Thursday, February 19, 2015

Time Aggregates and Growth Potential

While there are means to maintain growth, reducing time aggregate representation in the marketplace is not one of them. Governments and central bankers are playing with fire, when they tolerate policies which ultimately lead to fewer hours worked. Indeed, the recent decline in oil prices provided a perfect cover (cheap gas is great for the consumer? hmm), for the fact that deflation is being actively encouraged, to lower aggregate spending capacity.

Even though the U.S. has experienced supply side growth from oil production, "total petroleum consumption is down 21% from its 2005 peak". This, in a time when populations continue to grow, and more economists are becoming aware that growth cannot simply occur on consumption based terms. How might nations be encouraged to once again include their citizens in vital production and services roles?

Production of the future needs to be approached differently, because time also holds value as a primary product - not just product input. Consumption decisions also depend on the paths utilized, for production potential. If citizens aren't buying gas, what does that say about their other time use choices? Lower gas consumption holds vital clues about the marketplace many individuals now desire.

Knowledge use systems would allow more concentrated organization for work and life diversity. In many instances, these systems would not require the same infrastructure associated with automobiles and related transportation. Indeed, some services oriented communities could be built around interior bicycle and walking paths for normal workday routines, and more traditional transportation structure around the perimeters for the times when local citizens seek to connect with other cities and regions.

These forms of density and diversity planning would bring many back into the workplace, who simply can't afford the terms of economic access as they are presently structured. What's more, these systems would mean a new form of growth which could prove capable of returning to a more robust growth trajectory. This is particularly important because deficient demand is slowly leading to its own deflationary spiral. As to persistent below target inflation, Simon Wren-Lewis says:
You do not sit back, tell yourself that below target inflation is probably temporary, and do nothing. And of course, you do not plan for more fiscal austerity.
There are two things about his sentiment worthy of note. First, fiscal austerity is having more difficulty getting at the root of the problem, than monetary policy. Also, because non profit and for profit endeavor follow similar guidelines, the real monetary/fiscal problem is a lack of organizational capacity to generate new growth potential. Fiscal policy has become a catch all phrase in a world which can now scarcely distinguish between governmental and private activity.

The main thing that can be determined from these circumstance is that time participation is still dying on the vine, as various camps argue over the particulars of economic stability.  A discussion between W. Peden and Wren-Lewis in the above linked post, touched on the importance of ascertaining a reasonable level, when the output gap is considered. W. Peden also noted the fact that time aggregates or hours worked, may be more important than unemployment levels.

One thing that concerned Wren-Lewis, was the difficulty of maintaining both productivity and measurement capacity for the self employed. This is something that a knowledge use system would be able to address in a number of ways. In a coordinated time use marketplace, the self employed would have more takers for the skills sets they offer, and they would have better luck with their offerings than if they had to fight for a limited market share in primary equilibrium. As a former piano teacher trying to find and maintain students outside of regular school systems...just trust me on this one. It would be quite a difference, if only in attitude towards community members as to the skills they could share.

Another benefit is that time matching would take place within close time frames and recorded at the outset. There would be no need to wait for end of the year tax returns to ascertain the work activity and income of the self employed. Granted, hourly income in time arbitrage would be of a more limited nature than income in primary equilibrium. Still, ongoing local investments could also be recorded on an ongoing basis within the participating groups, so that real time monetary measurement for local economic activity would remain possible.

A primary benefit for knowledge use systems is that they could gradually bring time aggregates in the U.S. back to their recent levels of labor participation. With a little luck, the fiscal/monetary battle can die down as it becomes more apparent that what is needed is real change in organizational capacity, so that the paths to growth do not continue to be blocked at every turn.

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