Sunday, December 7, 2014

Competition in Two Dimensions

There is asymmetric competition which defines infrastructure formation, alongside the vital (more) symmetric competition which is needed to fill in patterns at local levels. When local economies provide symmetric competition, this "branching out" readily supplants social and familial dysfunction, which would otherwise fill in the gaps. Entrepreneurs across these dimensions are not always as dissimilar as it may first appear. Both need a chance to create producer and consumer choice in multiple settings, but all too often this does not happen.

Presently, a lot of unnecessary confusion exists, as to how competition plays out and even whether competition is desirable. In particular, it is misleading and unhelpful to argue against competition as a given fact of life. Doing so also generates further competition gridlock. After all, this most basic human function serves multiple purposes for all concerned, which also greatly depend on context.

What matters is whether pathways remain open, so that all individuals - with a little luck - can hope to find means to thrive. Even though the best means present real challenge; at the same time, survival needs to remain a doable option. Today, too many pathways for both survival and challenge remain blocked. What's more, it is not well understood how those missing pathways are affecting other activity formations. Should competitive patterns become recognized for their potential contributions in both dimensions, both tradable and non tradable goods production could find better balance, as a result.

Symmetric competition - given the right conditions - can be relatively benign. Much of what would be classified this way, simply wants to exist alongside other local competition. Think food trucks in a city with restaurants, for instance. Even though food truck overhead is less than restaurant overhead, their presence encourages locals to step out and sample more food environments away from home. Everyone benefits from greater product availability. Benign competition particularly represents greater strength through local economic diversity.

However, dynamic competition can sometimes disrupt multiple access patterns. Often, dynamic competition occurs with at least some degree of new infrastructure definition, both in social and environmental terms. Displacement is partly a result of operational differences in both costs and resource use, which result in substantial asymmetric shifts. Many productivity gains can also be found here, for this is the competition which often makes a broader marketplace possible. Of course, these are qualities which local economies discourage, in that some infrastructure or product formation cannot readily coexist in the same environment. For one thing, earlier product formation may include sunk costs which are held across multiple generations and investment strategies.

For example, even though the concept of time arbitrage is benign in terms of local symmetry (equal time use settings), it is dynamic (disruptive) in terms of presenting a fuller marketplace for services than is otherwise possible. To a degree, this presents a threat to services which are based on limiting knowledge use to a fraction of aggregate skills potential. Also, there is the paradox of increased productivity by increasing time use aggregates, instead of the compensated skills use limitations which services now rely upon.

Granted, time arbitrage is capable of increasing compensated labor force participation aggregates in association with product. This is a better approach than compensating individuals who are supposedly not "needed" in the marketplace, so that skills atrophy need not occur. Time arbitrage also provides gains through greater productivity definition, because time coordination increases measurement capacity and provides a complete marketplace for services product. In particular, time arbitrage would utilize building component innovation (strong and light materials, multiple use environment) so as to reduce overhead, particularly for local services formation.

Disruptive competition (as presently exists) represents not only a threat to existing equilibrium, but is often a source of tremendous profit to innovators when disruption succeeds. Progressives and conservatives alike have been increasingly skeptical about these forms of competitive growth, as compared to the status quo. Their reluctance has contributed to a growing shift by central bankers towards already existing assets and capital holdings, rather than dynamic time aggregate representation.

Perhaps most important is that - other than information technology - system wide innovation has almost been completely quashed in non tradable local sectors of education, healthcare and housing. Even the innovative gains of healthcare - limited as they are to institutional settings - hardly seem to gain more than a mention in conferences on economic growth. And that, in spite of widespread prominence for Wall Street profits! Even though education has hints of disruptive IT elements on the horizon, there is no general equilibrium circumstance which would (yet, anyway) allow that disruption to take place.

One could argue: that is okay for the least. Why? Only look at the marginal disruption an IT sharing economy poses to local transportation and hospitality systems, to glimpse what is at stake. In other words, the far more disruptive innovations of production reform in services and building components, need small scale experimentation as a starting point. Here, relatively complete forms of wealth generation and services dispersal, could gradually be discovered.

Hence some forms of disruptive (i.e. innovative) competition could be reserved for new communities that are not tied to preexisting zoning and regulatory environments. In a larger sense, local disruptive innovation could gradually be allowed to spread across regions, so long as these local economies are not in any way dependent on today's already maxed out services systems.

As such, some of these local economies might also provide points of entry for immigrants, who are willing to play active roles regarding inclusive services provision. The U.S. in particular has an incredible amount of land which remains open to this possibility. The fact that a broad innovation dynamic remains difficult in primary equilibrium, is hinted at in a recent post from Tyler Cowen, "How Technology Might Someday Fight Income Inequality".

What about communities which desire and need growth, but remain tied to primary equilibrium in ways that are difficult to disrupt through primary innovation? Here, competition and inclusion (in the meantime) could focus on broader Main Street offerings in tradable goods. Where social and physical infrastructure can't be changed, a stronger focus on benign or symmetrical marketplace elements would still do a world of good. Even though it may not be possible to extend permanent circumstance for lower overhead costs, ongoing offerings in this regard could still improve the overall economic environment.

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