Time Arbitrage and the Nominal Factor

There is a chart of changes in the NGDP growth trajectory for the U.S. that Marcus Nunes often portrays, which illustrates a slow but steady drift from an earlier growth line. While the chart is indicative of Fed monetary policy realities, it also serves as a reminder that time aggregates continue to be pulled away from total spending capacity - as represented by falling labor participation rates. Falling participation rates affect the time aggregates which are so important for total spending capacity. Is this why some are not willing to commit to an anchor which includes time representation, as viable?

If this were not problematic enough: economic time value holds a smaller role in current measurements, even as the healthcare component of U.S. GDP continues to grow. Chalking this up to demographic changes, tends to miss the larger point of general equilibrium imbalance. These changes in economic norms are presenting problems for healthcare measures which further distort what aggregate spending capacity represents. Available monies vary to such a degree, that healthcare now distorts quarterly GDP reports.

This also matters, because healthcare is a major (and growing) contributor of any consumption basket that might be compiled - with or without a nominal target as a viable consideration. As James Caton is discovering through a recent series of posts, his ideas for a fixed reserve ratio aren't quite as simple as he'd hoped.

Indeed, the same problems healthcare adjustments create for income measure (or) aggregate spending capacity, mean similar complexities in determining the composition of a basket of consumption goods. These problems occur primarily because healthcare is being nudged to increase representation beyond the (primary or central) pricing equilibrium which is actually possible. From part of my response to James in the first above linked post:

A nominal target recognizes how asset formations and commodity flows coalesce around the use of time aggregates. Which is why a nominal target already has a fixed component which is more reliable than other variables because it has a constantly dependable relation to money use, unlike other resources and commodities which gradually change.

Of course, there's somewhat of a problem with the (still wishful) nominal target defense which I provided for James. Even though time use needs to be our most reliable economic factor, it has been increasingly been called into question: which is one of the main reasons I started blogging in the first place. No one can afford to forget that economies would not exist without the actions of individuals - robots or no. James Caton is one of a growing number who recognizes that a nominal target is far better than what currently exists. The challenge is not only to define why this is so, but how it can best be delineated.

However, a political obstacle lies in the fact that the present day Fed does not find these ongoing considerations important. Thus far the dialogue has taken place without their input. Many in those exclusive halls remain convinced that the elite can run things without the help of everyone else. Unfortunately, that is no longer the case. While some seek to determine the direction and intent of fiat money, further population representation on the part of money is lost in the meantime. Governments can forget that fiat money is only possible, so long as the representation of whole populations remains in the mix. In other words, the real strength of government relies on the strength of individuals.

While time arbitrage (compensated time use in coordinated time settings) is not a complete economic representation by any means, it would return balance to an equilibrium which continues to falter in time use terms. Compensated time elements would be standardized (compensated) in relation to local resource use patterns, hence serving as a focal point for economic activity. One's time use would leave an imprint on other economic components, hence unique local nominal "imprints" would gradually form. Time use would be an ongoing choice by which to engage with others in compensated activity. Matched time use would also correspond with local investment options, which give flexibility to time use decisions.

Time arbitrage settings would provide further economic momentum by extending local investment access to all citizens, instead of having them need to rely on government redistribution for one's retirement needs.* Since non standard (services production) time aggregates directly correlate with local standard production, the benefits of a fiat standard are easier to recognize. Once populations begin to coordinate services formation in direct relation to normal production formations, the ongoing struggle to return to a gold standard (in some quarters) could well lose the better part of its intensity.

Money becomes capable of providing growth capacity, when individuals are (once again) given the right to define product. How so? The innovation which counts most, is when individuals transform resource use so that large scale time use gains are realized - something that most single mission institutions have little incentive to provide.

When innovation occurs, monetary growth can sometimes be stepped up to accommodate resource gains, depending on whether innovation triggers further (local aggregate) resource use other than fixed time quantity. Even though the horizontal nature of time arbitrage does not directly contribute to the growth pattern, it provides the setting in which knowledge use becomes capable of remaining front and center stage of a given (local) economic environment. Since time use freedom is desirable, local economies would sometimes opt for infrastructure which would not be possible in a national setting.

Among the details which need deciphering, are some very basic questions as to what the economy even means today, for all concerned. Time use has been externally defined for so long, that few really know how they would prefer to spend their time - in any number of capacities. Even though many accept this as normal: when one's time use is externally defined for a prolonged period - particularly if other social access is at stake - control over one's destiny can be lost.

The best way to determine monetary representation at a personal level is to directly compensate the "search" itself, through time arbitrage. What's more, doing so provides a recognizable point of economic entry which is not possible in normal income terms. Where other forms of time arbitrage have been notoriously difficult to determine, these would be locally recorded and measured. This particular point of entry would not easily be challenged, by those who claim that (today's) QE does little to help where it is most needed. Today, QE is often challenged in terms of inequality for instance, by those on the left and right who insist it does not get to the intended "targets". (Of course an ongoing rise in low wage job availability indicates the argument is not that simple.)

Locally coordinated time and investment options would provide more direct means to counteract arguments against full monetary representation. As a result (at least one would hope), monetary representation would be less likely to be shorted in the larger whole. In other words, even the utilization of "tiny" production/services economies as viable growth, could help to prevent arbitrary caps in the larger equilibrium. One of the best aspects of local production, flexible asset holdings and services coordination is that the ties between the three would make it evident what "inflation" actually consists of. "Provable" small scale macro? To a degree, yes.

Importantly, the idea of equal time use cannot be separated from access to local investment, personal innovation capacity and ability to define resource use. Why? Cuba serves as a primary example in this regard. While they held up the desirability of equality in time use and knowledge gains, real knowledge use capacity was utterly broken, because of an inability to link knowledge use to resource use in marketplace settings. While their example is extreme, institutions in many countries accomplish the same negative knowledge use result, to a lesser degree.

What's more: the further hypocrisy for Cuba, was the fact their government finally took advantage of marketplace circumstance to generate more personal freedom for government representatives, while personal freedoms on the part of the population remained lost. Much as limited elements of the free marketplace exist for Cuban government officials today, the inverse also exists in the U.S. Here, many who are monetarily compensated for the use of high value knowledge sets have personal freedom, which is quite unmatched by those with low skill sets.

Knowledge use need not be defined either as winner takes all or lose lose scenarios. To be sure, time arbitrage in local investment settings would illustrate the desirability of a nominal target. Just as important: eventually, time arbitrage could also bring back much needed balance in personal freedom, for individuals of lower income levels.


*Should a local community "fail" at some point, locals would still have valuable skills sets that could quickly integrate into other settings which utilize time arbitrage. This could cushion the blow of failed local investments which one was counting on for retirement. The fact that knowledge use would also comprise skills sets portfolios, means being able to work well into one's later years.

Update: New communities which bring production and services into a cohesive whole would certainly be studied. Advantage? Applied studies get plenty of cites! http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2523078