Except...the lack of familial identity particularly hurts some individuals all the more, who also don't have economic identity. Regular readers know that I tend towards the consequentialist view, in terms of creating better paths for aggregate time use capacity. Rules such as a license for parenting would especially hurt those who are already in regions which lack true economic access - should these individuals be brave enough to take on the odds.

Deontological libertarianism certainly does not get to the heart of some issues which concern me. One reason is obvious: land use rights are somewhat sterile in terms of overall applicability and economic vitality. When we generated product primarily through land formations, economic rights in terms of land were particularly important. They still are, but land and environment use need to be far more flexible (and liquid) components of community business and living strategies than is now the case. By creating local land shares and flexible building components for business and living environments, individuals would become able to take much needed local risks, without constantly being exposed to bankruptcy hence needless ruin of resource options.

However, digital communication and time use product are not really dependent on land - particularly those formulations which insist on single use capacity. What's more, knowledge use has gradually become the "soil" which now generates some of the most important product - robots or no. However...where are our rights in this regard? So far, rights for knowledge and time use appear as though nonexistent - even though time is our constant, and individuals can benefit from knowledge aids which exist well beyond the bounds of patents and credential seeking.

A lack of economic rights also accounts for missing aggregate time use capacity - so much so that this has finally distorted monetary policy. How to address the problem? Individuals need production rights which extend to both knowledge use and product definition, in order to regain economic access and bring stability back to monetary systems. Incremental time use ownership options for knowledge and (other) resources would also make it possible to rely less on finance. This approach would make it possible for finance to regress into the limited societal position it actually warrants.

What would production rights consist of? Some of the more basic aspects would be services based. For instance, rights to heal and rights to educate - in some instances - would become based on what is possible to achieve in one's life, and what others are willing to accept as defined product. The only time anyone's services offerings might be formally negated (in settings which allow a free marketplace for services), is when the results are clearly shown to harm others.

Just the same, most limitations would be informal in nature, so as to encourage more positive and informed offerings on the part of the provider. What's more, it is easier to determine this at local levels with mutual record keeping of ongoing activity, than through present day national institutions which attempt to monitor the product which millions of individuals rely on.

Another important aspect of production rights, would be to have the right to define the kinds of product we use in physical terms. One thing that would help in this regard, would be the flexible component aspect which allows reconfiguration and adaptation from agreed upon aspects of production. However, much innovation is needed at infrastructural levels, before new production standards can be realistically agreed upon. Communities have arbitrarily adhered to limited sets of standards (from centuries earlier) which makes many kinds of innovation impossible in the present. Exit and voice would ensure that different communities would gain the right to work with different environment adaptations than are now possible.

These are just some aspects regarding how my ideas fit in with Wikipedia definitions, and when possible I'll return to these definitions to find further comparisons.

Friday, July 25, 2014

Has Societal Trust Been Lost?

Certainly, this is a question worth asking. Especially so, since much of the economic life we take for granted is built on levels of trust among strangers. What comes first: trust, or the economic relationships which make it possible? While these are relative concepts, it's still possible that some gains have been lost, particularly in areas which have experienced decline. Without high levels of trust, maintaining a productive economy - let alone well functioning society - would not be easy. In particular, reestablishing trust among individuals in lower income settings is one of the more important challenges of the present.

Some have suggested that digital entertainment and other consumption could take the place of meaningful work and engagement, where no room (supposedly) exists for economic access. However social skills tend to become lost, when consumption becomes the only remaining option for anyone. In most circumstance, it is difficult to meaningfully play, when meaningful work is not part of the same scenario.

Anyone not truly engaged on economic terms, is likely to have issues with negotiation skills, reason and logic, and social/economic reciprocity. In social terms the phrase comes to mind, "water water everywhere, and not a drop to drink". We want to trust, just as we want others to be able to trust us. Yet in many instances, those without economic access have few means to either offer one's friendship or accept the invitation of others.

Many institutions have been forced to factor out or limit economic participation (in aggregate), just to pay the bills. Rather than debate whether or why this has happened, it would better to make time use an arbitrage point, so that the high hanging fruit of knowledge use can be brought back into the picture. This time around, knowledge use and more effective skills capacity need to be components of everyone's participation, so that gene pools do not continue needlessly splitting off from one another indefinitely. This is not just a matter of tending to a missing marketplace, which is important enough in itself. It's about extending an invitation to lots of individuals to meaningfully rejoin the human race.

Where trust exists among individuals, fewer rules are needed and more discretion is possible. However, discretion is not always easy when rules have already substituted (far and wide it seems) for the ability to directly negotiate with others. By using time as a compensated point of arbitrage, decentralized settings for services formations could generate multidimensional activity. In other words, educational factors can be brought back into the same environments as work and related living arrangements. By generating social interaction in multidimensional settings, it becomes easier not only to discern character formation, but to more effectively develop character as well.

Why should this matter? Consider what are often limited interactions with others, in settings which are not connected with one another in any way: for instance grocery stores, walking trails, even church settings to some extent. Unless one has mutual friends in these settings, the lack of local activities held in common with others, can make it difficult to establish the level of trust necessary to form relationships. In the twentieth century, many were able to overcome reluctance to engage with others who seemed "different" in any way, because of workplaces held in common. As these kinds of workplace formations have decreased in some areas, "differences" are once again perceived as something negative.

While it would take time to do so, societal trust can be regained. However, services product needs to be reexamined and locally restructured, before greater trust become possible to achieve. All too often, groups now want to split off from one another. But splitting off as a reactionary process is not necessarily conducive to positive change. Effective decentralization needs interior sustainability. How can new connecting points be created at basic economic levels? How can economic service product be redefined in ways that honor human dignity? These factors need consideration, before societal trust can be rebuilt.

Thursday, July 24, 2014

Needed: Higher Returns to Time Use

In order to confront issues regarding inequality, consumption potential is an important consideration. However, income adjustments which "chase" consumption needs and wants, are inadequate compared to an approach which gains higher returns for time use - both individually and in aggregate. Why should this matter? It is too easy for present day consumption imbalance to destroy wealth. One might be frugal and a careful planner over the course of a lifetime, yet still end up financially "undone" by unavoidable medical bills.

Healthcare as an aggregate supply factor, has distorted time use in many areas of life.The same healthcare service needs which can tangle family budgets, are now the same as those which tangle government budgets, particularly in the U.S. And yet the heaviest components of today's debt loads are built on artificial scarcities. How might populations gain the ability to produce more of their vital consumption goals?

As Scott Sumner recently indicated, economics is all about consumption. Even though consumption factors are trickier to quantify than income, they are more important in the context of meeting ongoing needs. Services respond to time use differently than other forms of production, because service product is uniquely dependent on time, place and circumstance to give useful results. What's more, individualized services are possible when people coordinate for time availability on the part of the group in question. Because individuals have the same amount of time availability, higher returns to time use are possible where arbitrage seeks to utilize group capacity.

One strategy of higher returns to time use would be to break down services specialization into more precise components, manageable by a wide range of local skill levels. For instance, many years of education have been required for the education of physicians. But today, automation, technology gains and digital assistance can assist in coordinating knowledge factors throughout local community.

What's more, there is a wealth of knowledge and information available that healthcare institutions have not been able to directly utilize. All these factors could allow individuals to participate in ongoing local training and education, and they would always have the option of taking on responsibilities for health related needs. None of this is like "becoming a doctor"or even a nurse for that matter. The response of every individual to concepts regarding healing and wholeness, is as wide as the capacity of life itself. Only spend an hour in quality second hand bookstores, which specialize in non fiction by comprehensive subject listings. In such an environment, it becomes easy to visualize the possibilities of skills arbitrage.

The right to produce is closely connected with the right to heal. Both involve the right to meaningfully explore in ways that one can suggest measures for others to take into consideration. No one needs to play god, and everyone has the chance to corroborate what others already seek. Given the wealth of material already available in this regard - let alone the capacity of natural curiosity and human desire to problem solve - bringing these abilities back to the average individual could go a long way to bring higher returns to time use. In the process, a higher trust society than anyone has now, would once again become possible.

Better coordination for knowledge use is the high hanging fruit which could return populations to prosperity. As Timothy Taylor said regarding the long term government budget scenario:

...the current spending patterns of the U.S. government are starting to crowd out everything except health care, Social Security and interest payments.

This fact alone, could well convince governments to allow their citizens to take on knowledge use systems projects which also have the future potential to tend to healthcare needs. In the process, citizens could provide many other useful benefits which make it possible to channel fiscal efforts into direct monetary efforts at local levels. Not only would there be higher returns to time use, there were be a way to generate new economic activity which is less debt ridden, and more capable of generating real wealth.

Wednesday, July 23, 2014

Midweek Market Monetarist Links and Summaries - 7/23/14

Tuesday, July 22, 2014

What are Desirable Economic Complexities?

While a recent Bloomberg View article (Mark Buchanan) skewed towards the left, it starts nonetheless with a quote which is apt for this post. Particularly given the fact that efficiency gains - by whatever means - are mostly "blind" to political ideology:

Much of human activity is focused on the quest for efficiency - getting the most out of resources so that we can improve our standard of living. Problem is, what we perceive as efficient is often making us worse off in ways that are difficult for the human mind to grasp.

Buchanan's article highlighted monoculture crops which have affected honeybee colonies. However, the monoculture concept extends well beyond agriculture, in terms of centralization and decentralization. There is a growing concern regarding "hollowed out" local economies in portions of the U.S., which I also touched on in "A Tribute to the Everyday Entrepreneur". As governments have taken over more of economic functions, sometimes little else is left behind, other than still taxable structures. Even as Washington worries about inequality, in recent decades it is Washington which has grown "out of balance" rich, from the nation's wealth.

Regular readers know that the "circles of sustainability" I emphasize are primarily economic in nature, even though other aspects of sustainability fit readily into the same paradigm. Both economic and organic environments suffer from overly streamlined measures which can cut the heart out of productive complexity. Often, the "efficient" results are guarded as well, with the confusion of unnecessary complexities. While the physical world starts to take on a sameness of appearance, the economic realm experiences a forced sameness in cultural definitions and acceptance of limited patterns of knowledge use.

Given the chance, individuals seek out nature where environmental diversity still exists, as well as cities where economic diversity also remains. Contrast the beauty of a natural forest, with pine trees planted in tidy rows which have little more than grass underneath. Anyone who has walked through planted "forests " knows they don't quite feel right. In order for the artificial forest to be "efficient", not much else in the way of organic life exists in the same space.

Even so, this form of efficiency is often easier to live with, than the monocultures of communities which are victims of economic centralization. Many such places are so bereft of knowledge use or resource potential, that what is left is mostly providers and consumers of hard drugs, with increasingly militarized police to skim off what benefit they can from the ensuing chaos and despair.

In the present, it often seems we have little left to generate positive economic complexities at local levels. Much of the process of price arbitrage in centralization, has been taken to levels well above the realities of many local economies. Fortunately, there is plenty of untapped potential on the horizon which could change this set of circumstance. Technologies are quickly developing (and becoming more affordable) which will become applicable for resource arbitrage at local levels, once again. Add those to the untapped potential of aggregate time use, and the new possibilities could finally overtake the present day gridlock of governments and special interests. Certainly, it's something to hope for.

Sunday, July 20, 2014

A Tribute to the Everyday Entrepreneur

Peter Gordon recently asserted that - given the state of politics in the present - the best we could hope for was to "pray for gridlock". Certainly I can see the reasoning, and yet I reject it just the same. Interestingly enough in that post, he referenced the book "Good Capitalism, Bad Capitalism" (2007) which I agree is a good primer for the subject. However, something about entrepreneurship seemed missing in the book's portrayal of capitalism, which perhaps had some bearing on Gordon's conclusion. Is gridlock really a "best response" to crony capitalism and politics?

Gordon's remarks about gridlock also reminded me of a recent post from Peter Boettke who claimed that crony capitalism was at least "better than crony socialism". For me, that is too broad a conjecture. To what extent does the marketplace actually function, for those who seek to become entrepreneurs? Under gridlock conditions, any attempt to simply participate may appear as though an attempt to disrupt. Simple descriptions of capitalism versus socialism may not hold the answer.

"Good Capitalism, Bad Capitalism" did not explore the alternatives of the present as thoroughly as I would have liked. For one thing - even though he was a co author - William Baumol's earlier contributions regarding present day service formations, were missing. Also, the role of the everyday entrepreneur was discounted. Granted, the more obvious aspects of economic growth are from disruptive innovation and the noted entrepreneurs who foster them. Before governments took on a major role in economic activity, however, everyday entrepreneurs were in many ways the center of economic activity in the U.S.

Much about the disruption we do get (gridlock notwithstanding) is somewhat misunderstood. How is the marketplace ultimately shaped by the disruptive innovation which is allowed to proceed? Which disruption is not fostered, and why? Are we getting the kinds of disruptive innovation which are so vitally needed for broad progress? Does the disruption which takes place, make the marketplace more substantive in overall context...or less? And most important for this post: is there any room left at local levels, for the everyday entrepreneur? Because if not, how are we to think about the outposts which remain? Every one of them needs to become something a lot more substantial than flyover zones.

Questions such as these matter. At the very least, Wikipedia's approach to entrepreneurship felt more evenhanded than usual, given the reluctance of some to consider "mere" business owners as entrepreneurial. And yet, entrepreneurs routinely work with, rearrange and arbitrage the elements that happen to be within the reach of their own environments. In some sense, this is what has always transpired, between human and resource. Whether a coordination of such in one's garden, management of resources in one's home environment, or ultimately, the arrangement of the broader marketplace. The crucial element in all this is that each individual remains producer, coordinator and consumer from a vast wealth of resource potential.

While the everyday entrepreneur is temporarily forgotten in the present, these individuals were once the workhorses of capitalism, at local levels of the economy. Many a baby boomer sought to remain engaged in these earlier roles, in communities which also longed to maintain the "connecting points" they were once able to provide to the larger economy. It's still easy to assume away the demise of the everyday entrepreneur in local economies, and chalk it up to the more efficient workings of the big players.

For services which rely on time use, better "efficiency" elsewhere is an illusion, just the same. For the movement of product separate from time, some centralized locations make sense...at least up to a point. For decades, local stores have closed their doors, while those who were once entrepreneurs either retired or perhaps moved to where work can still be found. It's easy to rationalize that the once available good is now only a long trip from home, or perhaps an internet purchase away. Still, these more distant forms of product availability, are somewhat lost to local resource coordination patterns which local entrepreneurs and their (nearby) customers were able to utilize for common experiences.

With little economic activity held in common, those who live in close proximity in "forgotten" areas, tend to lose the purpose of living close to one another. What's more, costs of accessing (locally) missing marketplaces - whenever one has this option, include externalities which are difficult to ascertain. The shift of economic life to the cities may appear benign or even desirable in some contexts. However, that shift circumvents local economic capacity - hence social and cultural factors - in unexpected ways. There's too little of real substance to replace lost economic activity in many areas. As it turns out, more may be at stake, than whether product formations remain locally available.

Unfortunately, what existed prior to the earlier economic enthusiasm of towns all over the U.S., is no longer part of the memory of many who are alive now. Rural areas have often been left behind, which makes it harder for them to support further growth they suspect will not find its way to their communities. They cannot help but express their disappointment towards Washington, especially when the most capable among their populations are compelled to leave for entrepreneurial opportunities elsewhere.

Even as many areas have declined, Washington gains considerable advantage from the places which still thrive. Still, it does little good to put all the blame on Washington. Local economies also need to look inward, to consider the NIMBY practices which ultimately excluded many among their own friends and family as well. When communities decide to exclude by rule and regulation, governments are quick to assent. With every compromise and favor for the select, fewer resources remain, to coordinate and arbitrage among the many.

Today's entrepreneurial arbitrage has little to do with coordination of local potential, as frameworks of possibility have shifted ever outward. As a result, it is the uncommon breed of entrepreneur, who breaks through the many barriers to gain economic entry at this level. Whereas, the everyday entrepreneurs who defined the landscape before income patterns diverged, made claims to the marketplace in ways which left plenty of room for local "others".

The earlier breed did not always need to gain entry through disruption - yet when disruption did occur, it tended to do so in ways which included innovation for the masses. As a result, everyday entrepreneurs often succeeded by expanding the marketplace from its earlier definition. Importantly, this is the same strategy which is utilized by start ups in developing countries today. They are not disrupting in every instance, so much as they are adding new growth. Whereas, creative destruction in developed nations isn't necessarily "creative", so much as it is simply market displacement by dominant parties.

Innovative disruption is still very much needed. However, this would be a unique kind of disruption, which would make possible what is still a missing marketplace. Hidden within that marketplace is a wealth of possibility for the everyday entrepreneur, in terms of both innovation for the environment, and innovation in services offerings as well. This disruption would form a new template in which it would once again be possible for numerous entrepreneurs to participate locally. Yet it would not be the kind of disruption that continually displaces others.

Hopefully I did not depress readers with a post written in lots of past tense! By no means am I resigned to the idea of everyday entrepreneurs as belonging in the past. Rather, I wanted to illustrate what has happened to local economies, so that the problems of economic exclusion might be overcome. There's still time, and there are more than ample resources to do so. Let's just do it.

Saturday, July 19, 2014

Time Use as Product, Time Use as Wealth

Society could really use a leap of faith, in order to turn focused time use into highly liquid - thus easily tradable goods. People have been willing to concede that economic value is a component of time use, but not in an aggregate sense. This is one reason, why few recognize the inherent value of monetary representation from aggregate time use.

It is also why groups, communities, regions, states and nations are now engaged in campaigns to keep others out of their territory who either don't have the necessary "goods", or are perceived as somehow "taking" skills goods away from the "in" group. And yet, specific population numbers, demographics or other group association factors are not the problem. So long as aggregate wealth capacity in time use is viewed as negative (too many "takers"), the same perception would hold true at any population level.

However, this unfortunate perception could be dramatically shifted in the coming decades, for there is much hidden wealth potential just under the surface. A leap of faith in skills capacity would expose the wealth in our own midst - hidden as it is by crony interests everywhere one looks. Since the Great Recession, people have been repeatedly told that the knowledge capacity and skills sets they sought to acquire by whatever means, are "inadequate" for present day circumstance.

Yet when governments realized more education wouldn't actually guarantee success, they basically began to tell the public it was time to scale back on dreams of growth and continued prosperity. At this point, people were starting to realize that many self improvement efforts could end up squandered. What - then - of the rationale that was abandoned?

How can any government or business explain what is at stake, i.e. the exterior definitions of value which have taken away the liquidity of our primary wealth. It's definitely not in their interests to do so. Just the same, it is in the interests of citizens to take back their right to produce services. Granted, few have held that right for quite some time. Still, without the right to produce or otherwise offer individualized services, too many citizens would remain in the hapless position they now hold - one where many are defined as "takers". That's an unfortunate role which never should have materialized.

Context is everything: perceived value - or not - on whose terms?? There's been little chance to find out, since everyone took for granted for nearly a century that business and government were supposed to "call" on people to help out as needed, rather than people calling on one another to help out, as before. Were we to look - once again - at service skills capacity on individual and local terms, everyone would quickly find skills sets in their portfolios which are useful to others. No one would have to be "lazy" (whatever that means) unless they simply want their investments to do the heavy lifting for them.

None of this is about wishful barter or sharing economies at the margins. It's about a growing understanding, how local economies could coordinate knowledge use in lieu of government and sometimes exclusionary businesses or professional associations, where there are clear societal benefits in doing so. What's more, becoming an entrepreneur in a knowledge marketplace, means skills arbitrage in equal time use settings. That's the same framework (minimal reliance on externalized time control) that people utilized to get most things done, for thousands of years.

With unique applications in local settings, time arbitrage systems could also make it possible to measure time value which in many cases had been taken for granted, hence perceived as impossible to measure or compensate. The algorithm of equal time coordination, is also a framework which makes it possible to show knowledge use as a growth trajectory within community settings. For understandable reasons, many present day forms of knowledge use were generated in recent centuries by tightly controlled profit and not for profit formations. Only recently has it become possible to locally and broadly internalize the same methods and structures, through more flexible means.

The primary problem of automation as (completely) replacing labor, is that we miss the reality of what we want from mental capacity in our economic environments. Indeed, some have wondered whether the most important faculties of life experience even need to be measured. Just the same, it's not a good idea to leave out measurement capacity for the work of the mind. What might happen, if records of this most human component no longer existed in substantial quantities? Not only might it be difficult to remember what transpires in this regard, it could also be difficult to replicate the components which matter most. Even though the internet captures some aspects of our knowledge histories, it is not yet built to sort according to societal value.

That is why it would be worth the effort, to translate economic activity which has been inadequately compensated as production residuals, into direct time use. There is much to gain, from measuring and compensating the activities in which we also experience the life of the mind. By doing so, knowledge use can become the true component of human capital which it always had the capacity, to represent.

Friday, July 18, 2014

They Didn't Want to "Let Go"

...That is, most baby boomers who have already left the workplace, didn't do so lightly. Many a boomer has gone to great lengths to stay actively engaged, before reluctantly letting go of the effort. After all, economic access gives individuals the chance of a continued normal life among friends, peers and family. Even the compensation of disability can be a letdown for some, compared to what they would rather accomplish if they were able. Before individuals were expected to gain income away from home and personal property, the point at which anyone needed to "let go" of work could be done more gradually and over time.

Normally it does not seem necessary to stress these factors. But when I read articles which take (too) lightly the absence of baby boomers in the workplace, there's a certain disconnect with the reality of present day work options. For one thing, discounting what made some boomers finally let go of the effort, would likely mean problems later on. Don't just hope that once the baby boomers are "gone", the workplace should return to "normal". If only it were that simple!

Still, one can almost hear a sigh of relief coming from Washington, after a detailed report in which the White House Council of Economic Advisers estimates that "only one sixth of the decline is attributable to a weak economy". Granted, the economy is somewhat stronger now, than it has been in recent memory. But the fact that labor force participation has been declining for more than a decade - let alone the fact only a small percentage of boomers are of retirement age - points to factors which in some instances have been papered over by the recent good news. For instance, the numbers of long term unemployed in this latest recession, point to issues which no one can afford to dismiss re economic access.

To be fair, those with knowledge work careers may not experience economic shifts quite the same way, as those who rely on multiple work options over the course of a lifetime. Also, many policymakers tend to live in cities where the changes of recent decades have generally trended positive, rather than areas which were once positive only to experience decline.

If I had worked in just one area (either geographic or type of work) all my life, I might not have noticed significant changes in the economy, either. For instance, one read around the year 2000 or 2001, that many alternative herbal remedies had reached a "tipping point" of representation in the marketplace. While few would likely notice market saturation in major cities where remedies of all kinds could still be found, many smaller towns and communities which had previously been able to profitably carry alternative remedies, were no longer able to do so. That presented problems in both supply and demand for healthcare options, which went largely unrecognized.

This tipping point was just part of an overall shift in retail, in which it became more difficult to make a "go" of various retail options in many regions. Unfortunately, the retail shift to prosperous areas got in the way of only one "game plan" for any number of baby boomers. There had been a proliferation of small business start ups, particularly in small towns in the first part of the new century. What was so alluring about the retail business gamble? It was a way for boomers to stay connected to the public, and what some had hoped to utilize as an early (partial) retirement option.

There were other related tipping points as well. Some boomers set out to create products for existing retailers in the marketplace, only to discover that store shelves had already become quite crowded. What's more, some of the space which had once existed for small business interests and independent brands, was being given over to large companies who were providing more variations on their basic product. As a result, recent efforts by boomers in these areas confronted what had become a common dilemma, for numerous start up options.

Another option that was tried by many boomers was variations on cooking establishments. Unlike the food trucks of the present, many of these options were more demanding, in terms of the overhead required and the fact that often a seven day workweek and full day open to the public was required to meet rent. That's not to say that boomers didn't want the challenge anyway - only that physical stamina starts to be compromised by one's forties and fifties.

Baby boomers tried many self employment options through the first decade of the new century, before the reluctant process of "selling oneself" to the workplace began anew. Who can blame potential employers for looking askance at self employment history, when no one can be called for verification? This was a hard time to renew one's (self employed) teaching capacity for instance, in that those who had (already) taught throughout adulthood had a definite advantage. Sometimes, before the final "destination" of disability became a consideration, more than a thousand resumes had been carried to or sent out to local businesses, before letting go. And of course, disability was primarily an option for those who clearly had the kind of health issues which warranted that choice.

Perhaps this post serves to give credit to those I observed over the last fifteen years, who tried with high hopes to start their lives anew. Many of them met with varying degrees of success, hence managed to eke out something they could at least be happy with. Just the same, the experimentation and efforts of boomers since the turn of the century, deserve more credit than they sometimes receive. For one thing, these efforts tell a story that no one should be sweeping under the rug right now: the marketplace needs a better playing board for economic participation. In other words, don't just wait for the day when boomers are already out of the marketplace, to hope that all will be well.

Local Economies as the Growth of the Future

Today, yesterday's news is still very much on my mind - too much of which has not been good. This is a time when I would suggest that no nation take its own regions for granted. In other words, quit making local regions fragile and dependent on government handouts. Quit allowing central bankers to destroy the destinies of younger generations. Quit supplying the friggin war toys to local police forces, local separatists or whatever they call themselves. Just do it.

Instead, give people the right to help themselves economically at home. Allow citizens to rebuild their lives in the ways that count most. How can nations encourage their local economies to become the positive growth of the future, which others would in turn seek to emulate and gain hope from? How might local economies be assisted in those goals?

Recent gains of the twentieth century need not be forgotten, if they can only be made real in the lives of individuals and the communities one is actually a part of. Knowledge is the wealth we have to make this possible. But first, no one can afford any more to isolate knowledge as though it were a scarce commodity. Doing so has already started a chain reaction around the world, which needs to be stopped now.

Too many areas in the world are becoming places which citizens somehow need to escape just to live a good life. They especially seek to escape to those places where we have carved out public monuments to "special" knowledge sets which supposedly matter more than any other. When we pretend that some knowledge obliterates other "contenders", entire societies are forced to make decisions as to what is important, which in turn forces them to turn their backs on much of what is valuable in the world. Think this doesn't matter? Think of the families which turn their backs on one another, when they disagree as to which knowledge is even important.

In the twentieth century, countless varieties of product flourished, which came from every conceivable imagination and place. Because this was product separate from the use of our time, it held a special freedom which lifted the potential of all nations. But the product which was connected to our time use and place of residence, did not have that same freedom to benefit from widespread innovation. Places which were once bastions of knowledge and culture, became more about the prosperity of regions or lack thereof, as locals became hostage to whatever limitations were imposed. In local economies, imagination and innovation were given short shrift as groups focused on standards which everyone was expected to emulate.

Even as I decry the folly of nations, I have an idea where the folly stems from. Once, nations were able to overcome the shackles of small mindedness and exclusionary tendencies, as they sought to uplift their own citizens with all the potential that innovation and technology held. But over time, nations have given in to the limited mindset which says one has to exclude in order to survive.

Life circumstance is too important to leave in the hands of planners, developers, government officials and ruling elite. Even as knowledge use has become the tool by which to overcome oppression and despair, it remains tightly held by those who see little benefit in bestowing true wealth on entire populations. Once, it was not so easy to make the connection between stinginess and greed in knowledge use and whether nations might be able to prosper for the long run. Now, the connection has become impossible to miss.

Wednesday, July 16, 2014

Midweek Market Monetarist Links and Summaries - 7/16/14

(David Beckworth) The Fed - as provider of checking accounts? http://macromarketmusings.blogspot.com/2014/07/coming-soon-to-economy-near-you.html

Even two years out, the same prediction from the FOMC: http://macromarketmusings.blogspot.com/2014/07/its-all-but-official-there-is-no-2.html

David provides highlights of his most recent paper:

http://macromarketmusings.blogspot.com/2014/07/its-time-for-fed-to-move-beyond.html
An article in Wonkblog for the Washington Post: http://www.washingtonpost.com/blogs/wonkblog/wp/2014/07/14/heres-why-larry-summers-is-wrong-about-secular-stagnation/
"There is hardly any data on the natural interest rate." http://macromarketmusings.blogspot.com/2014/07/the-data-problem-with-natural-interest.html
David provides some explanation for his Washington Post article: http://macromarketmusings.blogspot.com/2014/07/follow-up-to-my-washington-post-piece.html

Nick Rowe considers the Taylor rule in two posts:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/07/a-simple-test-of-simple-rules-against-actual-policy-in-the-actual-economy.html
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/07/some-simple-arithmetic-for-mistakes-with-taylor-rules.html
"What else" might be causing unemployment?http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/07/unemployment-aggregate-demand-and-searchmatching.html

When "appearances" really matter (Lars Christensen) http://marketmonetarist.com/2014/07/11/hollandes-danish-spectacles-is-france-the-next-trouble-spot-in-the-euro-zone/
A spot on post from Lars, inspired by Robert Hetzel and the quantity theory of money: http://marketmonetarist.com/2014/07/13/the-un-anchoring-of-inflation-expectations-1970s-style-monetary-policy-but-now-with-deflation/
I didn't know an iPhone could be so helpful in a hurry! http://marketmonetarist.com/2014/07/15/never-reason-from-a-price-change-version-436552/
Deflation has a thousand excuses: http://marketmonetarist.com/2014/07/16/stock-picker-janet-yellen/

(Marcus Nunes) The Taylor Rule proved to be an insufficient indicator: http://thefaintofheart.wordpress.com/2014/07/10/instrument-rules-and-target-rules/
Fischer is bogged down with too many goals: http://thefaintofheart.wordpress.com/2014/07/10/overburdening-the-fed/
The battle to "contain" the Fed gets more confusing than ever: http://thefaintofheart.wordpress.com/2014/07/11/beware-of-common-benchmarks/
A contraction in the first half? http://thefaintofheart.wordpress.com/2014/07/11/dont-blame-the-messenger/
Stuck in the same spot: http://thefaintofheart.wordpress.com/2014/07/11/plosser-the-scratched-vinyl-record/
Marcus highlights David Beckworth's paper and provides an alternative story for the 2002-2004 period: http://thefaintofheart.wordpress.com/2014/07/13/history-shows-that-an-explicit-ngdp-level-target-is-much-better-than-it/
When words don't have the money to back them...http://thefaintofheart.wordpress.com/2014/07/14/quite-comical/
It's not easy to pry loose the rusted locks of failed strategies... http://thefaintofheart.wordpress.com/2014/07/15/when-hunger-joins-up-with-eagerness-to-eat-understanding-the-house-price-boom/

Applying the Piketty 5% rule (Scott Sumner) Should the Detroit city government spend $185 million/year on art?
An odd penalty...The one thing you cannot do with cash
Scott responds, point by point: Tony Yates on market monetarism

At Econlog, Scott highlights a post from Phillip Booth regarding Piketty
The nominal, and the real There are two kinds of people
(sarcasm intended) Governments don't create problems, they solve them

(David Glasner) "...there is simply no scientific justification for the highly formalistic manner in which much modern economics is now carried out." http://uneasymoney.com/2014/07/15/another-complaint-about-modern-macroeconomics/

Bonnie Carr considers the recent post from Tony Yates, http://dajeeps.wordpress.com/2014/07/14/tony-yates-punching-the-daylights-out-of-a-market-monetarism-strawman/

"...before we get an NGDP targeting regime the Fed is likely to create another NGDP shock, and just like last time, it will be blamed on a problem that doesn't exist..." (Kevin Erdmann) http://idiosyncraticwhisk.blogspot.com/2014/07/risk-valuations-part-9-greenspan-put.html
"It frustrates me to see economists universally referring to the movement of production to low wage economies when the opposite is true." (Kevin Erdmann) There's a connection between high wage labor and international markets. http://idiosyncraticwhisk.blogspot.com/2014/07/risk-valuations-part-10-risk-aversion.html

Also of interest:

"The message is that governments should do what they need to do to stop the violent conditions that are making these children leave." http://time.com/2984030/honduras-children-deported-us-san-pedro-sula-violence-gangs/ I would add that the U.S. needs to stop its role in perpetuating the drug wars.

(Tyler Cowen) Why the Taylor Rule isn't a rules based approach to monetary policy

Monday, July 14, 2014

Today's Economy: What Might Be the "Biggest" Mistake?

Certainly it makes sense to frame the question this way, because much of our economy - just as the title of this blog suggests - ends up getting "planned" to some extent by someone, even in a supposedly free market society. If some degree of planning is inevitable, the very least anyone can do is leave room for good incentives and outcomes for all concerned. When that doesn't happen, everyone ends up instead with ad hoc and rigid results which - as Timothy Taylor indicated - are more about what happens at Pennsylvania Ave. and K St, rather than Main Street and Wall Street.

While this post is strictly one disgruntled opinion (heh), there happens to be a tie for "first place", as to the biggest economic mistake of the present. For one thing, a lack of real social and economic connections has resulted in needless isolation at all levels of society. To be sure, plenty of folk mostly want to be left alone and have the economic means to ensure this is possible. But others want the chance to meaningfully interact in their communities through the course of their lifetimes. Not only is there too little local coordination for services in many areas, default settings for these unfortunate circumstance tend to be both expensive and crisis oriented.

So why a blogpost such as this? Perhaps it is the result of a near sleepless night. I almost have to wonder if Tyler Cowen had a sleepless night after his musings, regarding what some may consider the "second place" (biggest) economic mistake. He asked, "How will we know if the ACA is working?" because he has not been very happy with the answers so far from either side. To be sure, Obamacare would probably rank as the first choice headache inducer, for some. While I agree that Obamacare was a tremendous mistake, I have to remind myself that this latest atrocity was built on the back of a healthcare system which had already incinerated vast quantities of services potential.

What is the first place "tie" for biggest mistake? It is the refusal of the Fed to acknowledge the human component of monetary policy, which is why they are too eager to stray from aggregate spending capacity when it serves their purposes to do so. It's quite reasonable to suggest that central bankers have contributed to the despair and worry, which so many face in the present. Money and the workings of the economy are supposed to represent people and their aspirations. Yet too many on both the left and the right, remain convinced that this is not the case.

Many individuals do not recognize the real dangers of ending up isolated, until they find themselves in this predicament. Once involuntary isolation happens, it's not always an easy place to walk back from - particularly the older one gets. However in the present, it is not just older individuals who find themselves with too few economic - thus social options. Increasingly, a lack of access to work and job possibilities can happen at any age, particularly when people are in relatively isolated areas.

Even though many mistakes represent supply side problems which are the responsibility of citizens, the right monetary factors need to be in place before economic circumstances can improve. Central bankers need to focus on what they can actually accomplish, rather than constantly fretting about things which are not theirs to worry about. Worse, worrying about the wrong things makes it too easy for those who really need to tend to supply side issues, to continue ignoring them.

Central bankers have a long way to go, before they can restore public trust in their institution. By refusing to act sensibly, they also make it more difficult for other factions to trust one another in economic relationships. Policy makers need to do their part and adhere to a nominal level target rule for spending capacity, so that it becomes possible to face up to other economic mistakes of the present. After all, central bankers still have an element of control. But if they do not utilize their (actual) monetary capacity properly while the opportunity remains, it becomes more difficult to control the winds of political change once they are set into motion.

Sunday, July 13, 2014

Subsidiarity? Some Subsidiaries Provide Clues

Sometimes it is said that everything about our lives serves some purpose, and in my case, quite a few employment opportunities felt relevant. Not that I ever held any particularly important position in what is admittedly a long list of jobs! Just the same - a wide range of work responsibilities over the decades, has allowed a glimpse into structures which rely on plenty of algorithms for resource dispersal. Looking back, I'm still surprised at the work which also provided "windows to the world" outside or occasionally below, both literally and figuratively.

One company I have wanted to write about for some time, eloquently expressed the independent nature of subsidiary status in relation to corporate structure. The founder of the corporation provided what turned out to be a graceful simplicity, between production perimeters and their representation. This contributed to mutual respect at all levels which added to the strength of the organization. Whenever we saw product on display in corporate office, it was what suppliers (hence their subsidiaries) already had on offer, as opposed to what organizations in some capacities would otherwise specify. Perhaps the examination of various subsidiary formations could provide valuable clues, regarding viable concepts of decentralization for community endeavor.

A recent article by Reihan Salam provided the contextual backdrop which I had sought for this post. He considers what the country might look like, were it run by the Tea Party:

Deep divisions notwithstanding, there are a number of principles that unite the movement. The most important is a devotion to subsidiarity, which holds that power should rest as closely to ordinary people as possible.

Hmm...do many in "maker" circles truly believe that? Who - and what - is able to gain acceptance as "ordinary", and why? After all, the answers to these questions matter - right down to the nth degree - for how product is ultimately defined. Reihan goes on to explain how a belief in subsidiarity leads Tea Party conservatives to favor voluntary cooperation among free individuals over local government, local government over state government and so forth.

All of which sounds promising of course, but what about those complex "ties that bind" when mutual gains (for some or a few) can be achieved somewhere along the line? In other words, what makes the most closely held ideal of this group, so difficult to achieve? When Arnold Kling highlighted Reihan's post, a commenter noted, "The internet is striving mightily to come up with an alternative, but all roads lead to Rome."

But why should centralization be the "inevitable" result, even as populations struggle to distance themselves from its ramifications? Could certain separations in business formation provide needed clarity for reasoning at local levels? Granted, some "separations" exist mostly in name only and would not provide much help - it's important to know the difference. Let's consider how subsidiaries are defined and how they also relate to subsidiarity. From Wikipedia, "Subsidiaries are separate, distinct legal entities for the purposes of taxation, regulation and liability." Again, from the same, for subsidiarity:

Subsidiarity is an organizing principle of decentralisation, stating that a matter ought to be handled by the smallest, lowest, or least centralized authority capable of addressing the matter effectively.

Subsidiaries can be a useful reference point for subsidiarity in context, because they make it possible to see whether the principle works and to what degree. In the example of my workplace, subsidiaries functioned quite independently of corporate office, particularly in regard to their relationships with suppliers. Of course in practical terms, that meant less streamlining of my (not yet computerized) job tasks. Accounts receivables for subsidiaries and suppliers were uniquely configured according to a wide range of contractual agreements. Even though that meant more time consuming work tasks at my desk, I probably took as much pride in those independent arrangements as anyone in my workplace.

However, something far more significant stood out, regarding the arrangement which the founder of the organization had created: something which matters very much to me in the present. The overarching purpose of the corporate headquarters I was fortunate to be a part of, was to serve as a vital connecting point. Its own responsibilities in aggregate were made simpler, in that it promoted the interests of both subsidiaries and suppliers so they could be equally successful.

That - in a nutshell - is the vision I wish the U.S. government could follow through on for its own citizens. There are so many connecting points for human aspiration which need to be made, which have yet to even be considered. Production reform - more than anything - is about bringing the everyday citizen back into the reality of economic life. It is about economic inclusion and loosening the strictures of product formation from their stranglehold, so that citizens need not give up on their own aspirations. Nowhere has the destruction of potential connecting points been more severe than in healthcare and education, both of which have slowly severed the sum of the whole from its many parts - even though each part depends on the whole. That is what was alluded to, by the commenter who spoke of the roads which still lead to Rome.

What if those "ties that bind" across hierarchical lines - and which have consequently severed production formation - were set free? After all, mutual "gains" have mostly scuttled mutual respect and made life far more complex than necessary. Remaining hierarchies would not only have a chance to simplify their goal sets, but their remaining roles could become far more effective. Perhaps I'm a hopeless dreamer, but I dream of governments which are willing to highlight the strengths which their citizens and communities can bring to the table. Rather than obstructing product formation (collaboration with special interests), governments could instead work to promote citizens and product formation. In other words, governments would work to make certain that infrastructure channels of all kinds - for citizens and product of all kinds - remain open.

None of this is to imply that hierarchical methods have not been beneficial to the whole, in the past - particularly in time frames when they have played substantial roles in the economic structures which contributed to the progress of recent centuries. Some hierarchies represent starting points for new beginnings which may take centuries to mature. However it is fair to say that present day hierarchies have matured to such a degree, that further gains now tend to be sought in ways which turn out to be zero sum, instead of applicable to populations as a whole.

For the U.S. real gain could come from handing the production reins to citizens and their communities, who now have enough knowledge use potential to carry on work which was often initiated by the state and private industry. Doing so would also create new forms of economic growth which can no longer be generated effectively from a national standpoint. Decentralization in economic activity is certainly needed in order to realize further progress. However, its potential applications need to be well understood, before they can be effectively applied at local levels.