Monday, February 23, 2015

Human Capital Needs a Time Based Marketplace

When intelligent people such as Branko Milanovic begin to demean human capital, I can't help but get nervous at the implications. If not for the capacity of the human mind...what, exactly?? When too many among the supply side have given up on human capital and economic potential, is this also true of the left?

Since lately it's come down to trashing human capital or or reasoning about inherent IQ and innate ability, perhaps so. Whatever happened to the wealth generating capacity of society as a whole? How can anyone possibly feel comfortable, allowing a mass experiment of mental capacity separation, to continue indefinitely? This isn't just a mass division of mental capacity playing out. It's also a vast divide which destroys the possibility of productive family formation, for the "losers".

The potential of human capital is what still gives us hope, given the present long term growth dilemma. Had it not been for an ability to reason and work with resource opportunities, I'd still be at the basic level of the animal creatures, whose environment I share (and there's a pair of wrens I wish had enough sense not to build a nest on the garage wall next to this office...). Without the combined societal benefits of countless minds before my lifetime, I probably wouldn't have had the opportunity to live 60 years already - in spite of numerous setbacks.

An ability to utilize human capital effectively isn't just about money - it's about whether we find means to make the best of our allotted time on earth. It is about getting the chance to interact effectively with people and resources in one's midst. A new marketplace for time use coordination could - over the long run - provide hope that life not become (once again) nasty, brutish and short. Even though individual time is limited, human ingenuity - as Julian Simon noted - holds infinite capacity. In spite of the fact populations haven't always gained from human ingenuity of late, the accumulated effects of earlier gains are still immense. Peter Gordon says of Julian Simon:
Whereas economists love to talk about scarce resources, it was Simon who described how one resource, human ingenuity, is not scarce; it is infinite--in a context of economic freedom
How to approach a rationale from the left that capital belongs to capitalists...yet not to people? James Pethokoukis was the recipient of one of these odd attacks recently, and he addresses it in this reasonable post. I was glad he noted Robert Reich as a proponent of human capital, something I'd almost forgotten after reading Reich's very good book, "The Work Of Nations", in the early nineties. Unfortunately, human capital has gradually become associated with the money and connections it often takes to have one's voice heard - which could have some bearing why it is now being exposed to ridicule.

In a compensated marketplace for time use, the point would not be to generate "perfect" skills product. After all, is there even such a thing? Time use - particularly for education and healthcare - is highly experiential in nature. Not having to assign specific value to specific knowledge in these settings, would make its use more flexible for the purpose of any given moment. Plus, a time based marketplace would provide means - and reasons - for individuals to seek one another out, once again. This is particularly important, given the fact that mass production and technology has meant that many have forgotten the reasons they once came together. A lack of reasoning for coming together in shared economic purpose, is particularly what leaves populations exposed to extremes such as these.

What's more, it is better to monetarily compensate individuals for helping one another, than to compensate them as a consolation prize for being "left out", especially as a long term monetary strategy. The existence of a linked and constant time continuum, means that groups would be able to contribute to societal gains which would gradually build on the initial exploratory efforts of these systems.

Knowledge use has the capacity to carry across a broader spectrum of economic activity, than is presently the case. It can be utilized in far more ways, than is possible within the compensated time use realm which single institutions employ. Knowledge is the component of human capital which has the capacity to transcend time, provided it remains embedded in a continuous time use context. The embedding of knowledge use in present day institutions is not continuous, because it serves the purpose of specific missions and profit goals, rather than the purposes of a given public at large.

However, a time based marketplace with multiple purpose coordination, would provide greater stability for knowledge use preservation. Paul Krugman recently wrote, "Knowledge isn't power." If it seems that knowledge isn't power, it is only because single mission environments make it difficult for individuals to make use of knowledge gains. Knowledge needs environments in which it is able to circulate freely and adapt to multiple purposes. A marketplace for time would give new economic freedom to knowledge, and in the process, allow knowledge to express the power it still holds.

Update: One way to think about the failure in monetary policy which led to the Great Recession is as a coordination failure - a thought which occurred to me after reading a Scientific American article about coordination problems. Even though it appears central bankers are (now) following a trajectory that honors aggregate spending capacity, the fact they remain unconvinced re human capital value, might explain why they stay well below the 2% inflation target, no matter the oil price. The fact that political factions on the left and right downplay human capital representation, appears part of the reason why the zero bound continues to threaten with a monetary policy which now tends deflationary. As mentioned in the linked article, groups don't always decide that it is in their best interests to take action to protect the whole group.

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