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.

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