Wrap Up for August '14

There's plenty in this August wrap up - these past weeks have certainly provided "food for thought". Earlier in the month, Time ran an article about the career advice "no one ever really gives you". Among the (somewhat) unsettling suggestions were "Doing your job well is not enough," and "Who you work for is hugely important. So is where you work."

All I could think after reading the above linked list, is that a number of CEOs have been trying to get out the word for a while - particularly since the playing field has changed in some key respects. The message basically goes: "We don't have all the answers, either for employment or economic stability! Sorry...give us a little help, guys!"

Except...the things that could help, still aren't happening. How many growth summits or helpful coordinated strategies between government and business have we witnessed, lately? Instead, policy makers have decided to tell the public that new growth strategies are MIA and "little can be done". Just the same, none of this pretzel logic has quieted the call for fiscal "solutions". "Fiscal to the rescue" stems from the idea that government magically pulls new business formation (along with jobs) out of a hat where business cannot, I suppose. But Washington has too many short term obligations right now, to provide an encore for that special request.

And since preexisting government obligations are too onerous to actually contemplate (let alone do something about), some economists still want to know why governments aren't stepping in, to do what private industry cannot. (Huh??) Since some folk didn't get the memo that fiscal options are mostly off the table, a monetary response - which would at least be capable of stabilizing economic activity - is instead in line for "takeoff" (our "back to normal" economy) with one engine still missing from the plane. However, as Barry Eichengreen recently noted:

...if the US does experience secular stagnation over the next decade or two, it will be self inflicted.

Timothy Taylor likened the recent Vox publication on secular stagnation to the parable of the blind men who all grab hold of different parts of the elephant and describe what they feel. Mostly, those descriptions were a bit too predictable...plus it didn't help that market monetarist were not even represented among the authors. Something else feels missing from these stories of secular stagnation as well: the idea of a complete marketplace, which has been all but abandoned in the struggle to move ahead with no adjustments to existing institutions, whatsoever.

Thinking about the missing marketplace, I find myself returning to a Zen koan which asks: how do you go further from the top of a hundred foot pole? Because that's what today's economy feels like - as though everyone awaits at the top of the pole, trying to figure out how to continue past the limits it imposes. In the meantime, bonuses become the new raises. As one executive noted in the linked WSJ article, the rules of engagement have probably changed permanently.

Living "as fully as possible" is a good response to seeming limitations. Some would just as soon forget about the economy and find new meaning on non monetary terms, elsewhere. However, passive adaptation to these economic circumstance could mean regression and loss. In "Instructions to the Cook" (1996), Bernard Glassman sought entrepreneurial means to generate connections between those who lack economic access, and the world they live in. He knew how important it was for all individuals to understand business concepts and the fact that money matters. He also understood the importance of including the rich alongside the poor, in common efforts for more integrated economies.

When I picked up the link for the book, I also found a related film which some readers might be interested in, which goes through the chapters of the book. Years ago, I was quite fortunate to learn from - and work with - an intuitive Lebanese cook, who utilized the same cooking principles which also apply to social action: use what you have. More than once, I was worried there might not enough food in the refrigerator to prepare a good meal for the guests who would arrive in a matter of hours. And yet - not only was there always plenty, the guests also enjoyed the results. This is the same principle which would allow any community to begin anew, economically: work with the resources which are already in place.

How to think about the 100 foot pole, in economic terms? There has been so much wealth in recent centuries, that for a long time, no one had to worry about the means of redistribution which became formalized as government fiscal activity. Hence people forgot the degree to which redistribution was dependent on the continual gains of the production residual, which paid workers to aid in the reconfiguration of adapted resources. Production residuals were especially helpful, for they sought to continue the monetary flows which provided new possibilities across the entire spectrum.

Production gains still provide tremendous wealth. However, they no longer work efficiently at local levels which need to remain capable of completing economic processes. To imagine moving "beyond the pole", move local services into the private realm, where they can be negotiated locally and individually. Provide greater flexibility and liquidity, for property utilization and ownership. Allow people to govern their own lives for services needs, so that the wisdom of the elders might have a chance to return. Another way to think of services to digital construction, is as a further strengthening of the net.

Today, government and business alike rely on a strong net, which is flung across the globe. Except there's just one problem. Those components are so broadly spaced that many facets of society - hence potential economic activity - fall completely through. Just the same, a stronger net remains possible. In the above linked book, Glassman refers to Indra's net, where each person and event is connected in space and time.

Local communities could generate stronger nets through becoming broader institutional structures for resource use, than today's business formations are now capable of. In effect, this would allow participating communities in knowledge use systems for services, to become supra institutional structures, by including the resource possibilities in their own midst. These structures would generate strong nets, and few would fall through the remaining holes. In short, economies everywhere need the help of their help of their local economies in order to continue moving forward in the 21st century.

...more links, so I'll give the rest of the wrap up over to them:

Jobs are coming back but with lower pay - what every local economy needs to bear in mind as it considers new forms of infrastructure for the future.

http://www.chicagotribune.com/business/breaking/chi-jobs-wages-inequality-mayors-20140811-story.html

An article from Paul Krugman, (India Times)
http://economictimes.indiatimes.com/news/international/world-news/us-crisis-not-over-america-should-learn-from-europes-experience/articleshow/40308766.cms

This county by county map is quite useful for anyone who wants to get a better picture of local economic conditions in the U.S.
http://www.nytimes.com/2014/06/26/upshot/where-are-the-hardest-places-to-live-in-the-us.html?action=click&contentCollection=The%20Upshot&module=RelatedCoverage&region=Marginalia&pgtype=article&abt=0002&abg=0

Of course every group has viewpoints that don't necessarily line up with one's own, and Ryan Long makes a good point about libertarians in this post.

Cross country comparisons are not easy: Dietz Vollrath takes a closer look at GDP.
http://growthecon.wordpress.com/2014/08/29/what-does-real-gdp-measure/

James Pethokoukis highlights slavery in an AEI post: This map shows where slavery and forced labor are happening around the world.

Not so long ago, it seemed that everybody did (Pethokoukis)...Fewer Americans now self identify as 'middle class'

"I feel like a pawn in a moneymaking game for hospital administrators." http://online.wsj.com/articles/the-u-s-s-ailing-medical-system-a-doctors-perspective-1409325361

Musings on the Marginalized Landscape

...that is, the circumstance of those who are either unemployed or insufficiently employed. In contrast to the idea of teeming masses locked away from society (as some dystopian stories describe), today's unemployed exist in disparate groups which often appear quite different from one another. These in turn are shaped by institutions, of which the most obvious are prisons which "mop up" the anger of economic exclusion. Of course this is a broad generalization, but prisons remain the primary institutions in the U.S. which attempt to reduce social uncertainties stemming from unemployment or low employment.

Too few hours on the payroll can mimic unemployment, when an individual struggles to save enough for the prerequisites which lead to either shelter or transportation options. Even prior to 2000 when the economy was booming, I knew of homeless people who came to work from tents or their vehicles, at a time when management could still afford to be understanding about their circumstance.

Indeed, there are times when homelessness turns out to be a rational choice. What society sometimes misses - particularly in zoning laws - is that some find more equanimity in peaceful settings which are possible to control, when they are able to live alone. One young man in my workplace had parents who were both college professors. After attempting to live with roommates with a very different lifestyle, he wanted to save enough to live in an apartment on his own, but was set back a number of times by illness (exposure to the elements) before he was able to do so.

Much as low income individuals are often "hidden" in city environments, those without any work at all - who are not homeless on the streets - tend to be hidden in environments which include "more reasonable" real estate. However, a lack of local work options is often the reason for either the affordability or the availability. As a result these individuals may have tenuous relationships with family members, whose lives are also affected by the lack of economic inclusion on the part of their kin.

For many in this circumstance, the additional burden on family members is a recent development. So long as transportation options remained within the perimeter of low income potential, this single factor was responsible for maintaining greater market depth at multiple levels. Some of that market depth has been lost, in ways that now require changes for infrastructure settings, before market depth can be completely regained. This particularly presents a problem for the U.S., in that many cities and towns were laid out with the automobile in mind.

Drugs and alcohol use are heightened in the unemployment and low employment landscape, which leads to numerous knock on effects as well. Because there are few systems in place which allow the marginalized to seek their own solutions, their shortened lifespans often act as a net positive for the states or institutions which are tasked with their responsibility.

The "deadweight loss" rationale is one of the most powerful arguments we have, to allow the marginalized to help themselves. Even from a completely dispassionate perspective, the social exclusion of low income and the unemployed can drag down not just longevity statistics for nations, but also long term growth prospects as well.

And while empathy may sometimes enter these discussions, economic inclusion - more than anything - is really a matter of common sense. Who cares if some elite end up embarrassed by the potential of individuals with "no impulse control and little intelligence", who find it in themselves to prove the naysayers wrong. The only thing we would lose - should the marginalized create a better reality for themselves - is the incomplete marketplace which continues to undermine the stability of nations.

What Constitutes an Experiential Service?

This question has relevance, in that it provides needed context for overall goal sets in time arbitrage coordination. Some experiential service components satisfy wants or perhaps ongoing challenges, while others satisfy basic needs. These groups would be approached quite differently, in that obvious needs would become core components of services. Think basic = core = inclusive, versus want = peripheral = exclusive.

Within this context, exclusive or unique time use formation is not arbitrarily driven out of group settings by the insistent valuations of basic services needs. This is just another way of describing how time use optimization can work. Without time use optimization, time use skills which should be basic in nature (yep, healthcare), tend to drive out exclusive forms of time use which can provide more happiness. Likewise: at a younger age, basic school core subjects tend to drive out numerous intellectual interests which students might otherwise pursue.

Even so, these "want" versus "need" designations cannot be teased out of the intangibles that represent total resource use (standard of living) settings - nor should they. Instead, services wants versus needs can be accounted for in time use aggregates, where the differences become much easier to quantify. By tracking the finite nature of (aggregate) local time use available for services as a core point of reference, services taxation becomes practically unnecessary for any knowledge use system which 1) provides education for core healthcare skills and 2) tracks time use separately from standard accounting and economic measures.

Today's post is in part a response to an article regarding happiness and experiential product: an article which I subsequently lost, even after retracing my online steps from yesterday in an attempt to find it. Darn! Normally when I come across a link that is possibly postworthy, I try to save it promptly, just in case. While experiential product was not designated as such in the article, I think of the experiential product which is capable of generating happiness, as peripheral and exclusive service product formation.

Fortunately, Tyler Cowen posted a link which also touches on the research (he calls it speculative) and it is here. Also, his reference to delayed gratification is only a partial context for experiential product, as opposed to the delayed gratification one normally thinks of regarding investment. The gist of the article was that experiential product - i.e. not a physical product but one that generates "memories" - creates more happiness than, say, waiting in line for a product which we would either 1) carry home or 2) consider a basic good.

Hmm. There's plenty of product formations (involving services time components) which make us want to pull our hair out while waiting. These wait times all too often exist, for what has become defined in recent decades as basic needs on multiple levels. Hence this kind of negative experience stands in stark contrast to pleasant experiential services which are also coordinated through timed group settings.

How might we contrast the aggravation with the positive experiential setting? Waiting in line for fast (basic or everyday) food might be classified a minor nuisance. Sometimes the wait for service help on the phone calls for a zen attitude. And all too often, waits for the doctor may feel as though a total time loss...at least bringing a book helps!

And yet, anticipating vacation or standing in line for special meals or concerts can evoke positive feelings. Yet if the wonderful meal happened every day, it wouldn't be special. Nor would anyone choose to stand in line for that special meal on a regular basis. That's why 1) exclusive experience is a peripheral gain, and 2) by recognizing basic time use needs - thus generating them in more closely spaced time units - there is still room for the peripheral pleasures which time use coordination makes possible.

So for time arbitrage, it helps to ask: what does coordinated time seek to accomplish? Is the services time in question being correlated with basic needs, or is it closer to what people seek after more basic needs have been taken care of?  Does the collaboration represent exclusive or surprise elements (to generate a unique positive experience), or does it call for more inclusive service formation such as one would expect within the context of daily life?

None of this suggests that access to needed services can't provide happiness. However the happiness that results from life saving and maintenance services measures is due to gratitude, rather than the special memories of unique events. Therefore, life saving methods for both disease and accidents, would be a part of core local education for time arbitrage, in coordinated knowledge use systems for services.

Could some elements of healthcare comprise experiential service product which is closer to the happiness of exclusive settings? Absolutely - these occasional settings would actually be quite desirable in local economies. After all, individualized offerings represent unique ways for individuals to learn about healthcare options because they want to, not because they feel compelled to in a "do this or else" office setting. Retreats for alternative healthcare options - in some instances - can be just as inspiring as any vacation. This is one of many options for aspiring services entrepreneurs (individuals and teams), which could go well beyond the daily routines of local healthcare needs.

Experiential product which generates positive memories can be associated with many services. Presentation is important, and variations on presentation are only limited by one's imagination. As services entrepreneurs, individuals can propose ongoing offerings for locals which represent the intellectual challenges they most enjoy. Parts of life which are now associated with thriving economic regions and "special" cities could make any place feel special. The main ingredient? Simply the desire of local citizens, to make it happen.

Midweek Market Monetarist Links and Summaries - 8/27/14

(Nick Rowe) Since it's theoretically possible for the central bank to run out of assets to buy, why not start there, first...http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/08/land-vs-helicopters.html
The job of the central bank is to deal with the world as it is:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/08/second-best-monetary-policy-and-the-strategy-space.html

A determinate equilibrium can trump an indeterminate equilibrium, even if it is inadequate (David Glasner):
http://uneasymoney.com/2014/08/22/the-trouble-with-is-lm-and-its-successors/

David Beckworth posts the slides which he included in a recent talk: http://macromarketmusings.blogspot.com/2014/08/talking-about-past-five-years.html
2% inflation target? No. 2% ceiling to an inflation target corridor? Yes: http://macromarketmusings.blogspot.com/2014/08/about-fed-not-trying-hard-enough-to-hit.html

Bill Woolsey takes a closer look at Scott's conclusions in a recent Econlog post:
NGDP targeting in developing countries

Tight money and protectionist tendencies are likely related (Lars Christensen) http://marketmonetarist.com/2014/08/21/something-very-clever-bryan-caplan-wrote-in-2007-on-anti-foreign-bias/

Was 1968 a black swan event? (Scott Sumner) Delong on the mother of all black swans
Scott's response to a Binyamin Applebaum article: The Fed can fix high employment, it can't fix low unemployment
Progressives have been slow to embrace monetary policy: Better late than never, but early is even better
"...debt crisis are the result of NGDP growth crashes." Draghi doesn't understand what caused the eurozone double dip 
So far the EMH still comes out on top - 2001: A Market Odyssey (Shiller out of sample)
Krugman...too much for Paris? French socialists purge far left Krugmanites from government

Some Econlog posts from Scott:

In a response to a Vox article, Scott also notes that targeting total labor compensation could minimize employment volatility: http://econlog.econlib.org/archives/2014/08/nominal_gdp_tar_1.html
As interest rates fall from tight money and damage credit markets, bond prices rise: Never reason from a bond price change
Mr. Bernanke vs. the structuralists

Older workers as long term unemployed? Oh well...(Bonnie Carr) http://dajeeps.wordpress.com/2014/08/22/janet-yellen-writes-off-older-unemployed-doesnt-get-that-it-is-irrational/

These pictures tell a story (Marcus Nunes) http://thefaintofheart.wordpress.com/2014/08/19/ez-fast-going-down-the-drain-now-joined-up-by-germany/
Perhaps the public has "figured out" more than anyone suspects... http://thefaintofheart.wordpress.com/2014/08/25/snippet-of-a-conversation-at-houston-airport/

A trifecta of "central bank sins"? (Benjamin Cole) http://thefaintofheart.wordpress.com/2014/08/23/the-great-conundrum-faced-by-righty-tighties/
...At least he understood monetary policy! http://thefaintofheart.wordpress.com/2014/08/25/richard-easy-money-nixon-shames-barack-know-nothing-obama-tapes-reveal-nixon-wanted-easy-money-and-to-pack-the-federal-reserve-with-monetary-expansionists/

Ravi Varghese responds to Benjamin's "righty-tighty" post: http://insecurityanalyst.blogspot.sg/2014/08/what-kind-of-dollar-do-they-want.html

Evan Soltas looks at some housing factors which aren't getting much attention. Good post. http://esoltas.blogspot.com/2014/08/housing-weakest-link.html

(Kevin Erdmann) "A problem with programs like ACA is that they muddy the usefulness of GDP. I'm not sure they even effect growth rates coherently, except in the very long term." http://idiosyncraticwhisk.blogspot.com/2014/08/aca-survey-from-philadelphia-fed.html
"...there has been a real loss in potential GDP growth, due to the allocation of capital to real estate in lieu of more dynamic productive assets." http://idiosyncraticwhisk.blogspot.com/2014/08/squaring-circular-logic-of-interest.html

Lorenzo does justice to the topic with an in depth post: http://skepticlawyer.com.au/2014/08/27/ahistorical-pomposity-and-gnostic-sneering-why-academics-write-deep-crap-about-neoliberalism/

Hang on! Don't tighten yet! (James Pethokoukis) Here's why the job market is telling the Yellen Fed to go slow, in one chart

Also of interest:

Ashok Rao considers the proposal by Pranjul Bhandari and Jeffrey Frankel: http://ashokarao.com/2014/08/22/a-nominal-income-target-in-emerging-markets/

"There are two responses to technical change. Raise output, or lower inputs. Since 2000 we've apparently been choosing the latter strategy, and that might be how we continue." (Dietz Vollrath)
http://growthecon.wordpress.com/2014/08/23/lower-skill-demand-in-the-21st-century/

Notes on GDP Measure and Time Aggregate Considerations

A number of factors appear problematic in today's GDP measures - although some suggestions represent more "practical" concerns than others, of course. Happiness...do we really need to be able to measure that? Even though doing so appears impractical, this seemingly elusive factor would not actually be that difficult, were time aggregates a part of traditional measures. After all, the ability to optimize time use potential could bring happiness factors within reach of one's economic outlook. Even though much about happiness involves personal decisions, it certainly helps to have more economic choices with others in our midst, to make that process easier.

Local coordination patterns would mean gaining better control of our time, through direct negotiations with others. One good argument for the utilization of time aggregates (services time use potential among local groups) is that immigration would ultimately come to be perceived as a positive - rather than a negative - by many. How can citizens have positive perceptions regarding "excess" immigration, when nations impose severe limits on their members who are allowed to heal? Should the capacity for healing be opened to all members of society, few would still be perceived as outsiders who supposedly only want to "take" needed services from others.

One common argument as to the "inadequacy" of GDP, is that technological advancement is not easy to factor into societal gain through economic measurement. However: this argument often has an underlying implication, which questions the need of citizen involvement as vital for future growth. Who needs the economic time representation of people (on a wide scale) if automation can do the bulk of the work?

For me, this line of reasoning is a fallacy, because economic activity is part and parcel of human life. No one can afford to be fooled into thinking that wide swathes of society can somehow go without meaningful work and still be able to retain integrity and identity. A primary reason we realized such gains from technology in the past, is that it freed us for more challenging intellectual work. No one can afford to stop this process now, just because of the institutional hurdles in the way of direct use of our digital realm for the benefit of all.

What's more, going too far with the idea of robots as the only workers necessary, could present problems for time use as a sufficient monetary anchor. That would be the case not just for market monetarists and economic activity in general, but for everyone at a personal level. This is the time to be moving ahead and making decisions how to spend time among one another - not insisting there are no ways to reasonably do so. Lest anyone forget, humans are central to economic activity. The work that people seek is every bit as much desired consumption, as any vacation. One only need look at forfeited vacation time statistics in the U.S., to get a feel for the forms of consumption which people actually desire.

However there is a more immediate issue, which presents further difficulties for GDP measures. Production measures for services had already skewed GDP results in recent decades, but calculation and measure of present day healthcare is becoming even more murky. Unfortunately, healthcare uncertainties are making it difficult to accurately pin down quarterly components, which impact ongoing economic flows at multiple levels. As Kevin Erdmann recently noted about the ACA:

Frankly, in an industry so screwed up, I don't understand how they can begin to account for economic activity. What is the market price for a medical procedure that is "billed" at $2,500, but settled with your insurance company for $200, with a $20 co-pay?

In a recent post I looked at historical timing in the U.S. as a possible factor for healthcare monetary confusion, in that its current structures were formed when government taxation was also increasing. Almost from the outset, there were hidden costs and redistributive structures which were all but impossible to disentangle. In the above linked post, Kevin Erdmann also noted problems which healthcare presents for inflation, which - while present in education - do not show up in statistics to the same degree.

All anyone can really presume is that education is at least obvious in terms of what is expected of those who participate. That in turn makes the monetary flows easier to understand. Whereas nothing about healthcare is obvious: whether it be one's personal health outcomes, how much money might remain for administrative costs and expenses at the end of the quarter, or even what insurance can be expected to cover. While aggregate skills capacity is needed in all areas of our lives, skills and time optimization are desperately needed in healthcare to assist in some of these uncertainties.

Otherwise, not being able to measure monetary flow and adjust accordingly, is like going down the road in one's vehicle, and not even knowing what gear one should be using. In all of this, it is important to remember that GDP is not a static concept. The essential nature of GDP is that it represents economic flow. There are aspects of income which shape shift within the flow for past and future concerns. But healthcare has become one giant shape shifting monster, which is dependent on factors which go well beyond the economic flows of the present. This situation only becomes more untenable as time goes on, hence it needs to be addressed.

To be sure, time arbitrage is the high hanging fruit in the tree. Just the same, it is still well worth the harvest efforts that would be necessary. If services are to remain a vital part of tomorrow's economy, everyone's time is needed, in order to make it happen.

Update: I neglected to link to an article from FT Magazine earlier this summer which questioned whether GDP had outgrown its usefulness, hence this post serves as an apt "parking spot".

Sometimes, Change Just Happens Before We're Ready

For all my talk about needed change and progress, today I unexpectedly find myself in...an environmentalist position? At the very least, commenters might call me a tree hugger! After not posting yesterday I was determined to make headway with a pile of notes on the desk this morning, only to get some unexpected news. In a sense I should have known because the warnings were there: survey markers were going up around my walking trail but I didn't pay them much mind.

Then, another walker I've seen on the trail for the last three years told me, "They're getting ready to build a softball field. Apparently the work starts in two months." Another short walking trail had recently been laid in the new city park on the edge of town. Except the new trail seemed like the afterthought it really was, hence held little appeal. As a result that only increased the traffic of joggers and walkers on this (longer) half mile trail, which loops back and forth through a mature grove of pecan and oak trees.

No wonder the mention about the softball field was buried somewhere in the local paper where few would even notice. Why was this little strip of school property chosen for a makeover - situated as it is between the two football stadiums - when other properties would have provided more room? Just thinking about the old pecan trees - which will likely be pulled out of the ground - is like pulling out a piece of my heart, and the work will begin in the middle of this year's pecan harvest.

Of course there's plenty of other pecan trees, for they grow wild in this part of Texas. People have picked up pecans freely along the walking trail for years, much as they do in other public areas. Still, this grove and trail is in a welcoming spot, where people have always felt free to exercise or just relax and watch the passersby. In small towns where Main Streets are not much more than pharmacies and a few lonely businesses, it means quite a lot to have places on any day of the week where one can be outdoors in trusting environments.

One older tree by the parking area is well over a hundred years old. I still look at it and remember Dad scrambling up the trunk (shortly before his ninetieth birthday), to shake down pecans we couldn't reach, some years ago. For many years, Dad has paid school taxes from the pecans he's been able to sell. For me it always felt more rational to just pick out as many pecans as possible to eat at home. But then...exercise is exercise!

As Joni Mitchell sang, "You don't know what you've got till it's gone." I never even started my two mile a day walking regimen till 2011, and the trail was probably built years after my high school graduation. Twice a day I've bicycled in recent years - early morning and evening - to the same area where I began and completed the education of my youth.

Property decisions such as this are of course the school's prerogative, for they have much more money at their disposal to determine public areas than the city does. However like so many things school related in small towns, that tends to skew resource use for local activities towards people who are still quite young, along with their parents.

That's why the local football stadium might seem incredibly over the top to some, given the relative lack of resources in other shared areas. And yet, most families are going to appreciate public areas given over to group sports, more than general use areas...right? General use areas must be for older folk such as myself, who often walk along in solitude. Don't older people just want to stay home and watch TV? Or so the rationale apparently goes.

Like others, I'll adjust to the tiny trail that was added to the city park on the edge of town. It will probably become the new morning spot, where I can organize thoughts for the latest post. Even though the stay in my old hometown is of a temporary nature, this particular change just happened to come along before I was ready. The shade and comfort of the pecan grove will always remain in my memory.

Notes on Nominal Targeting and Services Potential

In recent years, more individuals are considering the possibilities of a NGDP level target for greater economic stability. However there are still some unknowns, regarding the long term viability of a nominal target. Worries about needed skills sets in the marketplace still translate into long term uncertainty. Could lower employment levels negate some of the primary reasoning behind aggregate spending capacity?

Should the contributions of income and wages become less than a nation's commodities markets, supply shocks could become greater problems in nations which lose employment over time, even as they would be measuring income and wages as a component of the primary anchor. These issues are worthy of consideration, as developing nations also consider nominal targets. Low employment in relation to commodities could make a nominal target problematic in some circumstance.

How can the U.S. return to a full employment trajectory, and move beyond the obvious constraints which remain since the Great Recession? Even though labor force participation is still varied and complex in developed nations, more needs to be done in the years ahead to ensure it remains so. Without a doubt, a nominal target would be an easier sell to the public, if it also plays a role in overcoming labor market deficiencies. Even though monetary policy alone cannot bring about full employment, the degree to which it can assist the process, has been obscured by the fiscal and monetary battles which are far from resolved.

One recent aspect of the fiscal/monetary debates are fiscal helicopter drops versus open market operations on the part of the Fed. Nick Rowe pointed out in a recent post that monetary means are better than helicopter drops, because something remains after the fact of open market operations on the part of the Fed. There is still tangible wealth, should the Fed buy land instead.

Even though this makes more sense for Fed purchasing operations, a problem remains in that the value of land and related assets mostly reflects the value of skills sets which are being utilized in the marketplace. Presently, asset holding is frequently a strategy for needed skills sets which often cannot be taken for granted.

If skill sets are artificially limited, asset value and hence growth potential are also limited in aggregate. This also has bearing on the fact that the Fed can only support additional growth in the marketplace when it sees those efforts in progress. In other words the Fed cannot generate additional growth on its own, without coordinated intentions from supply side efforts in the marketplace. If it seems as though the Fed has more power than anyone else, some of that could be a result of self inflicted wounds all around.

First, the Fed needs to be aware of intent on the part of the public to generate new growth, and advocates for growth do exist. Perhaps next year instead of Jackson Hole, there can be a growth summit so that advocates from around the country can meet one another for the first time. (Hey a little daydreaming doesn't hurt!) Once the process of community projects is under way, the Fed can provide assistance for the incorporation of these activities into the measurement of GDP. Ultimately, compensation for these new economic projects can be explained on terms which are understandable to the public.

The fact that only so many jobs can be generated either through redistribution or production residuals, has slowly placed a cap on the amount of growth which has been possible. Fortunately,there is a way to overcome this problem: make services standalone wealth which count on monetary terms. Where government backed services and private profit can only generate wages and income up to a point, compensated time arbitrage can continue past the old boundaries.

Why is this the case? When time use is coordinated equally for local services needs, each matched hour leaves no remainder which needs compensation from redistribution or other profits. In other words, there is no debt: hence matched time becomes a standalone source of new wealth which is also monetary in nature. Even though local services might still have some characteristics of the earlier fiscal backing, they would no longer be exclusive and restrained to strict knowledge use choices. Knowledge work would only be limited by the available time on the part of local residents.

As standalone wealth, it would become possible to think of services on monetary terms. As a result, communities and regions which adopted these systems would be able to generate both work and product through their own capacities and resources.

After a certain point, this would make the newly created wealth of services just like any land, commodity or other asset which could in turn receive backing from the Fed. In other words, services formation as direct standalone wealth, could eventually become a part of open market operations at the Fed. The only limits to growth would be the actual limits on local time use coordination, for services.

Where is Economic "Certainty"?

Recently, Giles Wilkes posted about a brief stint in the sharing economy at a young age, which he was all too happy to leave behind for more secure work. Indeed, a reliable occupation is what most individuals seek. And yet the marketplace only generates those certainties up to a certain degree. Why? Here's Wilkes:

You don't need to read Coase to know that there is a reason for firms to exist...Investing in your staff rather than trading them, is so often the obvious and intelligent thing to do. 

In the midst of labor market uncertainty, it's easy to rationalize that none of us should have to trade ourselves in the marketplace on a daily basis! Still, I'm old enough to remember that some individuals put up with the drudgery of a single job over the course of a lifetime. Why do we find it difficult to generate working environments between seeming extremes? Even the most sought after work tends to be externally paced, hence beyond optimal levels for mind and body. Instead of workplace challenges which leave room for work life balance, people find themselves sorted into all or nothing economic options.

Either way - when certainty disappears, it pays to look more closely. What has the marketplace not been able to provide in terms of time use balance and workplace opportunity? Can missing service components be readily defined, and if so, are they of sufficient value to provide real merit in time arbitrage settings?

For instance, there's little point in saying that free markets are the "problem", when the reality is free markets are what we are collectively willing to make them - both as providers and consumers. This is particularly true of healthcare and education, which never even had a good chance of free market definition in the 20th century. If they are not closely reconsidered, neither may have a chance to remain a substantial part of the marketplace in the 21st century.

While governments continue to throw up barricades which reduce work options, it helps to remember that private interests and individuals continue to ask them to do so. And yet we wonder where the jobs are! Instead of getting bogged down in yet another dispute over "needless" regulations - for instance - stop to consider where regulations actually make it impossible for all of community to freely participate in the workplace. Often that aspect is hidden, until the possibility of intentional exclusion is considered in a number of contexts.

How might individuals coordinate to recreate work environment certainties which have been lost? In other words, how could local communities envision the Coasean frameworks which allowed individual firms to maximize social and economic options for so long? Part of the answer involves integrating better and more complex services formations with local production potential. Some organizations have leaders who are good at finding places where everyone can fully participate: same principle, only at the level of community. In a search for coasean certainty, I found this quote:

Not merely is the division of labor limited by the extent of the market, it is limited by the predictability of the extent of the market. Organization matters, then, because various organizational forms have quite different abilities to eliminate sources of uncertainty - and therefore to support a more elaborate division of labor.

Predictability is key, and it accounts for how a firm is actually able to organize itself. Many firms were able to generate internal certainty in their labor force, so long as they could rely on dependable markets for their product. As the marketplace for tradable goods has come to rely on world markets, local economies can regain dynamism by seeking the same flexibility and adaptability which allowed their more international counterparts to thrive.

By adopting resource use diversity under common local frameworks, uncertainty can be diminished through integrated production networks. Today's automation and technology not only make it possible to bring production settings to small communities, but also the services which were once only possible to achieve in major centers. To be sure, some will continue to insist that the days of economic certainty are gone, but by no means does their reasoning need to be the final word. There's too much potential which has yet to be tried.

Was Medicare Availability Linked to a Black Swan Event?

In a recent post, Scott Sumner looks at the gradual fade out of gold redemption over a forty year stretch in the U.S. Why did this black swan (i.e. relatively rare) event occur, after a long historical period in which gold (and related) standards remained quite stable? To be sure, there are no easy answers. Like Scott, I am inclined to agree with 1968 as an identification point, when the "gold window" was closed to foreigners. And as Scott also reminded his readers: the idea of fiat money as capable of replacing a gold standard, was inconceivable to populations for a long time.

Gold (and silver) standards among nations were particularly tested by WWI in the early twentieth century. Those problems were exacerbated, with the monetary policy stumbles which led to the Great Depression. Even though the path back to a gold standard was broken, fiat money nonetheless implied a changing relationship between national governments and their citizens - a relationship which still has not found real certainty. To what degree does today's knowledge economy matter? Has automation begun to turn the tide toward regression in this regard? How has services expansion affected attitudes toward fiat money?

Perhaps it depends on the services in question, and the degree to which citizens are capable of meeting those responsibilities through their own means. For instance, educational services in the U.S. were built on direct taxation which (excepting Medicare related retirement expectations) generally fall within budget capacities and the reasoning of participants - for better or worse. For the most part, those expectations were adopted in the U.S. before the twentieth century - in other words, prior to when monetary systems moved to fiat representation. In spite of its deficiencies, the transparency of property taxation accounts for much of public education, at local levels.

However, government responsibilities with healthcare needs are not transparent - nor did they really have a chance to start out that way. Substantial changes came about in healthcare requirements in the same time frames which Scott Sumner noted. Much of their current structure was established when taxation systems were expanding and increasing in complexity - hence hidden redistribution and subsidies which go well beyond the central components of the system. Nothing about this vital service role was directly conceived in terms of actual redistribution or monetary flow.

Healthcare often lost access to local coordination, once its most important elements shifted to prosperous regions of the country. Costs do not necessarily match up to the money that's available at any given moment. As a result, quarterly budget imbalances have become more difficult to ascertain, and healthcare accounts get shuffled around like so many bills at the end of the month, when there's not enough money left in the check book. In spite of increased government responsibility, the actual end product - in aggregate - is slowly being trimmed away.

With present day limitation on participating physicians, citizens are becoming responsible for healthcare budgets to a degree which increasingly goes beyond their own budgets. Indeed, the lack of clarity has generated imbalances throughout the economy: imbalances which cannot be addressed until healthcare needs are met and supplied more directly.

There were some interesting similarities between the years Medicare became available to the public, and the years which Scott mentioned (1968, 1971, 1979) as important for fiat monetary representation. I found this quote from Trends in Health Care Coverage and Insurance for 1968-2011

In 1968-1974, only persons aged 65 and over were asked about Medicare coverage. In 1976, Medicare coverage was estimated through reasons for not having health insurance coverage. Beginning in 1978, Medicare coverage was asked of persons of all ages.

Of course, Medicaid and its budget needs are not even considered in this context. One wonders: to what degree did government's new and open ended burdens for healthcare, play a part in the inability to maintain a gold standard?

None of this is to detract from Medicare and Medicaid, which have been lifesavers for so many. Rather, the problem is the way in which this system was conceived, alongside artificial limitations in supply which never should have been considered necessary. If that were not enough, we also got the artificial promises of healthcare insurance to make up the "difference". Granted, some products are worse than health insurance, but not many. As insurance gradually scales back in what it covers, unsuspecting customers will increasingly be left with the tab.

In "The Story of Medicine in America" (written in 1973), a quote which ends the book sounds oddly familiar, in spite of persistent government attempts to settle the matter:

Medicine in America is currently at a crossroads, with the path to the left leading to socialized medicine, the path ahead to the semi-federalized HMO, the path to the right following the status quo. The road the American physicians will choose is still uncertain.

Often we hear that education looks just like it did 100 years ago and is ready for a complete overhaul. Even though healthcare has changed dramatically in the past 100 years, everything about the way it is delivered also needs an overhaul - no less than education. Perhaps - if a lot more people were allowed to practice medicine - fiat monetary policy would not remain as threatening to some constituencies as it is now.

Incremental Ownership in Knowledge and the Active Student

Knowledge has the capacity to be incrementally "owned" (through compensated time use) whenever it is actively "put through the paces" in some capacity by more than one individual. In a services based economy, we don't own knowledge outright in an exclusive sense, nor do we need to because knowledge is both iterative and circumstance dependent. How unique or important is the particular transaction in time...versus the knowledge component of the transaction?

Often we have no way of knowing, and a lot of time may pass before any larger societal value (beyond the participating individuals) even becomes evident. Other times, the local focus provides gains at the level of the individuals involved, which might not otherwise be possible through replicated knowledge. In the larger sense, economic knowledge to wealth gain is a collective result of our time use focus. We own the time in which applied knowledge transforms thought and/or environment.

Time use is an important distinction for knowledge capture as "ownership", in that knowledge particularly comes to life when we engage with it at economic levels. Otherwise, knowledge can become a static wealth component, "sitting" on some conceptual version of a shelf or in reserve for a limited market.

Since 1) we can't replicate our time availability, and 2) we have time in the exact same quantity (individual and collective), time becomes the most reliable measure for monetary compensation and record keeping. This framing allows knowledge use to write the story of local time engagement, which becomes a record for local economies in (cumulative) economic or knowledge use histories. Even though an individual may not remain in one setting for a lifetime, personal records re his or her forms of knowledge use engagement could still exist.

Such record keeping is also an aspect of local student participation. Measurement of time/knowledge use (in equal measure) for GDP could easily take place on these terms. Eventually, these efforts could generate services stability in terms of fiat money representation. Until now, the true capacity of services formation - whether by public or private means - has remained murky at best with the partial representation of today's institutions. As a result, many services formations continue to revolve around the most successful cities and regions.

Sometimes one hears that knowledge now belongs to the digital realm and has "no business" being "owned". Why have ideas regarding knowledge freedom not made headway...already? Often, advocates of knowledge freedom have different conceptual frameworks which are not easy to reconcile. What's more, freeing knowledge without a wealth building context of time use, could endanger some aspects of knowledge which are considered vital. Do those vital aspects exist because of exclusivity...or something else? Often the answers would be quite different, and those differences would be reflected in the marketplace afterward.

As a building block for wealth formation, knowledge use would become the "unseen" component of incremental ownership. Whereas, "seen" components of incremental growth could be represented by flexible and changeable building components in local community. Local property and building component investment shares could also improve the chart which Evan Soltas was concerned about in this post. Too bad incremental ownership isn't on the agenda at this year's Jackson Hole gathering!

Education as a whole could especially benefit from an incremental or "stairstep" time use approach to wealth creation. Individuals could supplement what they learn through primary sources, by generating applied settings with peers for knowledge use. A wide variety of services settings -  alongside ongoing local business projects - could become central components of local economies.

Possibly the best option for reducing educational problems at multiple levels, is allowing students to become directly involved with ongoing community economic processes. Doing so would make a difference not just for the relief of excess staff and already stretched lower income parents, but for the students own self esteem. Not only would assigning (and compensating) student responsibility increase their ability to retain knowledge, it could further involve students in the services goals of their own communities. This in turn could lead them to local investment opportunities at a young age, under the community business "umbrella".

Participation in a compensated services economy would be just as much a possibility at the age of ten, as it might be at 30 or 90 years of age. If someone is learning different aspects of knowledge use all the time...are they a student? Are they a services entrepreneur? Why should it matter? In a sense the process is just an updated version of engaging with knowledge use. Certainly it would be a major improvement, over the disappearance of knowledge use behind the walls of the present.

Midweek Market Monetarist Links and Summaries - 8/20/14

Whenever Scott Sumner suggests that readers may want to skip a post, it seems to get more commenters! The Millenials are the real "Greatest Generation", (reluctantly acknowledged by a grouchy aging boomer)
In some quarters, monetary offset was taken into consideration, in 2008...Monetary offset in Australia
Different trend rates for population growth need to be taken into account: Who had a better first half, the US or Japan?
Of course, jobs are still an issue: IP date shows the recovery is continuing
Like Bernanke, Mark Carney faces institutional inertia...There are two types of central bankers
Why is Krugmen so forgiving of the ECB?
Higher government spending in the eurozone would not help right now. Is the eurozone's problem excessively small government?
In Japan there is lots of confusion about nominal aggregates: Don't talk about wages and incomes

Scott Sumner (at Econlog) takes a closer look at Tyler's suggestions for NGDP targeting: Tyler Cowen on ECB policy
"Tight labor markets do not cause rising wages": Never reason from a price change, even in Japan
Does grade deflation create academic "depressions"?
Slower population growth does not have to impact AD

Where is the rate of real output growth? (Marcus Nunes) http://thefaintofheart.wordpress.com/2014/08/14/needed-truth-in-textbook-writing/
The Fed seems to be operating in a different "galaxy"! http://thefaintofheart.wordpress.com/2014/08/16/inspector-clouseau-hrundi-v-bakshi/
By no means is it inevitable and we need to take steps to avoid it: http://thefaintofheart.wordpress.com/2014/08/16/barry-eichengreen-secular-stagnation/

David Beckworth is not convinced that it's all downhill: http://macromarketmusings.blogspot.com/2014/08/secular-stagnation-missing-forest-for.html
This is a "bug" the Fed doesn't need to catch! http://macromarketmusings.blogspot.com/2014/08/the-secular-stagnation-bug-is-spreading.html

Russia now has 331 protectionist measures in place (Lars Christensen) http://marketmonetarist.com/2014/08/16/if-goods-dont-cross-borders-armies-will-the-case-of-russia/
Headlines aren't necessarily a good indicator..http://marketmonetarist.com/2014/08/18/talk-about-being-disappointed-by-the-bundesbank/.
Friedman went further...http://marketmonetarist.com/2014/08/19/at-25-bob-hetzel-had-become-a-friedmanite-at-80-milton-friedman-had-become-a-hetzelian/

Evan Soltas is not convinced, regarding secular stagnation: http://esoltas.blogspot.com/2014/08/secular-stagnation-meet-data.html

Also of interest:

Diane Coyle notes Ed Glaeser's more positive contribution to the stagnationist debate: http://www.enlightenmenteconomics.com/blog/index.php/2014/08/innovation-the-romans-and-us/?utm_source=rss&utm_medium=rss&utm_campaign=innovation-the-romans-and-us

The difference between 2% and 3% growth is more than it may seem (Timothy Taylor) http://conversableeconomist.blogspot.com/2014/08/whats-difference-between-2-and-3.html

Please, can we stop talking about a return to the gold standard? (James Pethokoukis)

Knowledge is Still the Wealth That Matters

Sometimes it's easy to think, perhaps this is no longer true. Understandably so, when investment and time spent on one's own education do not necessarily provide the rewards they seemed to promise. Let alone when people now fight over redistributing monetary gains from the already wealthy, instead of the rights to knowledge use which the wealthy so often have. How do we account for the arguments that suggest we need not "waste our time" with wide swathes of knowledge? What's more, how do we approach particularly important aspects of knowledge use, which many of us are supposedly not "smart" enough to take part in?

By rejecting the "not smart enough" rationale of exclusion, it would be possible to generate a stronger economy and a still missing services marketplace. But in order for that to become possible, ongoing commitments would be required, for the mutual support of our own mental capacity at peer to peer levels. Such systems would also require commitment to generate forms of knowledge which particularly matter, so that we can find the means to reintegrate knowledge use and vital services into our economic realities.

One important aspect of knowledge use potential, is a willingness to at least respect the use of logic and hard won wisdom on the part of the disadvantaged and marginalized. Look closer, to discover when these groups are making honest efforts to get along with others in spite of their difficulties. Constantly these individuals are expected to do so, and yet receive little feedback or appreciation for complying with demands on a regular basis.

In too many instances, people who appear as though indigent, are not as thoughtless or irresponsible as they appear to their own families and peers. Not every member of one's extended family can be a "smashing material success", for instance. By ignoring logic and careful reasoning from others where it does exist (particularly when such places prove "inconvenient"), it only becomes more difficult for society, when people forcefully demand these qualities in character from their leaders.

It helps to remember that societies which don't maintain critical thought and logic in high school settings, may believe logic is mostly necessary for those in power, anyway. But without the widespread use of logic or critical thought in ongoing life circumstance, there are too few means for the excluded to help themselves, particularly when their own societies no longer have room for them to come to the negotiation tables of higher affairs.

The good news is that a more inclusive economy is a decision we can make for ourselves. Eventually - should enough of us do so - governments will begin to back us in our efforts. No one has to give in to the notion that "only the best" are needed for knowledge use: a stance which can even put individuals into competition with their closest friends. Including everyone is a real possibility. Governments mostly hesitate to do so, because many individuals have also hesitated for so long.

When all the hesitating is done and we collectively agree to become our own safety net, our own personal chances for long and fulfilling lives are also increased. The only way that knowledge use can stabilize as our primary wealth source, is for the door of knowledge use to open to all who wish to participate. This could be our future, instead of the severe limits which are now imposed on economic growth - let alone the capacity for longevity among lower income levels. With concerted effort, knowledge can still remain the wealth that matters most.

Political Bottlenecks = Exclusionary Outcomes

Often, there are individuals who - because of their aversion to either business or labor interests in general - don't find it useful to seek solutions which consider greater economic integration or inclusion. However, both business and labor formations are in a state of absolute transformation. The very idea of labor could be changed, as well as business formation, before all is settled. Nothing about our economic present exists in the absolute forms of labor and capital, which opponents on the left and right still imagine.

Political bottlenecks present more problems for growth and continued progress, than it may seem. Tactics born of obstinacy mostly lead to the same exclusionary outcomes, regardless of political bent. As a result, sound monetary policy may appear to both groups as accruing to those who don't "deserve" it, rather than as a natural representation of aggregate spending capacity. Wherever dialogue is simplified to the point that imagined differences are highlighted, the greater good gets diminished in the process.

Some commenters on the left - for instance - repeatedly refer to Say's Law as vulgar. Someone please tell me - how is it even possible for balance in supply and demand, to be considered vulgar? Granted, my view of Say's Law may be more simplistic than that of either economists or everyday individuals. Just the same: the wish to give Say's Law a chance, is generally based on a desire for inclusive and positive outcomes.

To be sure, Say's Law has been abandoned in the present. Economies of scale have had some bearing on this, in that they are still expected to work for services formations and centralized settings. What gets missed in all the political posturing, is that some economies of scale as they are now recognized, are long overdue for change and adaptation. Some are more effective than others: a fact which neither business or government interests has yet faced. For instance, economies of scale don't apply for (time use) services as they do for separate product formation. Say's Law particularly needs to be utilized for service formations, in order for redistribution of any kind to remain possible.

Thankfully, there are voices of reason in spite of today's political bottlenecks. After watching this video at Digitopoly, I thought about what Joshua Gans was trying to accomplish. People like him do not want exclusionary outcomes; they want to rebuild and redefine a future which includes as many individuals on the economic stage as humanly possible. Before any leap of faith is possible however, the moralizing and distracting noise of Marxists and internet Austrians both need to take a break. Change is already here, and denying that can hardly lead to good outcomes.

By the same token: when anyone stops to think about why one percenters have so much wealth in the present, most of the answers have little to do with moral reasoning. Many imbalances are about a world which attempted to utilize centralization and large economies of scale, well beyond their natural capacities.

Thus the challenge is not to figure out how to "siphon" from the one percenters (which is impossible anyway) but to look more closely to find the economies of scale which actually fulfill productive roles. For instance, where economies of scale still work well for physical transport of goods, they no longer perform as well for the work of the mind - particularly in cities - as they once did. Digital roles now need to partially supplant cities in terms of economic scale, if knowledge use dispersion is to continue and grow.

Just as important: some economies of scale for physical product could change as well, if local economies are to take charge of their own destinies. In particular, local 3D printing capacity could turn building components and recycling options into high value local economies. People on the political left and right need to get past old ideas of capital and labor, which have little relevance for the present. Labor markets are now murky to a degree that in many instances, this concept does not even have substantial bearing on local economic outcomes. Both labor and capital formations need to move beyond centralized settings, before economic engagement and resource use can find more inclusive outcomes.

Expectations, and Explanations for "Sticks in the Mud"!

In the past year or so, I have written several posts considering how expectations are affecting economic conditions. Still, I'm surprised that confidence in the economy has continued to drop, since the Great Recession. James Pethokoukis took a closer look at expectations measures in this post.  As it turns out (and I'm not sure when these measurements began) expectations regarding economic conditions have only been worse 16% of the time, than they presently are. As to how individuals feel about business conditions, only 11% of the time has been publicly expressed in more negative terms.

Some readers may be convinced that I'm just looking for "bad news", hence I apologize if it seems that way! There are a number of bloggers who routinely emphasize the positive whenever they can. (Left leaning) Bill McBride of Calculated Risk comes to mind. Also Mark Perry (right leaning) of Carpe Diem, who was inspired by Robin William's "Dead Poet's Society" to seize the day - hence his blog name.

What about those who sometimes come across as "sticks in the mud" bloggers? Admittedly, a few have made their reputation from this particular stance. At first glance, differences in rationale for pointing out stark realities might not be obvious. For instance, there are internet Austrians who know that something "bad" will happen at some point...and then they will be vindicated! Urban Dictionary describes Debbie Downers as "Someone who prefers to allow things of seeming enjoyment pass them by." Is that really what is going on? For instance, James Pethokoukis takes an online route similar to my own, with his regular reminders that all is not yet well in the economic realm - in spite of encouraging statistical appearances.

However, some of us occasionally highlight negatives not to make more of them than they already appear, but as a reminder that those negatives provide impetus for the real economic change which is still needed. Denial continues to run quite deep, and the monetary causes of the Great Recession are still not understood - let alone the more important non monetary causes. Glass "half empty" or no, there is much more work to be done for continued economic prosperity, than policymakers have (openly) contemplated or discussed with the public.

Market monetarists who occasionally "grumble" about the loss of the former growth trajectory, do so because they are concerned about those who remain left behind, in a lackluster recovery. Marcus Nunes, Bonnie Carr and Benjamin Cole are just a few of the market monetarists who happen to be in this category. And yet, I can scarcely blame any market monetarist who seeks to highlight the positive, because we are all in need of some relief right now.

Emphasizing positives and negatives can be a delicate walk. Normally, self interest (greed?) would provide plenty of impetus for growth. But as excessive caution continues to rule the day, the once reliable progression of self interest has in some instances been replaced by fear. That's one reason why none of us can afford to become too despondent in our message. When fear takes over - as has already happened to some degree - people lose confidence in continued growth and prosperity.

Still, as a market monetarist and an advocate for growth, I have to stay on message regarding what could happen if a more inclusive economy is not sought. I want the banner of growth to remain with this group - if only because I'm clueless who else could take the growth banner right now and do it justice. Too many people have been retreating back into their political corners as of late. Too much fear underlies today's monetary policy as well, and fear makes it all too easy to lose focus on societal goals. Hence, some of us who might appear as "sticks in the mud", are trying to make certain that no one loses sight of prosperity. I believe that such a focus could still make a difference, in the long run.

Time Use Arbitrage: Luxury, Subsistence...or Something Else?

Increasingly, people question the value of personal time use which involves the formation of product. Often, the marketplace is capable of delivering product on more practical terms. When this is the case, time use for production may appear as though a luxury good. That is, one could logically "choose" to use time in this manner as an experiential consumption good, when personal time use has already been "freed" in other respects. Otherwise, doing so may not appear logical.

Of course, the opposite side of this coin also needs to be taken into account. Where one has little economic access, personal production (either for knowledge use or separate product) - which does not match up with the time of others - may start to appear as though subsistence for one's survival. While the change in definition may be subtle, generally a "subsistence good" aspect of time use gains less respect. Digital product can be difficult to substitute for some educational options, because it is not always possible to know the difference.

Recently, Art Carden and other commenters at Econlog discussed the merits of using one's time in cooking, for instance. But on a more serious note, farming as an occupation - hence investment of one's time - has been questioned for decades. Larger business entities which are government backed and depend upon scale for what profits they can generate, dominate the marketplace. While other aspects of agricultural product may seem dubious given government subsidies, economies of scale make sense. What would the marketplace in food look like, if government did not tamper with it? We just don't know. As  Dietz Vollrath indicated in his post title, "Farming doesn't pay...for a reason."

A present danger is that the work of the mind - hence its potential role in services growth - is not always seen as a practical or even particularly important good. Many institutions back "no growth" experts in this regard by replicating limited knowledge sets, instead of seeking more. Often, life circumstances dictate that more "practical" (hard or low skill) work makes more "sense", for both individual and collective survival.

However I do not believe this reasoning is valid, because knowledge use and innovation are the forms of wealth which are capable of generating new growth and greater productivity. Any time that we utilize only previously generated knowledge - instead of current knowledge potential aggregates - asset formations are forced to represent the limitations society imposes on growth. Hence, the main argument for time (use) arbitrage as a basic good, is really about what it would be capable of capturing, which present day institutions often miss. Diane Coyle recently said of Dierdre McCloskey:

Her argument is that it isn't the accumulation of capital but rather innovation that is the engine of wealth, collective and individual. 

Innovation needs knowledge use. But without the societal support of knowledge use at local levels, the only innovation potential which is available, is between firms. Even within firm environments, innovation at grassroots levels may not materialize - let alone the firms which buy innovative product, primarily to suppress it. In much of the current realm of knowledge use, no one even has to buy innovative thought in order to suppress it. Often, useful ideas are either abandoned, ignored or else watered down, if a broad consensus does not materialize to support them.

While no one can expect today's institutions to support knowledge use potential in aggregate settings, local communities can do so - and become empowered in the process. What is the difference in this regard? Knowledge use is part of the bottom line for local productivity gains. Because a complex economy is now possible to coordinate in local community settings, productivity can be captured and layered (i.e. multiple time use gains at once) at all levels.

In summary: So long as an individual holds a job, many things in the marketplace are more reasonable to buy, rather than take the time to do, oneself. Hence our engagement with production that generates product separate from time use, allows a spread of production capacity, as ongoing time use can gradually be "dropped" from ongoing processes. However, services that require time use and knowledge are different: both in terms of "affordability" (Baumol's disease) and conceptual formation.

As a result, replicated knowledge (in order to "save" money in services institutions) too often shortens the capacity of further production in knowledge use, instead of furthering knowledge dispersal throughout the marketplace. This is why horizontal applications of time arbitrage need to be tapped, so that the spread of knowledge use is once again possible - just as it was in earlier stages of today's institutional formations. Eventually, the services that time arbitrage make possible, would not be thought of either as luxury or subsistence goods. Instead, they could become basic goods.

Skills Liquidity is Better Than Tax Complexity

One advantage of greater skills liquidity, would be the gains in negotiation leverage that skills arbitrage makes possible at individual levels. For instance, imagine being in what might appear (to some) as a "minimum wage" skills set position. This - by no means - need be thought of as purely a "starting" position.

Now, imagine negotiating directly with others in this (subjective) relative position, for what you think is the best "minimum wage" skill set approximate. Instead of remaining stuck in a marketplace which places a salary range as hostage to existing service offerings, the buying power of our time becomes a valid part of both the negotiation process and the definition of the product as well.

That in turn gives our time use greater validity than a minimum wage. The service options gained in such a scenario, have a wealth of possibility which simply can't scale up within the structure of today's institutional settings. This scale is only possible through coordination and focused education within given local populations, at equal time use points.

After all, when time is the arbitrage point, non monetary gains on the part of all concerned, make the negotiation process greater than the limitations of services which are negotiated beyond ourselves. Money comes into the picture, to support (compensate) a process which strengthens both participants, over time. That is the cumulative gain which goes well beyond zero sum, even in the short run. Granted, some aspects of voluntary skills divisions presently appear problematic, as Timothy Taylor aptly points out in this post. Just the same, some who need services, have only limited access to the prosperous regions which presently provide them in their present day "ultimate" form.

This is why coordination for aggregate skills gains - which would also generate new growth in GDP - is needed within local arenas which have been economically left behind. Eventually, new services wealth options could erase the negative skills approximate (by comparison to high skill) so many of us face in the present. Many of us appear as negative skills components, in a world which understandably seeks high skill components to perpetuate prosperity. The "price of entry" for prosperous regions reflects this reality, which can only be amended by greater knowledge dispersion. The price of knowledge use entry can be as problematic for illegals who cross into the U.S., as for rural residents of the U.S. who seek entry into prosperous coastal regions of the country.

When knowledge dispersal is inadequate across regions, tax complexities pretend to erase many of the vast differences in skills sets which are sought in developed nations. Policymakers of every stripe remain caught up in the pretending process. However, governments cannot even come close to providing what they attempt to promise in this regard - even if they sincerely want to be able to do so. No amount of redistribution is capable of filling the hole of negative skills capacity, which highly valued skills compensation in time use terms, has created.

Redistributive illusions become problematic, wherever high skills compensation occurs in the guise of artificially limited skill sets. Unfortunately this process tends to occur all too often, within what society defines as basic goods consumption baskets. In other words, it is hard for the average individual to engage in ongoing (lifetime) rational decision making processes, without access (at some point) to this basket of skills goods. The negative skills effect this generates on lower income, is a result of one's time use not being capable of making up the difference. One could work "nonstop" to access a primary component of the (basic) consumption basket, and still not be able to fulfill their responsibility (i.e.individuals without insurance or government support).

However, high income compensation in this regard is different from income compensation which results from engagement with alternative or luxury options. That is, being a one percenter in a common resource pool which represents resources separate from time, generally does not impede the ability of a poor individual to get from point A to point B in daily routine. For instance, those who get rich building yachts, may not affect common resource or time pool structures negatively in any measurable way. After all, no one (at least that I know) needs a yacht in order to get around.*

While some prosperous regions have adequate skills capacity for their asset to services monetary flows, other regions are forced to rely on additional resource capacity at national levels in order to make up the difference. Tax complexities have hidden the degree to which nations and smaller regions have become dependent upon one another. But tax complexities cannot be eased, until the differences between pools of time use aggregates, versus the much larger pools of resources separate from time, are approached and dealt with on their own merits.

As is too often the case, I wrote this post intending to focus on some individual components (in this instance, tax complexity), only to get sidetracked by a discussion in comments yesterday at a Simon Wren-Lewis post. However I really can't complain, because I came away from that comment thread with a better understanding of some of the differences between resource pools and time use pools. As a result, much of this post ended up rewritten.

Just the same I want to provide the links which initially prompted the post title. Tyler Cowen was concerned about tax complexities being subject to gaming and a lack of transparency, as indicated in this post. He also linked to one he'd written ten years earlier, and cited a recent experiment with piecemeal work which was paired with both simple and complex tax structures. In the experiment, participants were far less likely to respond to the complex tax structures - particularly individuals with less cognitive ability. Small wonder that targeting the ones who appear to be deficient in this regard is a perennial favorite strategy, for policymakers. A recent Tax Foundation post provides what turned out to be an apt illustration of Tyler's concerns, as well as some of his commenters.

*There is one resource separate from time which will become increasingly problematic, thus deserves mention: water. We have limited ourselves to building structures which use more water than necessary, which in turn presents problems for water use not just in developing nations, but increasingly, in the U.S. as well. Buckminster Fuller tried to address the looming problem of water in his lifetime and many supported his ideas. It is time to revisit what he already envisioned, which could solve so many of the problems of the present.

Midweek Market Monetarist Links and Summaries - 8/13/14

Bill Woolsey responds to Anat Admati's call to increase capital requirements for banks: What are Banks?
John Cochrane believes she has made substantial progress in a short amount of time, for her cause.

"...what happens in the real world when central banks increase the rate of interest they pay on reserves?" (Nick Rowe) http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/08/if-new-money-is-always-paid-as-interest-on-old-money.html
Some consequentialist/utilitarians understand! http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/08/why-do-i-hate-driverless-cars.html
For a long time, the overnight rate has been 1 percent: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/08/why-has-the-bank-of-canada-done-nothing-for-4-years.html
Lots of clarity from Nick, in this post: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/08/money-prices-and-coordination-failures.html

Ouch, that's quite a drop (Lars Christensen) http://marketmonetarist.com/2014/08/07/ecbs-failure-in-one-graph/
An eye opening post: http://marketmonetarist.com/2014/08/07/three-terrible-italian-gaps/

How long can they expect strong growth? (Scott Sumner) China on the Home Stretch
Governance is changing quicker than Westerners realize: Asian values
Markets could be reacting to the disconnect between unemployment data and GDP data. Why is the yield curve flattening
Arguments about the decline of the middle class don't come from utilitarianism: Scenes from a declining middle class
At least this monetary/fiscal approach would (seemingly) have a clear focus: Is New Zealand once again leading the way?
Brazil tries redistribution, but where is the wealth payoff? Brazil on the short end of a 7-1 score
Marcus agrees with Scott that Brazil defies easy definitions

Bonnie Carr responds to Scott Sumner's post re the yield curve. I agree with her assessment (and a graph from the Cleveland Fed) that real interest rates are still negative. http://dajeeps.wordpress.com/2014/08/09/slow-gdp-with-falling-headline-unemployment-rate-and-flattening-yield-curve/

Raghuram Rajan sees a very, very accommodative ECB. Wow, just wow. (Marcus Nunes ) http://thefaintofheart.wordpress.com/2014/08/06/when-your-brain-is-high-jacked/
Real threats are closer than they may appear...http://thefaintofheart.wordpress.com/2014/08/12/draghi-is-waiting-in-vain-as-known-from-the-play-for-godot/
David Glasner also has a response to Rajan's lack of monetary awareness: http://uneasymoney.com/2014/08/11/misunderstanding-totally-competitive-currency-devaluations/

Hourly participation is key. Benjamin Cole provides a Fed chart in this post, which shows how constrained it has actually been: http://thefaintofheart.wordpress.com/2014/08/11/the-european-central-bank-doesnt-listen-to-pimco-the-continent-fades-to-black-usa-next/

"Human capital is basically the dark matter of economics. We know it's there. In the end, it is probably the primary driver of everything that is important. And, we can't see it." (Kevin Erdmann) http://idiosyncraticwhisk.blogspot.com/2014/08/the-absurdity-of-blaming-capitalism-for_13.html

"Markets are probably not greatly undervalued, either." (Justin Irving) http://economicsophisms.com/2014/08/11/u-s-markets-are-not-overvalued/

Also of interest:

Large denomination bills is not just a U.S. mystery...(Timothy Taylor) http://conversableeconomist.blogspot.com/2014/08/who-is-holding-large-denomination-bills.html

This is a prime reason why many municipalities need to rethink their organization strategies in the near future. New jobs pay 23% less than those lost during the Great Recession (James Pethokoukis)

Thanks, Noah: http://noahpinionblog.blogspot.com/2014/08/yes-womens-labor-force-participation.html