Time Value and Utility in Rival and Non Rival Knowledge Context

One reason the differential marginal utility of money can appear so strong, is the fact there is presently no marketplace for time value. Tyler Cowen sparked a discussion about marginal utility in a recent post, Bob Murphy provides summaries of the discussion and highlights the ordinal and cardinal contexts for utility. David Henderson responds to Murphy's post and notes:

I oppose government taking from the wealthy and giving to the poor, unless the wealthy people first took it from the poor people.

Think about Henderson's response. It is not at all obvious whether something is "taken" from a poor person by a wealthy person, in many instances. What kinds of resources are at stake? Resources which exist separately from time, often can be readily quantified or thought of as cardinal. Sometimes, these separately existing resources appear as though infinite. Quantity is often unknown - or at least uncertain - to a degree the resource becomes a poor candidate for "equitable" distribution.

On the other hand, time value is the exact opposite in this respect. We know exactly how much time potential (i.e. hours) we have - individually and in aggregate - which could contribute to our condition and that of others. Plus: whenever time value is lost, one may not always be able to amend those deficits in the course of a lifetime - in spite of what may be tremendous effort. This is why the "riches" of off-limits knowledge use can make some groups poorer in aggregate, if and when the knowledge product is integral to everyone's survival.

Whereas if someone were to limit knowledge use which doesn't affect general consumption and production patterns (say, space exploration), rival or monopolistic restriction would only mean knowledge use "poverty" or equilibrium distortion in a very limited sense. In this instance, the "unnecessary" knowledge would more closely represent product separate from time value - nice to have, but generally not necessary. Long story short: limits in knowledge use for basic product formation (healthcare), amount to knowledge use theft which matters across general equilibrium levels.

These limits also manifest in more than a cardinal or aggregate sense. One's time value is ordinal, to the degree time value is derived from positioning within series of economic interaction. In other words, most individuals are not actually free to schedule time with others whose time is already in high demand. Rather than attempt to force high demand individuals to provide knowledge to entire populations, it is far more reasonable to disperse knowledge more widely, so that demand can more easily be met within the given time series of economic interactions which are actually possible. In other words, services productivity involves both consumption and production coordination, not just demands on the part of a limited supply of production.

Greater knowledge use dispersal and more precise services production are possible through a time based marketplace. Coordination would take place through both individual and group aggregates, instead of the externally defined skills limitations which have distorted services equilibrium. Even though present day institutions coordinate time use, these knowledge applications are only representative of population subsets.

Indeed, this has bearing on the fact that non rival knowledge is treated as though rival. In particular, the tendency is all the more pronounced, given the fact that knowledge use remains in a secondary position to other forms of production. Knowledge use as rival, seems more "efficient"! Dietz Vollrath responds to recent discussions involving Paul Romer, in this regard:

One thing we have come to a consensus on is that economic growth is driven by innovation, and not simply accumulating physical or human capital. That innovation, though, involves non rival ideas. Non-rival ideas (e.g. calculus) can be used by anyone without limiting anyone else's use of the idea. But modeling a non-rival idea is weird for standard economics, which was built around things that are rival (e.g. a hot dog). In particular, allowing for non-rival ideas in production means we have increasing returns to scale...But if we have increasing returns to scale, why don't we see growth rates accelerating over time?

Even in knowledge use systems, growth rates for non rival knowledge use would not contribute monetarily to the representation of skills capacity, other than the time use base. The most obvious gains would be increased knowledge and skills quality in group settings over time, so long as the chain of cohesive group structure is not broken. However, monetary gains would also result from the production formations used to generate local economic activity. The system creates its own form of desirable product (secured human capital), which in turn generates a new marketplace.

Non rival knowledge use is not everyone's "cup of tea", and would take some getting used to. Knowledge use systems could be thought of as a contract which honors the ordinal or positional component of knowledge use in a time based framework. In this setting, it would be rational to "take" the  knowledge one needs and leave the rest. Of course, it helps to remember that no "stored" knowledge or skill sets would be "collecting rent" in the form of asymmetric time value. One simply utilizes the knowledge which fits the current circumstance and environment.

While knowledge use would not be compensated on its own merits, the real value lies in quantifying how it is used in given context, and recording how settings change. The fact that time value is immediately quantified with no residual, provides certainty which otherwise isn't possible for services systems. Low growth for GDP in terms of compensated time arbitrage may not be all bad, if human capital can be secured and protected. There are real advantages, compared to the present low growth economic environment of services uncertainty, and rival knowledge use as far as the eye can see.