Think of economic relationships as relatively unconscious patterns which - for long periods of time - are capable of working reasonably well. It is only when those existing patterns reach certain stages of maturity, that a rising price level for a widely diverse whole may appear detrimental to additional inclusion. And yet, further growth is always needed in order for systems to maintain their inherent dynamism.
If growth cannot take place through the primary equilibrium, the whole may need to generate miniature, somewhat conscious replications. Tiny and relatively complete wholes in terms of assets/production/services formation, can generate new growth. They can also provide ample evidence that a nominal level target matters in more than one dimension.
This economic expansion can take place in small "growth burst" environments, which can rise as they develop and slow as they mature. In the meantime local density potential is filled and further complexity is generated. At a certain point, the internal growth of knowledge use would become more important than locally needed production. Tiny local equilibrium (with its tiny monetary transmission) can grow without engendering traumatic shock on the part of tight money advocates. It would be growth which does not make the general equilibrium margin appear as though needing to encompass monetary policy "infinity". Many replications would stay relatively small, particularly the communities with walkable centers.
The unconscious element of a marketplace - i.e. primary equilibrium, is desirable in many respects. After all in the right circumstance it offers great flexibility, which contributes to countless collaborations and interactions among individuals. The fact that large systems work best with minimal conscious coordination, provides strength - as evidenced by the failed planned economies of the twentieth century.
What can be done, then, when primary equilibrium either needs to change or continue growing? Small local templates can be generated, which allow freedom of both individual and group action. Free markets also mean determining how to engender the participation of as many as possible. Perspective as to earlier circumstance is also important, to determine how varying approaches were once able to work well together. In primary equilibrium (i.e. international monetary flows for services), earlier approaches still work, but in a less dynamic state.
Most recently, production and manufacture were able to (widely) contribute to reliable services systems growth for more than a century. They were able to do so, providing multiple private interests had ample room for further growth in their own right. This long lasting production and manufacture trajectory also created the growth trajectory for GDP and output, which the U.S relied on until the Great Recession.
Only now has that earlier growth mechanism been cast into doubt. As a result, services systems now need to be able to generate further wealth through their own steam. Because services such as healthcare and education are so closely linked to government activity, it is difficult for them to make the transition in a broad based setting. The transmission mechanism of the monetary system still has considerable bearing on this relationship as well.
By no means is this the first time that the need for economic evolution has only been partially met, particularly given political realities. Yet the potential for combining past lessons with future possibilities, is often missed. Why? When push comes to shove and hard times call for structural reform, often the interests of those in power overcome rational suggestions. As a result, inclusive measures capable of honoring the economic intent of the individual, get pushed aside.
Indeed, maintaining economic complexity and vitality, seems to suggest creating conscious echoes of the larger whole. The best part? One need not know how much time to utilize, how many resources to add, or how much money to contribute to the economic picture. Rather, a well defined path for the ongoing "dance" of time and resource use, is primary. In this sense, a (miniature) nominal level target is not so much a hard rule, as it reflects the current environment of economic possibility - perhaps a monetary "season". Given the chance, money stands at the ready, for what people actually want to do. From "The Lost Writings of Wu Hsin" (HT Farnam Street):
There is a natural rhythm to the workings of the world. Some are discernible while others cannot be discerned. It is the dance between the two that creates action.How to consider a nominal target in this context? First, the inclusion of all participants makes the natural intersection of resource and time use easier to balance, which in turn provides a reliable measure. Locally recognized (and recorded) price levels are generated in time use and asset structures, which develop and mature over time. Meanwhile, the more "porous" or "open to the world" component of the local price level follows tradable goods, as they are integrated into the local assets to services equilibrium. The rise and fall of local growth trajectories would provide clues as to how various elements interact and affect growth, for the primary equilibrium.
System wide recognition of equilibrium "spin-off" makes it possible to approach a number of problems which are difficult to tackle on their own. Local equilibrium would make taxation more effective for needed services. Just one example: the underemployed and the poor face considerable taxation on both income and consumption. And yet their tax contribution is subsumed into a mega structure which can neither effectively utilize the "small" contribution (so large for the poor) or provide real value to those who are expected to pay it.
Yet populations remain caught up in asking why disadvantaged groups cannot adapt to the existing equilibrium. The question becomes unnecessary, when equilibrium is in greater need of "adaptation" than those who cannot readily enter. No one yet knows what the important services and knowledge work of the 21st century may consist of. No one can be certain yet, what the still missing marketplace actually wants and needs. But at least monetary compensation efforts can begin, as new participants stumble their way towards a more inclusive services and production environment.
Why should anyone go to the trouble to generate a more conscious form of economic circumstance? No one has to, by any stretch of the imagination. Still, doing so would allow our economic reality to move beyond the apparent stage of decline which some now insist is inevitable. To be sure, there is inevitable decline in many things and many aspects of life. But the idea of economic decline is not only premature (no asteroid on the way that I know of). It also ignores the hopeful realities of millions of individuals who by no means are ready for decline to be imposed on them by others. Indeed it is wrong to do so, for all too many in this world are at a stage of growth which has scarcely begun.