Long term, debt remains a concern for the U.S., in spite of recent progress in this regard. http://www.aei.org/publication/the-debt-is-still-a-major-threat/ Of course regular readers know I remain confident that a lot of debt could ultimately be transformed into long term growth and wealth creation.
One primary debt concern in relation to governmental healthcare obligations, is due to the current costs of chronic illness. Chronic illness costs are more substantial than those associated with end of life care. http://conversableeconomist.blogspot.com/2015/06/focusing-on-high-cost-patients.html
Local coordination for chronic illness - via knowledge use systems - could also help to relieve the burden of government debt.
"Off-grid" living is sometimes illegal, and could remain so until new communities seek combined gains in energy use with new infrastructure patterns. http://www.collective-evolution.com/2014/03/09/florida-makes-off-grid-living-illegal-mandates-all-homes-must-be-connected-to-an-electricity-grid/ New forms of internal corporate infrastructure would benefit from local energy use alternatives.
Present day energy companies don't benefit from these kinds of changes, hence both they and governments suffer from a "first mover" problem. It's not easy to alter default settings, when state government and externally structured corporate special interests depend on one another to override both free market and consumer alternatives. However, for knowledge and services formation to be possible through less sticky income levels, local equilibrium needs infrastructure innovation and adjustment, as well.
Greece: the numbers - http://blogs.wsj.com/briefly/2015/07/03/greeces-debt-the-numbers/
A chip that mimics human organs is the design of the year.
Peter Boettke reflects on Greece: http://www.coordinationproblem.org/2015/07/greece-and-wrestling-with-the-fiscal-commons.html
My thoughts on reading this post https://growthecon.wordpress.com/2015/07/06/the-glacial-speed-of-institutional-change/ from Dietz Vollrath:
Blazing the (most recent) path is what took so long. As to following the basic path? It happened fairly quickly, for nations which were able to do so in recent decades. However, much now depends on blazing a new path for growth - one which could take decades to fully develop - provided that growth is not reversed, instead.
A figure which would likely destroy lots of economic complexity in a hurry: Could you live on $64 a day if Greece's crisis happened here?
Texas and a few other states certainly could have done without the decline in nominal income...only consider the graphs: http://www.voxeu.org/article/surprising-decline-us-petroleum-consumption
When coordination goes wrong (The Economist) Learning the Lessons of Stagnation
A positive take on the future: Five New Technologies and One Very Old One That Will Save The World
She acknowledges the fact that services are a consequence of prosperity, and the tradable service sector: http://www.voxeu.org/article/service-labour-market-engine-growth-and-inequality
Due to slower than expected growth: http://blogs.wsj.com/economics/2015/07/16/why-the-white-house-no-longer-projects-a-decline-in-debt/?mod=WSJ_EC_RT_Blog
"In the projections, which stretched from 2015 to 2020, the staff did not expect inflation to ever reach the Fed's 2.0 percent target." http://in.reuters.com/article/2015/07/24/usa-fed-forecast-idINKCN0PY1WB20150724
"The last time homeownership levels were this low, LBJ was president." U.S. Homeownership Drops To Its Lowest Level Since 1967
(WSJ) Grand Central: What if the Output Gap is Global?
Tim Worstall is concerned about social mobility in the UK. A difficult problem but we'd really better try and find a solution
"New analysis of U.S. Census data by the Pew Research Center reveals that 18- to 34-year olds are less likely to be living on their own today than they were during the Great Recession." (Time) Even More Millennials Are Living At Home
Tonight is one of those occasional "blue moon" events which - if I understand correctly - means a better "alignment" is on the way. I certainly hope so, because this past week it has felt as though my entire jaw is not correctly aligned with the rest of my skull! Sometimes pain management can only do so much good. At any rate, here's wishing better "alignment" in the days ahead for all my readers.
Friday, July 31, 2015
Wednesday, July 29, 2015
Money is Not "The Root of All Evil"
Notions of money as "the root of all evil" run deep, in spite of the fact money has been a basic tool to get things done as long as anyone can remember. While it's tempting to dismiss what some believe in this regard, remember this deep distrust also affects monetary policy, in that it extends well beyond political boundaries or personal ideology. For these individuals, money holds the dubious distinction of being on a par with crony capitalism, or perhaps politics as a whole. But even though money can be an easy scapegoat for imaginary "sins", it holds the same important coordination roles which governments and markets are also responsible for.
One reason money has a "checkered" reputation in some circles, is that it doesn't coordinate economic activity as smoothly as one would expect. Granted, money fulfills its role quite well for the goods, services and assets which higher income levels seek. But proceed further down the income spectrum, only to discover that coordination patterns become less reliable for both services and asset formation. As a result - even though money is far more effective than barter - some elements of the marketplace remain incomplete.
Coordination patterns also depend on whether individuals still have direct links to local production capacity. Indeed, whenever money became a major component of local group settings in the past, this would precipitate a shift away from inter group coordination patterns, towards the externally defined patterns made possible through more specialized institutions.
So long as sufficient means remained for local groups to work with local resource capacity, shifts toward externally driven resource use would not be so traumatic. However, in the twentieth century, governments did not provide some citizens a chance to maintain sufficient forms of internal resource coordination. Even though populations were reimbursed in various ways when they lost means to production, it did not take many decades for redistribution to create imbalances in monetary flows.
As it becomes more difficult for governments to provide these reimbursements, local communities will need the chance to recreate monetary representation closer to home. Even though technology now provides much of today's tradable goods, time value on everyone's part can contribute to the knowledge based services marketplace of the future. New local institutions are needed to create more sustainable structures for services and asset formation. Given the fact that local economies cannot always provide the income levels which governments seek, local citizens will need to have a voice in consumption options which more closely match their resource and skills potential.
Whenever money is not a practical tool for all income levels, misunderstanding can gradually spread through social and political structures, regarding money's actual capacity. When this process continues too long, historical atrocities are sometimes the result. Even though much social unrest can be traced back to these economic roots of misunderstanding, it is not easy to stop the process if and when it is set into motion.
Further, the same hard won lessons of monetary policy from earlier episodes are too often set aside, as well. Historically, it is not enough to know when something is clearly wrong, to keep society from making the same mistakes. This is why money always needs to remain a pragmatic tool for multiple income levels. When monetary policy gives too many favors to special interests, the resulting economic imbalances can become practically impossible to address. On the other hand, when money is allowed to represent the economic capacity of multiple income levels, it can remain a source of liberation and freedom for all concerned.
One reason money has a "checkered" reputation in some circles, is that it doesn't coordinate economic activity as smoothly as one would expect. Granted, money fulfills its role quite well for the goods, services and assets which higher income levels seek. But proceed further down the income spectrum, only to discover that coordination patterns become less reliable for both services and asset formation. As a result - even though money is far more effective than barter - some elements of the marketplace remain incomplete.
Coordination patterns also depend on whether individuals still have direct links to local production capacity. Indeed, whenever money became a major component of local group settings in the past, this would precipitate a shift away from inter group coordination patterns, towards the externally defined patterns made possible through more specialized institutions.
So long as sufficient means remained for local groups to work with local resource capacity, shifts toward externally driven resource use would not be so traumatic. However, in the twentieth century, governments did not provide some citizens a chance to maintain sufficient forms of internal resource coordination. Even though populations were reimbursed in various ways when they lost means to production, it did not take many decades for redistribution to create imbalances in monetary flows.
As it becomes more difficult for governments to provide these reimbursements, local communities will need the chance to recreate monetary representation closer to home. Even though technology now provides much of today's tradable goods, time value on everyone's part can contribute to the knowledge based services marketplace of the future. New local institutions are needed to create more sustainable structures for services and asset formation. Given the fact that local economies cannot always provide the income levels which governments seek, local citizens will need to have a voice in consumption options which more closely match their resource and skills potential.
Whenever money is not a practical tool for all income levels, misunderstanding can gradually spread through social and political structures, regarding money's actual capacity. When this process continues too long, historical atrocities are sometimes the result. Even though much social unrest can be traced back to these economic roots of misunderstanding, it is not easy to stop the process if and when it is set into motion.
Further, the same hard won lessons of monetary policy from earlier episodes are too often set aside, as well. Historically, it is not enough to know when something is clearly wrong, to keep society from making the same mistakes. This is why money always needs to remain a pragmatic tool for multiple income levels. When monetary policy gives too many favors to special interests, the resulting economic imbalances can become practically impossible to address. On the other hand, when money is allowed to represent the economic capacity of multiple income levels, it can remain a source of liberation and freedom for all concerned.
Tuesday, July 28, 2015
Notes on Organizational Capacity and Density Patterns
Organizational capacity - in terms of corporate structure - is woefully incomplete. How so? Even though present day capacity has greatly benefited nations through international trade, the potential for organizational structure has scarcely been tapped, in places where it is needed most. As a result, local non tradable sectors have become burdened with excessive infrastructure costs and obligations, even as the benefits of tradable sectors continue to improve the global economy.
Today, a majority of time based coordination is informally generated, as a side benefit of other (economic) capacity which relies on the geographic spacing of modern transportation systems. However, this reliance also means that family and friends have been separated across the globe from one another. Not only can this be problematic in one's later years, it can be problematic for families and friends which seek economic means to remain closer to one another. Could societies provide the option of closely spaced skills diversity, for time based coordination patterns?
Contrary to what it may seem, this is possible, through the density coordinates which time arbitrage would make possible. Today's dispersed means of organizational capacity are not always easy to replicate, in the places where they are needed most. A better corporate response for living and working, would be to build tighter density patterns within a single local corporate framework: one capable of providing a full range of production and services interaction, under a single umbrella.
One of the most important questions to ask about organizational capacity is what income and other resource flows do groups seek to rely on, over long periods of time. Even though resource flows cannot always remain stable, organizational capacity needs to move in tandem with changes in resource use patterns, instead of reacting against them. This is particularly important in terms of infrastructure, local asset patterns and services formation.
Whereas an international corporation seeks to maximize potential in the global marketplace, the internally driven - or local corporation - would seek to maximize the marketplace potential of its inhabitants in terms of both production and consumption. In these settings, the tradable goods of the international marketplace would represent further options for time use freedom, rather than competition to local production. Plus, local citizens would not only take part in locally generated production and consumption patterns, but also in the basic definitions of local consumption models. By matching time value with investment and production capacity, no one need rely on time based compensation as the primary source of income.
Time value - rather than skills value - is the first point of economic entry, which takes place as services arbitrage. From this starting point, one gains access to the investment options for local building components. As the participant becomes comfortable with this level of investment, they gain both time based investment options and financial investment options, for local environment definition and infrastructure maintenance.
As one further progresses, financial investment options in services capital can augment personal skills sets. From this point, production capacity for some knowledge use systems would extend to markets beyond those that are local. Some of this focus could be for the support of other knowledge use systems, such as the travel environments that would be possible in "sister" communities. While there are many advantages and possibilities for internal corporate structure, possibly the best is simply that of a "permanent" timeline for ongoing economic activity and knowledge use.
Today, a majority of time based coordination is informally generated, as a side benefit of other (economic) capacity which relies on the geographic spacing of modern transportation systems. However, this reliance also means that family and friends have been separated across the globe from one another. Not only can this be problematic in one's later years, it can be problematic for families and friends which seek economic means to remain closer to one another. Could societies provide the option of closely spaced skills diversity, for time based coordination patterns?
Contrary to what it may seem, this is possible, through the density coordinates which time arbitrage would make possible. Today's dispersed means of organizational capacity are not always easy to replicate, in the places where they are needed most. A better corporate response for living and working, would be to build tighter density patterns within a single local corporate framework: one capable of providing a full range of production and services interaction, under a single umbrella.
One of the most important questions to ask about organizational capacity is what income and other resource flows do groups seek to rely on, over long periods of time. Even though resource flows cannot always remain stable, organizational capacity needs to move in tandem with changes in resource use patterns, instead of reacting against them. This is particularly important in terms of infrastructure, local asset patterns and services formation.
Whereas an international corporation seeks to maximize potential in the global marketplace, the internally driven - or local corporation - would seek to maximize the marketplace potential of its inhabitants in terms of both production and consumption. In these settings, the tradable goods of the international marketplace would represent further options for time use freedom, rather than competition to local production. Plus, local citizens would not only take part in locally generated production and consumption patterns, but also in the basic definitions of local consumption models. By matching time value with investment and production capacity, no one need rely on time based compensation as the primary source of income.
Time value - rather than skills value - is the first point of economic entry, which takes place as services arbitrage. From this starting point, one gains access to the investment options for local building components. As the participant becomes comfortable with this level of investment, they gain both time based investment options and financial investment options, for local environment definition and infrastructure maintenance.
As one further progresses, financial investment options in services capital can augment personal skills sets. From this point, production capacity for some knowledge use systems would extend to markets beyond those that are local. Some of this focus could be for the support of other knowledge use systems, such as the travel environments that would be possible in "sister" communities. While there are many advantages and possibilities for internal corporate structure, possibly the best is simply that of a "permanent" timeline for ongoing economic activity and knowledge use.
Sunday, July 26, 2015
Sustainability - Different Definitions for Different Groups
Sustainability...is it about budgetary responsibility, responsibility for the Earth's fragile ecosystems, or something else altogether? Sustainability concepts can be difficult to discuss without moral overtones, because people feel strongly about them - albeit in different ways. For this blogger, sustainability matters most in terms of the economic systems that populations rely on. How can individuals be expected to care for their environments, if sustainability does not take humanity into consideration?
Some on the right mostly think of sustainability as a balanced budget. In the present - unfortunately - both Democrats and Republicans associate sustainability with limits to growth, which in turn affects monetary policy. The Republican stance for limited government can come across as hard limits on services formation, whereas some on the left think in terms of limits to "crass" materialism. Both perspectives can be harmful, for more recent arrivals to the marketplace who could use a bit more of both. The "limits to growth" mindset is also a burden for all who seek economic access, because choices are now too limited, in what has become a "full equilibrium".
While some progressives view sustainability in terms of local economic potential, the "we'll grow or make our own" mindset tends to be a reaction against the benefits of international trade - even though tradable goods are not the problem. Tradable goods have provided immense benefit for the poor, even as the non tradable sectors have become problematic for all concerned. Granted, more production needs to take place in the U.S. But organizational capacity needs to be strengthened in the non tradable sectors of knowledge use and building options, where people of multiple income levels still have insufficient economic footing.
Both sides of the debate have missed the fallout from reduced labor force participation. This plays havoc with markets to a greater degree than is presently acknowledged. Only consider the effect of lower labor force participation on fossil fuels use in the U.S., which means further layoffs in states which only recently had been leading the way for economic growth. If the right can be faulted for ignoring the vital role of services in the economy, the left can be faulted for paying little attention to the fact fossil fuels use is already in decline, in spite of the fact that no infrastructure adaptation has taken place.
Another example of confusion regarding monetary sustainability is Steve Keen, an economist at Kingston University in London. For understandable reasons, his "quantitative easing for the people" has gained a wide audience. However, there are central flaws in the debt jubilee and basic income concepts, and their presumed capacity for solving the problems of economic access. A basic income would seriously distort the maintenance of any economic equilibrium, because it leaves no room for economic mobility or one's capacity to contribute to economic outcomes. Even if it were possible to create a basic income, this structure would not hold up well over time, because of the generational problems associated with those who lack economic access for the full duration of their lives.
One of the most important aspects of sustainability, involves the further proactive evolution of services structures which originated in the 20th century. Whereas the political left expects governments to continue funding services as they presently exist, others on the right remain unconvinced that services are an important part of the marketplace. This lack of foresight regarding services, helps to explain why both governments and economies falter when austerity appears as though necessary, and no one has a plan in place to ensure that services are not lost.
The fact that so many citizens in the U.S. still yearn for the broad manufacturing base which once existed, is a good indicator that much work needs to be done, regarding economic sustainability. However, the primary efforts need to take place at local levels, in the non tradable sectors of the economy. There are ways to rethink organizational capacity, so that the advantages of corporate structure need not be limited to prosperous regions, and I will touch on this in the next post.
Some on the right mostly think of sustainability as a balanced budget. In the present - unfortunately - both Democrats and Republicans associate sustainability with limits to growth, which in turn affects monetary policy. The Republican stance for limited government can come across as hard limits on services formation, whereas some on the left think in terms of limits to "crass" materialism. Both perspectives can be harmful, for more recent arrivals to the marketplace who could use a bit more of both. The "limits to growth" mindset is also a burden for all who seek economic access, because choices are now too limited, in what has become a "full equilibrium".
While some progressives view sustainability in terms of local economic potential, the "we'll grow or make our own" mindset tends to be a reaction against the benefits of international trade - even though tradable goods are not the problem. Tradable goods have provided immense benefit for the poor, even as the non tradable sectors have become problematic for all concerned. Granted, more production needs to take place in the U.S. But organizational capacity needs to be strengthened in the non tradable sectors of knowledge use and building options, where people of multiple income levels still have insufficient economic footing.
Both sides of the debate have missed the fallout from reduced labor force participation. This plays havoc with markets to a greater degree than is presently acknowledged. Only consider the effect of lower labor force participation on fossil fuels use in the U.S., which means further layoffs in states which only recently had been leading the way for economic growth. If the right can be faulted for ignoring the vital role of services in the economy, the left can be faulted for paying little attention to the fact fossil fuels use is already in decline, in spite of the fact that no infrastructure adaptation has taken place.
Another example of confusion regarding monetary sustainability is Steve Keen, an economist at Kingston University in London. For understandable reasons, his "quantitative easing for the people" has gained a wide audience. However, there are central flaws in the debt jubilee and basic income concepts, and their presumed capacity for solving the problems of economic access. A basic income would seriously distort the maintenance of any economic equilibrium, because it leaves no room for economic mobility or one's capacity to contribute to economic outcomes. Even if it were possible to create a basic income, this structure would not hold up well over time, because of the generational problems associated with those who lack economic access for the full duration of their lives.
One of the most important aspects of sustainability, involves the further proactive evolution of services structures which originated in the 20th century. Whereas the political left expects governments to continue funding services as they presently exist, others on the right remain unconvinced that services are an important part of the marketplace. This lack of foresight regarding services, helps to explain why both governments and economies falter when austerity appears as though necessary, and no one has a plan in place to ensure that services are not lost.
The fact that so many citizens in the U.S. still yearn for the broad manufacturing base which once existed, is a good indicator that much work needs to be done, regarding economic sustainability. However, the primary efforts need to take place at local levels, in the non tradable sectors of the economy. There are ways to rethink organizational capacity, so that the advantages of corporate structure need not be limited to prosperous regions, and I will touch on this in the next post.
Saturday, July 25, 2015
Economic Complexity: The Best Solution
The more economic possibilities available to any individual in the marketplace, the greater the chances of positive outcomes. Even so, how could economic complexity be considered the best solution for corruption? For one thing, economic complexity is quite different in nature from legal complexities, for it implies diversity and greater choice. While legal complexities limit marketplace options and mean more wealth for those who hold power, economic complexities generate wealth creation potential for the average individual. And when more economic options exist, the incentive for corruption is vastly reduced.
However, reforms in favor of economic complexity get short shrift. Instead, arguments for greater economic diversity are tossed aside, by arguments to supplement income for those who still have some degree of economic access. In particular, arguments about "helping the poor", tend to short circuit into limited approaches such as EITC, which is little more than further income compensation on the part of government, rather than one's employer.
Noah Smith is only the latest in a line of economists in recent years to defend this approach. But the earned income tax credit is only about alleviating the circumstance of those who already have work, rather than making certain that the marketplace remains viable and diverse wherever people live, and for all who seek economic access. I don't believe it makes sense to pay people for not working. But why is it proving so difficult, to talk about how people could be compensated for helping one another?
Unfortunately it is human nature to approach policy with an eye to alleviating the "bad", instead of finding ways to create more good - an approach which gets discounted as "planning". How is it that proactive policy is less desirable than policy which seeks more marketplace limitation because of negatives? The best approach is to provide more positive options, so that more individuals will ultimately be less inclined to choose negative options for survival. Ricardo Hausmann makes some related points in "Fighting Corruption Won't End Poverty".
No nation can remain strong, when it becomes divided against itself. But it is too easy to forget this, when reacting to the bad is inevitably the first response. Instead of reacting to the bad, it's time to focus on the good. It's time to get serious about economic complexity.
However, reforms in favor of economic complexity get short shrift. Instead, arguments for greater economic diversity are tossed aside, by arguments to supplement income for those who still have some degree of economic access. In particular, arguments about "helping the poor", tend to short circuit into limited approaches such as EITC, which is little more than further income compensation on the part of government, rather than one's employer.
Noah Smith is only the latest in a line of economists in recent years to defend this approach. But the earned income tax credit is only about alleviating the circumstance of those who already have work, rather than making certain that the marketplace remains viable and diverse wherever people live, and for all who seek economic access. I don't believe it makes sense to pay people for not working. But why is it proving so difficult, to talk about how people could be compensated for helping one another?
Unfortunately it is human nature to approach policy with an eye to alleviating the "bad", instead of finding ways to create more good - an approach which gets discounted as "planning". How is it that proactive policy is less desirable than policy which seeks more marketplace limitation because of negatives? The best approach is to provide more positive options, so that more individuals will ultimately be less inclined to choose negative options for survival. Ricardo Hausmann makes some related points in "Fighting Corruption Won't End Poverty".
It is easier to mobilize against injustice than for justice. We are more enthusiastic to fight the bad - say, hunger and poverty - than to fight for, say, the kind of growth and development that makes food and sustainable livelihoods plentiful...But we should remember that casting the bad into the sea does not imply the sudden appearance on the shores of the good that we need.Instead of constantly focusing on the bad and trying to "nudge" people towards the good, create environments which are capable of encouraging good action from the outset. Societies especially need simpler options for protecting the weak, disadvantaged and marginalized - options which do not continuously tax either governments or charity. The best way to do so, is to create simple legal and economic frameworks which allows individuals to gainfully assist one another.
No nation can remain strong, when it becomes divided against itself. But it is too easy to forget this, when reacting to the bad is inevitably the first response. Instead of reacting to the bad, it's time to focus on the good. It's time to get serious about economic complexity.
Thursday, July 23, 2015
Where "Understandable" Equilibrium is the Goal...
Some economists acknowledge what appear to be wide variations in general equilibrium. Nevertheless, equilibrium tends to be approached as though it is both reliable, and possible to categorize through rational marketplace expectations. General equilibrium patterns understandably hold the most relevance, for observers who rely on reams of statistics and continuous record keeping. Within this well documented terrain - for instance - many individuals appear to be in better economic positions than their parents experienced at a similar age. Also, what may be considered primary equilibrium, is what central bankers are most concerned with.
So long as missing time aggregates are not taken into consideration (reduced labor force participation), many of the main questions which stemmed from the Great Recession have been "settled". Consequently, as U.S. unemployment figures continue downward, policy makers are anxious to move forward. In all of this, some central bankers and economists believe that interest rates should reflect an economy which has long since moved out of recession. How does one define future growth potential, if interest rates are sending the "wrong signals" for the marketplace?
There's only one problem for central bankers and policy makers: the new normal is a far cry, from the old. As a result, some have resorted to Neo-Fisherian logic, in order for the desired equilibrium to have a more understandable context. Within this agreed upon economic environment, "better" minimum wage floors are becoming a feature, as a starting point for economic access. Once again, however, less prosperous regions and rural areas are forgotten, for they will also need to comply with these same wage floors. Plus, many policy makers agree with the population, that inflation needs to be kept as "low as possible". If only this dogmatic approach could provide the imaginary stability it seeks to promise!
Policy makers are resorting to a Neo-Fisherian scenario, in hopes that rising interest rates will "normalize" economic activity through signals that "all is well". The big unknown thus far, is whether normalization can occur from a changed economic reality, rather than the output which existed prior to the Great Recession. Whether rising interest rates will cooperate with these hopes is yet to be seen. If central bankers are able to do so without undue harm, some policy makers will doubtless reason they are finally "home free".
I don't have a problem with anyone's wish for a general equilibrium pattern which makes sense to all concerned - nor do I take issue with anyone's desire for the economy to return to a normal status in spite of who (and what) has been left behind. A more robust long term growth trajectory is still possible, but I suspect it would need to take place through more negotiation than is likely, in primary equilibrium. Even though such flexible terms are difficult to come by in broad sets of circumstance, there is still hope that experimental strategies can occur at local levels. Over time, a return to a better long term growth trajectory is still possible.
In a recent post I highlighted some fundamentals about economic balance which remain my primary concerns. One reason growth has been scaled back in the present, is that it has become difficult for traditional production to maintain adequate provision for the services marketplace. One of the easiest ways to think about where - and how - equilibrium begins to break down, is in the rural areas - which of course never gained adequate attention after the Great Depression. Instead, they became reliant on government redistribution and subsidies - a pattern which continues to this day. Now, their circumstance is only becoming more problematic. Recently, Arnold Kling touched on this subject with colleagues at lunch:
Even though the idea of "overheating" seems odd in a near deflationary environment, it applies to any groups which reach for the expected "beyond the means" ladder because it's (often) the only one available. While sticky wages are still debated, it's the sticky marketplace which particularly makes problems for those still seeking economic access. Available options for both living and working, are often regulated so they are not amenable to one's actual circumstance and resource capacity. Further, should more individuals opt to become a nurse (for instance), healthcare practitioners also have the same watchful eye as city locals, as to new graduates who are waiting in the wings for their own jobs. Again, "full cities", and a full primary equilibrium need to be accounted for.
Hence the focus on the part of policy makers is one of maintaining the current equilibrium that exists, not attempting to expand it. Even though there are still open doors for future careers, there simply isn't as much room for entry, as what existed prior to the Great Recession. None of this means that dynamic long term growth is no longer a possibility - simply that it needs to occur on new terms. It is doubtful that anyone can achieve 4 percent growth for instance, by "nibbling around the edges" of regulations which prevent individuals from plying some of the simpler services trades.
Fortunately, it is possible to generate new long term growth, without having to rely on the transmission from production to services primary equilibrium. However, more direct forms of services wealth creation need to happen in ways which won't present problems for current primary equilibrium patterns. Ultimately, this will mean new cities, new means to "make a living", and new settings for infrastructure innovation to take place. The best part, is that real alternatives to primary equilibrium are possible. What's more, those options will not be dependent on other sources of wealth. Instead, they can provide additional means for greater productivity and new wealth creation.
So long as missing time aggregates are not taken into consideration (reduced labor force participation), many of the main questions which stemmed from the Great Recession have been "settled". Consequently, as U.S. unemployment figures continue downward, policy makers are anxious to move forward. In all of this, some central bankers and economists believe that interest rates should reflect an economy which has long since moved out of recession. How does one define future growth potential, if interest rates are sending the "wrong signals" for the marketplace?
There's only one problem for central bankers and policy makers: the new normal is a far cry, from the old. As a result, some have resorted to Neo-Fisherian logic, in order for the desired equilibrium to have a more understandable context. Within this agreed upon economic environment, "better" minimum wage floors are becoming a feature, as a starting point for economic access. Once again, however, less prosperous regions and rural areas are forgotten, for they will also need to comply with these same wage floors. Plus, many policy makers agree with the population, that inflation needs to be kept as "low as possible". If only this dogmatic approach could provide the imaginary stability it seeks to promise!
Policy makers are resorting to a Neo-Fisherian scenario, in hopes that rising interest rates will "normalize" economic activity through signals that "all is well". The big unknown thus far, is whether normalization can occur from a changed economic reality, rather than the output which existed prior to the Great Recession. Whether rising interest rates will cooperate with these hopes is yet to be seen. If central bankers are able to do so without undue harm, some policy makers will doubtless reason they are finally "home free".
I don't have a problem with anyone's wish for a general equilibrium pattern which makes sense to all concerned - nor do I take issue with anyone's desire for the economy to return to a normal status in spite of who (and what) has been left behind. A more robust long term growth trajectory is still possible, but I suspect it would need to take place through more negotiation than is likely, in primary equilibrium. Even though such flexible terms are difficult to come by in broad sets of circumstance, there is still hope that experimental strategies can occur at local levels. Over time, a return to a better long term growth trajectory is still possible.
In a recent post I highlighted some fundamentals about economic balance which remain my primary concerns. One reason growth has been scaled back in the present, is that it has become difficult for traditional production to maintain adequate provision for the services marketplace. One of the easiest ways to think about where - and how - equilibrium begins to break down, is in the rural areas - which of course never gained adequate attention after the Great Depression. Instead, they became reliant on government redistribution and subsidies - a pattern which continues to this day. Now, their circumstance is only becoming more problematic. Recently, Arnold Kling touched on this subject with colleagues at lunch:
3) There was a lot of talk about how things are not really as bad for the middle class as the left makes them out to be. I asked, if things are not so bad, then imagine giving a talk to people in a small town in Ohio or rural Oklahoma. What sorts of advice about future jobs would you give? Some of the answers were glib ("Move to the city") Others suggested that the jobs would be in fields like nursing. But not everyone is cut out to be a nurse.There's another important thing to consider re the "move to the city" response. More and more, one finds online references to the fact that many sought after cities are uncomfortable with newcomers. New arrivals want to take part in a dynamic which locals suspect to be fragile, in spite of appearances. Hence those online "population full" signs for popular cities, can be considered equivalent to the "full" equilibrium, which central bankers now treat as a knife's edge between "overheating" and deflation.
Even though the idea of "overheating" seems odd in a near deflationary environment, it applies to any groups which reach for the expected "beyond the means" ladder because it's (often) the only one available. While sticky wages are still debated, it's the sticky marketplace which particularly makes problems for those still seeking economic access. Available options for both living and working, are often regulated so they are not amenable to one's actual circumstance and resource capacity. Further, should more individuals opt to become a nurse (for instance), healthcare practitioners also have the same watchful eye as city locals, as to new graduates who are waiting in the wings for their own jobs. Again, "full cities", and a full primary equilibrium need to be accounted for.
Hence the focus on the part of policy makers is one of maintaining the current equilibrium that exists, not attempting to expand it. Even though there are still open doors for future careers, there simply isn't as much room for entry, as what existed prior to the Great Recession. None of this means that dynamic long term growth is no longer a possibility - simply that it needs to occur on new terms. It is doubtful that anyone can achieve 4 percent growth for instance, by "nibbling around the edges" of regulations which prevent individuals from plying some of the simpler services trades.
Fortunately, it is possible to generate new long term growth, without having to rely on the transmission from production to services primary equilibrium. However, more direct forms of services wealth creation need to happen in ways which won't present problems for current primary equilibrium patterns. Ultimately, this will mean new cities, new means to "make a living", and new settings for infrastructure innovation to take place. The best part, is that real alternatives to primary equilibrium are possible. What's more, those options will not be dependent on other sources of wealth. Instead, they can provide additional means for greater productivity and new wealth creation.
People Are The Heart of Economic Life
If people are central to economic life, why has it become so difficult to think about the economy on these terms? Even though many suspect problems down the road - should too few remain employed as technology increases - few have dealt with this issue head on. It's important to realize that ensuring full employment does not create a "planned" economy. Instead, a steady focus on new organizational capacity, would ensure that people have voluntary means to interact with one another which are formally embedded in both social and economic structure.
Many on the left believe that governments define economic circumstance, hence should be responsible for any economic matters deemed most important. But governments can't take the place of the social coordination which sustains a civil society. In today's marketplace this coordination is incomplete, and too few on the right have noticed. Others on the right have grown less concerned about the economy, in relation to family and what they consider more important matters. But when economies don't have the chance to remain strong, families and cultures also struggle to stay afloat.
Regular readers know that I believe the marketplace needs a bit more help from people from all walks of life. Not just in the U.S. but also other nations, as central bankers continue to wind down the growth levels which were associated with the twentieth century. Are potential solutions too "boring"? Why don't domestic summits have the same panache as other kinds of summits? If given the chance, they might actually yield a greater benefit than often materializes from international summits. Yet how many nations have heeded the call to seek domestic vitality, in order to generate more positive monetary policy?
Time value in relation to other forms of resources, is the reason that economics matters. And yet the time value of the individual, is the central component which has been most neglected. How might one think about time value in broad terms? A few years earlier I touched on five stages of economic activity which seemed to apply regardless of other resource capacity, and it seems useful to consider them again, here.
These five categories provide ways to think about economic activity in both broad societal terms, as well as those of the individual. Not only do they provide a framework for decision and management process regarding divisions of labor, they serve as ways to think about time management as one transitions through different phases of life.
Many on the left believe that governments define economic circumstance, hence should be responsible for any economic matters deemed most important. But governments can't take the place of the social coordination which sustains a civil society. In today's marketplace this coordination is incomplete, and too few on the right have noticed. Others on the right have grown less concerned about the economy, in relation to family and what they consider more important matters. But when economies don't have the chance to remain strong, families and cultures also struggle to stay afloat.
Regular readers know that I believe the marketplace needs a bit more help from people from all walks of life. Not just in the U.S. but also other nations, as central bankers continue to wind down the growth levels which were associated with the twentieth century. Are potential solutions too "boring"? Why don't domestic summits have the same panache as other kinds of summits? If given the chance, they might actually yield a greater benefit than often materializes from international summits. Yet how many nations have heeded the call to seek domestic vitality, in order to generate more positive monetary policy?
Time value in relation to other forms of resources, is the reason that economics matters. And yet the time value of the individual, is the central component which has been most neglected. How might one think about time value in broad terms? A few years earlier I touched on five stages of economic activity which seemed to apply regardless of other resource capacity, and it seems useful to consider them again, here.
These five categories provide ways to think about economic activity in both broad societal terms, as well as those of the individual. Not only do they provide a framework for decision and management process regarding divisions of labor, they serve as ways to think about time management as one transitions through different phases of life.
Maintenance - Building - Creating - Understanding - Healing
Think how coordinated activity evolved, prior to extensive monetary use. One can think of maintenance activity as the human element which transcends instinct, in terms of preserving what has already been formulated by the mind. Maintenance ensures that the gains of building and creating become embedded in society. As such, maintenance forms a pyramidal base for economic activity in general.
Even though building (of new elements) and creating (design) regularly come into play, they are not needed constantly, because much of daily activity continues to proceed from the reenactment and preservation of earlier efforts. Hence building, creating and understanding are layered on top of maintenance structure, and healing forms the pinnacle. However, it is important to remember that this is not the healing of the human body (which resides alongside all forms of teaching in the maintenance structure) but the healing across disciplines which preserves what lies below.
Even though building (of new elements) and creating (design) regularly come into play, they are not needed constantly, because much of daily activity continues to proceed from the reenactment and preservation of earlier efforts. Hence building, creating and understanding are layered on top of maintenance structure, and healing forms the pinnacle. However, it is important to remember that this is not the healing of the human body (which resides alongside all forms of teaching in the maintenance structure) but the healing across disciplines which preserves what lies below.
While building and creating are considered primary for today's forms of wealth formation, they are not needed to the degree that maintenance is needed, and yet they have been expected to fund all of maintenance capacity. This is why maintenance tends to break down over time. Consequently, the vital activities of maintenance need to be approached directly, so that they can also be capable of wealth creation on their own.
Otherwise, what looks to be a highly stable pyramid formation, develops holes at the base of the structure, when it proves too difficult for building and creating elements to regularly contribute to the base of the structure. The pyramidal structure is endangered now, because healing and understanding elements have already been fragmented. As the process continues, a breakdown can ensue in the building and creating components, which further extends to the base.
Otherwise, what looks to be a highly stable pyramid formation, develops holes at the base of the structure, when it proves too difficult for building and creating elements to regularly contribute to the base of the structure. The pyramidal structure is endangered now, because healing and understanding elements have already been fragmented. As the process continues, a breakdown can ensue in the building and creating components, which further extends to the base.
By tapping into personal time value, new wealth can be generated from the bottom of the pyramid, so that building elements do not have to carry the load for both wealth formation and maintenance capacity. The base is made up of every kind of knowledge use imaginable. Yet the services capacity which lies here is strangely unrecognized, for the distinctly human quality it holds. When one considers the immense importance of the maintenance base of the pyramid, the mistake of discounting services finally becomes evident. Far too much of maintenance was written off as governmental instead of personal responsibility, even as it became impossible for governments to maintain the vital processes of knowledge use and preservation.
This is why time arbitrage is needed, in order to preserve what has become so valuable in recent centuries. Technology provides elements of maintenance alongside building capacity, but technology cannot be expected to substitute for the vital work of the mind. Equal time use capacity would make multiple forms of knowledge use sustainable, at the base of the pyramid. People are the heart of economic life. It's time to recognize the role that every individual has to play in the maintenance functions of society, so that everyone can also reach for the other roles which personally matter most in the course of a lifetime, as well.
Tuesday, July 21, 2015
The "Dreaded Wait": Incentives and Constraints in Services Formation
Both for profit and not for profit endeavor face similar incentives and constraints, when it comes to providing time based services. How so? Organizational efficiency is normally sought, by finding ways to reduce the time required to fulfill given services functions. Unfortunately, the results are often less than optimal, whenever time value provides the most important function of the product in question. True, long waits have mostly been "conquered" in the tradable goods free market sectors. Even so, the process has hardly begun for time based product, due to the lack of a marketplace for time value.
In particular: privatizing any product which requires some degree of knowledge based interaction in specific circumstance, hardly guarantees a better or more "efficient" good. Pressing a number by phone for a service, or taking a number in an overcrowded room, does not always lead to the product which anyone desires from personal interaction. Waits that are associated with government services, stem from the same budget constraints for time value which businesses face.
Governments and businesses alike seek to get the job done, by providing the smallest amount of compensated services time possible. One of the most aggravating waits on the planet is for services by phone, regardless of profit or non profit origination. When services are relatively centralized, monopolized and externally defined, little incentive exists to reduce wait times at any step of the process.
By contrast, the wait time in restaurant lines almost seems a breeze. Hardly anyone gets upset at the prospect of a thirty minute wait during peak hours. And when customers need to return to work after lunch, local food providers compete to reduce the midday wait, for a product often more practical than experiential. Plus, consumers tend to be more comfortable with wait times when food preparation seeks experiential product status - particularly for evening and weekend meals. The more that wait time is associated with freely chosen scarce goods, the less "onerous" it tends to be. When it comes to vacations, "waiting" may even take on positive associations.
Whereas the artificial scarcity of knowledge use is a far cry, from a freely chosen scarce good. And yet long waits and lines are generally a given, when rival time value means less time based product in aggregate. In these instances, asymmetrically compensated rival time means less than optimal product availability, in order to maintain marketplace advantage. While artificial scarcity is often not problematic for tradable goods, governments experience long term problems when artificial scarcity is built into basic service formations. The greatest political struggles of our time, stem in part from time compensation asymmetries. However, these knowledge use imbalances are entrenched at levels which neither politicians or voters have adequate means to address.
Hence the overwhelming public reaction, to perceived shortages in healthcare availability. Public dialogue has morphed into questioning the worthiness of those who gain healthcare access, on multiple fronts. While this approach may appear easier than addressing services provision directly, it still solves very little. Plus, it leads to societal judgments which should not have been necessary in the first place. A marketplace for time value would help to change this unfortunate circumstance eventually, in terms of organizational capacity at local levels. A decentralized marketplace for time value, could approach time constraints at personal levels, in order to determine the marketplace which individuals actually seek.
Granted, no one knows for certain how they would choose to organize time value, until individuals "give one another permission" to find out. However, one thing is for certain: no one would willingly force everyone to stand in line or wait for hours at a time, to carry out basic services functions. The main reason so many experience the "dreaded wait", is that time value has been excluded from production for obvious economic reasons. By making room for time value as a fully functioning marketplace, no one would need to endure the aggravation of lines, except for the moments when lines make sense for all concerned.
In particular: privatizing any product which requires some degree of knowledge based interaction in specific circumstance, hardly guarantees a better or more "efficient" good. Pressing a number by phone for a service, or taking a number in an overcrowded room, does not always lead to the product which anyone desires from personal interaction. Waits that are associated with government services, stem from the same budget constraints for time value which businesses face.
Governments and businesses alike seek to get the job done, by providing the smallest amount of compensated services time possible. One of the most aggravating waits on the planet is for services by phone, regardless of profit or non profit origination. When services are relatively centralized, monopolized and externally defined, little incentive exists to reduce wait times at any step of the process.
By contrast, the wait time in restaurant lines almost seems a breeze. Hardly anyone gets upset at the prospect of a thirty minute wait during peak hours. And when customers need to return to work after lunch, local food providers compete to reduce the midday wait, for a product often more practical than experiential. Plus, consumers tend to be more comfortable with wait times when food preparation seeks experiential product status - particularly for evening and weekend meals. The more that wait time is associated with freely chosen scarce goods, the less "onerous" it tends to be. When it comes to vacations, "waiting" may even take on positive associations.
Whereas the artificial scarcity of knowledge use is a far cry, from a freely chosen scarce good. And yet long waits and lines are generally a given, when rival time value means less time based product in aggregate. In these instances, asymmetrically compensated rival time means less than optimal product availability, in order to maintain marketplace advantage. While artificial scarcity is often not problematic for tradable goods, governments experience long term problems when artificial scarcity is built into basic service formations. The greatest political struggles of our time, stem in part from time compensation asymmetries. However, these knowledge use imbalances are entrenched at levels which neither politicians or voters have adequate means to address.
Hence the overwhelming public reaction, to perceived shortages in healthcare availability. Public dialogue has morphed into questioning the worthiness of those who gain healthcare access, on multiple fronts. While this approach may appear easier than addressing services provision directly, it still solves very little. Plus, it leads to societal judgments which should not have been necessary in the first place. A marketplace for time value would help to change this unfortunate circumstance eventually, in terms of organizational capacity at local levels. A decentralized marketplace for time value, could approach time constraints at personal levels, in order to determine the marketplace which individuals actually seek.
Granted, no one knows for certain how they would choose to organize time value, until individuals "give one another permission" to find out. However, one thing is for certain: no one would willingly force everyone to stand in line or wait for hours at a time, to carry out basic services functions. The main reason so many experience the "dreaded wait", is that time value has been excluded from production for obvious economic reasons. By making room for time value as a fully functioning marketplace, no one would need to endure the aggravation of lines, except for the moments when lines make sense for all concerned.
Monday, July 20, 2015
On Preserving Knowledge Use and Time Value
Recently, the Literacy Site had this to say in an advertisement entitled "Hell No! Our Libraries Can't Go!"
For instance, today's schools provide insufficient reward for the investment they require, because they do not adequately prepare students to assist in their own communities, afterward. Also, as Ivan Illich noted in "Deschooling Society", schools isolate the very groups which live among one another, in terms of the mutual support such groups could otherwise find. And libraries cannot expect to remain viable, when local book investments become mostly limited to leisure and entertainment which can readily be found elsewhere. Even though libraries are one of a broad category of experiential goods, many aspects of experiential product now need a broader economic purpose.
Not only is local knowledge based product important for educational purposes, it needs to provide structural backup for ongoing service formation and other related economic activities. For instance, do locals have an adequate range of local references to assist them, when their access to professional healthcare or hospitals is limited? Even though so much material is available online, citizens would have quick recourse to action, from information and knowledge which remains close at hand.
Many of the environments which individuals enjoy, are associated with time commitments which can be difficult to maintain, when there is no marketplace for time value. Service capacity and potential time value are both being lost, as labor force participation continues to decline in less prosperous regions. Fortunately, the process of lost labor force participation can be reversed through the local services coordination and time arbitrage of knowledge use systems. New communities would be able to preserve important knowledge and services sets which other communities are no longer either able to support.
Time value would become a part of this preservation process, in that individuals would able to contribute time value to the overall wealth of the community. This process would go a long way to preserve the validity of economic thought for general populations, because it can make vital connections between individual capacity and resource potential. If there is too little appreciation of economic thought in the present, it is because some suspect that the connection between the individual and economic life has been severed.
Social cohesion is primary, and there are ways to think about how it can be approached on more concrete terms. Only consider how trust needs to be preserved. And yet, both governments and private interests have moved in the opposite direction, by profiting off the citizen's attempt to gain economic access, instead of making a marketplace which holds more room for economic access. Trust takes years to build, and yet can be broken very quickly. When this happens it takes a long time to repair trust. The process of knowledge and time value preservation, could eventually go a long way to restore trust in both for profit and not for profit forms of organization.
The U.S. House Budget Committee proposed to eliminate the Institute of Museum and Library Services last month, causing consternation among librarians, museum curators, and the people they serve.In times of monetary restraint, it's not a bad idea to plan for possible eventualities in this regard, given the reality of budget issues. Also, it's not enough to assume that standard for-profit organization can always accomplish the goals populations seek. How to think about this? In many instances, local amenities need broader applications and connections to local communities than is now the case.
For instance, today's schools provide insufficient reward for the investment they require, because they do not adequately prepare students to assist in their own communities, afterward. Also, as Ivan Illich noted in "Deschooling Society", schools isolate the very groups which live among one another, in terms of the mutual support such groups could otherwise find. And libraries cannot expect to remain viable, when local book investments become mostly limited to leisure and entertainment which can readily be found elsewhere. Even though libraries are one of a broad category of experiential goods, many aspects of experiential product now need a broader economic purpose.
Not only is local knowledge based product important for educational purposes, it needs to provide structural backup for ongoing service formation and other related economic activities. For instance, do locals have an adequate range of local references to assist them, when their access to professional healthcare or hospitals is limited? Even though so much material is available online, citizens would have quick recourse to action, from information and knowledge which remains close at hand.
Many of the environments which individuals enjoy, are associated with time commitments which can be difficult to maintain, when there is no marketplace for time value. Service capacity and potential time value are both being lost, as labor force participation continues to decline in less prosperous regions. Fortunately, the process of lost labor force participation can be reversed through the local services coordination and time arbitrage of knowledge use systems. New communities would be able to preserve important knowledge and services sets which other communities are no longer either able to support.
Time value would become a part of this preservation process, in that individuals would able to contribute time value to the overall wealth of the community. This process would go a long way to preserve the validity of economic thought for general populations, because it can make vital connections between individual capacity and resource potential. If there is too little appreciation of economic thought in the present, it is because some suspect that the connection between the individual and economic life has been severed.
Social cohesion is primary, and there are ways to think about how it can be approached on more concrete terms. Only consider how trust needs to be preserved. And yet, both governments and private interests have moved in the opposite direction, by profiting off the citizen's attempt to gain economic access, instead of making a marketplace which holds more room for economic access. Trust takes years to build, and yet can be broken very quickly. When this happens it takes a long time to repair trust. The process of knowledge and time value preservation, could eventually go a long way to restore trust in both for profit and not for profit forms of organization.
Saturday, July 18, 2015
Some Notes on Time Value, Services and Monetary Systems
William Luther of the Sound Money Project detailed some aspects of commodity currencies in a recent post, which got me to thinking about the commodity currency aspect of time arbitrage as a single market. From his post:
One could liken the missing (aggregate) time component to land which is allowed to lie fallow indefinitely. If the land were "elsewhere" (such as other resources not central to production and consumption) this would not be problematic. However, the fallow "land" in this instance, lies in the heart of what is presently utilized. To be alive is to consume, which means that personal production in some capacity is a complete necessity, regardless of existing production patterns.
While monetary redistribution - via fiat money for knowledge use - is a reasonable pattern for some time periods ("produce" remains available from other fields), problems eventually develop. How so? Some skills sets retain special privileges for services production, even as technology allows consumption aggregates to take precedence over production aggregates. This process means the "best" fields are expected to provide the services consumption bounty, for too many fields which are expected to lie fallow. When limits to knowledge use are left in place for too long, they can eventually lead to societal stratification and even caste systems. Presently, the growing inability of governments to coordinate a time and knowledge based marketplace, also means that fiat monetary systems are being questioned.
Money as presently utilized, is the only good that can be traded for all other commodities - none of which can be directly traded with each other. Fortunately, this isn't problematic for most resources, because they are already represented as complete sets of aggregate possibilities in the marketplace. This means the monetary price signals for goods other than time, are generally reliable for efficient coordination. In other words, X amount of resource Y is what is available to be quantified, measured and valued. Whereas time aggregates lost this opportunity, because portions of time Z were quantified, measured and valued in ways which didn't take total time aggregates into account. Thus the monetary pricing signal for time value is incomplete.
When public and private interests attempt to coordinate pathways for time use, a complex economy which relies on fiat monetary policy for services needs is consequently left with mixed signals. This is not just a matter of mixed signals regarding how individuals would prefer to utilize their time in relation to that of others, but also what government budgets are capable of accomplishing. By allowing time value to provide a parallel pricing function alongside money, signals would become more clear, while knowledge use and services formation could be brought back into economic balance.
One thing William Luther did not touch on in his post was the importance of money as a medium of account. Indeed, a medium of account context is what normally provides a broad framework for goods and services coordination from a national perspective. However, the medium of account as representative of broad income and consumption aggregates, works best when labor force participation is high. And fiat money systems become difficult to comprehend, when time value is not well anchored in relation to traditional production.
The changing nature of governmental responsibility in the economy, was responsible for the fiat monetary systems which evolved in the 20th century. In some respects, governmental supplementation could be sustainable, so long as the ongoing compensation for time value remains simple - such as basic retirement wages. The main problem for fiat monetary formation, is when governments attempt to compensate for differences assigned to hourly time values for services coordination. While governments have good intentions in this regard, supplementing time use variance only creates a vast degree of complexity, which consequently becomes difficult to track, measure or budget.
Commodity monies can be contrast with fiat monies like the modern dollar, euro, yen, etc. which function as commonly accepted media of exchange but are not used for any other non-monetary purpose. Commodities that have served as money include gold, silver, copper, and salt, among others.In most respects, fiat currency is a better approach for monetary policy than earlier commodity monies or the more recent gold standard transitions, for that matter. Why - then - doesn't fiat money adequately represent time value? Knowledge use aspects of service formation come into play, once other production patterns have grown complex in fiat systems. However - as a secondary component of production - only certain time aggregates are accounted for, in these conditions.
One could liken the missing (aggregate) time component to land which is allowed to lie fallow indefinitely. If the land were "elsewhere" (such as other resources not central to production and consumption) this would not be problematic. However, the fallow "land" in this instance, lies in the heart of what is presently utilized. To be alive is to consume, which means that personal production in some capacity is a complete necessity, regardless of existing production patterns.
While monetary redistribution - via fiat money for knowledge use - is a reasonable pattern for some time periods ("produce" remains available from other fields), problems eventually develop. How so? Some skills sets retain special privileges for services production, even as technology allows consumption aggregates to take precedence over production aggregates. This process means the "best" fields are expected to provide the services consumption bounty, for too many fields which are expected to lie fallow. When limits to knowledge use are left in place for too long, they can eventually lead to societal stratification and even caste systems. Presently, the growing inability of governments to coordinate a time and knowledge based marketplace, also means that fiat monetary systems are being questioned.
Money as presently utilized, is the only good that can be traded for all other commodities - none of which can be directly traded with each other. Fortunately, this isn't problematic for most resources, because they are already represented as complete sets of aggregate possibilities in the marketplace. This means the monetary price signals for goods other than time, are generally reliable for efficient coordination. In other words, X amount of resource Y is what is available to be quantified, measured and valued. Whereas time aggregates lost this opportunity, because portions of time Z were quantified, measured and valued in ways which didn't take total time aggregates into account. Thus the monetary pricing signal for time value is incomplete.
When public and private interests attempt to coordinate pathways for time use, a complex economy which relies on fiat monetary policy for services needs is consequently left with mixed signals. This is not just a matter of mixed signals regarding how individuals would prefer to utilize their time in relation to that of others, but also what government budgets are capable of accomplishing. By allowing time value to provide a parallel pricing function alongside money, signals would become more clear, while knowledge use and services formation could be brought back into economic balance.
One thing William Luther did not touch on in his post was the importance of money as a medium of account. Indeed, a medium of account context is what normally provides a broad framework for goods and services coordination from a national perspective. However, the medium of account as representative of broad income and consumption aggregates, works best when labor force participation is high. And fiat money systems become difficult to comprehend, when time value is not well anchored in relation to traditional production.
The changing nature of governmental responsibility in the economy, was responsible for the fiat monetary systems which evolved in the 20th century. In some respects, governmental supplementation could be sustainable, so long as the ongoing compensation for time value remains simple - such as basic retirement wages. The main problem for fiat monetary formation, is when governments attempt to compensate for differences assigned to hourly time values for services coordination. While governments have good intentions in this regard, supplementing time use variance only creates a vast degree of complexity, which consequently becomes difficult to track, measure or budget.
Thursday, July 16, 2015
AD to AS: Where You Lead, I Will (Ultimately) Follow
The main role of central bankers is aggregate demand, and making certain that it is sufficiently met. Since economists are divided as to whether aggregate demand management "should" be active or passive, what central bankers actually need to do, appears more complex than is necessary. In the short term, monetary policy has a vitally important role for both monetary stability and growth, while the supply side has the larger responsibility for growth in the long term.
During the short run, aggregate demand management "leads", but certainly not in a "central planning" context. Even though monetary policy sets the stage for presently occurring activities, it can do the greatest good by faithfully following ongoing trends, so that productive capacity is fully met. This is also the course of action which a nominal target would seek to provide, as well.
While some think of aggregate demand in terms of a government driven economy, both government activity and private marketplace elements are taken into account, for those who emphasize the importance of a nominal target. Hence in the midst of debates as to which is more "important" - government or private interests, it can be easy to forget that private interests are (still) the point of economic origination. This is also why private interests - i.e. the marketplace - are the ultimate determinant of long term growth. In aggregate, it is simply easier to provide unique - or new growth capacity - through the organizational capacity of a relative few. Sometimes populations agree on big government projects, but generally not for long periods.
What about the belief that governments are now more capable of leading (further) growth to a greater extent than the supply side? While governments are major contributors to economic growth, their current roles in this regard are somewhat murky. And even though aggregate demand plays a major role in the consumption driven economy of the early 21st century, private consumption still relies on the income which only the circumstance of aggregate supply can provide - in spite of government efforts to maximize consumption requirements.
In recent decades, it seemed that government could play a larger role for wealth creation through partnership with supply side interests, so long as populations could fulfill government defined consumption roles. One could say that governments "contribute" to growth by defining the environments for production capacity. Even though this was an equilibrium which proved capable of strong growth for decades, it did not offer alternative forms of growth besides the primary channel which was created. As a result, nominal income growth was able to keep pace with the given equilibrium so long as it continued to mature.
Once access to this defined equilibrium began to peak, neither policy makers or supply side interests were willing to consider growth potential through a revised equilibrium, because of the dislocations this would cause. Due to this reluctance, policy makers stand at the edge of the precipice, peering into the depths and trying to determine if progress can somehow resume on yesterday's terms. It's not easy to follow in a dance, if one's partner has suddenly gotten cold feet. Will the enthusiastic dance of the twentieth century become a memory? Who is the most reluctant partner in this dance - the supply side, the demand side, or both?
Consider the scenario in terms of needed infrastructure. Why can't governments somehow "lead the way" out of stagnation with further government consumption? Besides the fact few agree what infrastructure is important, too many ongoing monetary obligations now exist, even as maintenance for earlier infrastructure "goes begging". Even privately funded infrastructure offerings may not adequately consider shifts in consumer preferences, and some are too willing to place such preferences into political context where they don't belong. As to more immediate concerns, government provisions for needed highway maintenance, would mostly be short term stimulus with no long term effect. Why was there a broader growth aspect to government's prime infrastructural example: the interstate system of the fifties?
Interstate access provided economic access for the economically impoverished. In other words, those who had previously been excluded - particularly when agricultural choices became limited - were able to meaningfully attach to the new trunks and branches of transportation in ways which also meant economic reward. Many a road and highway became the locations of countless new businesses. It was much later, when brick and mortar retail and manufacture consolidated into more prosperous regions, and other retail distribution evolved from independent business people into digital records and delivery trucks.
Another form of infrastructure is ready, and government's contribution is mostly a memory, as it happened decades earlier. The digital highways of the present have the potential to provide main roads and side roads for the resources of the mind. Thus far however, the new infrastructure is mostly passive participation, instead of access. Why the difference? Whereas participation is entertainment and communication, access includes means to make a living. The go ahead for digital access is on hold.
This is one reason why all the supply side boasting about digital wealth, and that it "should" generate good deflation, rings hollow. Today, it is mostly the physical interstates which lead to full scale knowledge use and hold the artificially limited wealth value of the present. All the education in the world is not going to assist the coming generations, if there are no nodes at the end of all these new digital branches to set up business and prosper, once again.
Presently a contained depression is still papered over with excuses and wishful thinking. Few in power are comfortable with how continued growth now needs to take place, and the exclusive growth which special interests prefer has hit a speed bump. Government infrastructure serves little purpose - and even less growth capacity, when and if it is mostly about providing more options for those who already have options aplenty.
"Treading water" with monetary policy is not the only problem. When supply side interests (quietly) work to restrain further economic access, long term output potential is gradually reduced over time. While this represents problems in monetary terms, it also means societal problems. In recent years, market monetarists (including this blogger) have promoted a nominal target in order to promote economic stability and optimal conditions for continued growth. But if supply side representatives do not see continued growth as optimal, even nominal income can only follow where the supply side chooses to lead, in the long run.
During the short run, aggregate demand management "leads", but certainly not in a "central planning" context. Even though monetary policy sets the stage for presently occurring activities, it can do the greatest good by faithfully following ongoing trends, so that productive capacity is fully met. This is also the course of action which a nominal target would seek to provide, as well.
While some think of aggregate demand in terms of a government driven economy, both government activity and private marketplace elements are taken into account, for those who emphasize the importance of a nominal target. Hence in the midst of debates as to which is more "important" - government or private interests, it can be easy to forget that private interests are (still) the point of economic origination. This is also why private interests - i.e. the marketplace - are the ultimate determinant of long term growth. In aggregate, it is simply easier to provide unique - or new growth capacity - through the organizational capacity of a relative few. Sometimes populations agree on big government projects, but generally not for long periods.
What about the belief that governments are now more capable of leading (further) growth to a greater extent than the supply side? While governments are major contributors to economic growth, their current roles in this regard are somewhat murky. And even though aggregate demand plays a major role in the consumption driven economy of the early 21st century, private consumption still relies on the income which only the circumstance of aggregate supply can provide - in spite of government efforts to maximize consumption requirements.
In recent decades, it seemed that government could play a larger role for wealth creation through partnership with supply side interests, so long as populations could fulfill government defined consumption roles. One could say that governments "contribute" to growth by defining the environments for production capacity. Even though this was an equilibrium which proved capable of strong growth for decades, it did not offer alternative forms of growth besides the primary channel which was created. As a result, nominal income growth was able to keep pace with the given equilibrium so long as it continued to mature.
Once access to this defined equilibrium began to peak, neither policy makers or supply side interests were willing to consider growth potential through a revised equilibrium, because of the dislocations this would cause. Due to this reluctance, policy makers stand at the edge of the precipice, peering into the depths and trying to determine if progress can somehow resume on yesterday's terms. It's not easy to follow in a dance, if one's partner has suddenly gotten cold feet. Will the enthusiastic dance of the twentieth century become a memory? Who is the most reluctant partner in this dance - the supply side, the demand side, or both?
Consider the scenario in terms of needed infrastructure. Why can't governments somehow "lead the way" out of stagnation with further government consumption? Besides the fact few agree what infrastructure is important, too many ongoing monetary obligations now exist, even as maintenance for earlier infrastructure "goes begging". Even privately funded infrastructure offerings may not adequately consider shifts in consumer preferences, and some are too willing to place such preferences into political context where they don't belong. As to more immediate concerns, government provisions for needed highway maintenance, would mostly be short term stimulus with no long term effect. Why was there a broader growth aspect to government's prime infrastructural example: the interstate system of the fifties?
Interstate access provided economic access for the economically impoverished. In other words, those who had previously been excluded - particularly when agricultural choices became limited - were able to meaningfully attach to the new trunks and branches of transportation in ways which also meant economic reward. Many a road and highway became the locations of countless new businesses. It was much later, when brick and mortar retail and manufacture consolidated into more prosperous regions, and other retail distribution evolved from independent business people into digital records and delivery trucks.
Another form of infrastructure is ready, and government's contribution is mostly a memory, as it happened decades earlier. The digital highways of the present have the potential to provide main roads and side roads for the resources of the mind. Thus far however, the new infrastructure is mostly passive participation, instead of access. Why the difference? Whereas participation is entertainment and communication, access includes means to make a living. The go ahead for digital access is on hold.
This is one reason why all the supply side boasting about digital wealth, and that it "should" generate good deflation, rings hollow. Today, it is mostly the physical interstates which lead to full scale knowledge use and hold the artificially limited wealth value of the present. All the education in the world is not going to assist the coming generations, if there are no nodes at the end of all these new digital branches to set up business and prosper, once again.
Presently a contained depression is still papered over with excuses and wishful thinking. Few in power are comfortable with how continued growth now needs to take place, and the exclusive growth which special interests prefer has hit a speed bump. Government infrastructure serves little purpose - and even less growth capacity, when and if it is mostly about providing more options for those who already have options aplenty.
"Treading water" with monetary policy is not the only problem. When supply side interests (quietly) work to restrain further economic access, long term output potential is gradually reduced over time. While this represents problems in monetary terms, it also means societal problems. In recent years, market monetarists (including this blogger) have promoted a nominal target in order to promote economic stability and optimal conditions for continued growth. But if supply side representatives do not see continued growth as optimal, even nominal income can only follow where the supply side chooses to lead, in the long run.
Tuesday, July 14, 2015
The Things That Are Economic
When national governments utilize fiat monetary systems as means to increase power - instead of maintaining the integrity of economic connections - populations suffer. Many who think carefully about such matters, are beginning to doubt a long standing trust, as governments share power with special interests. Some are even willing to consider calls for secession on the part of states (in the U.S.), despite the fact such calls are no panacea for anything, right now. What sort of economic context do those calls suggest? How would some states better represent their populations, and through what means which Washington does not already provide?
Traditional Republicans view calls for secession as ludicrous and quite unimaginable - as do Democrats - and understandably so. But both parties need to be paying closer attention, to a segment of the population which is now being swayed by secession and anti-fiat monetary system talk. Gridlock in Washington is beginning to breed a "do something" mentality, but this reaction would hardly be a proactive step. Presently, states are equally inclined to follow the nature of special interest requests, which would only further limit both service formation and knowledge use. What states legislatures might not realize, is that doing so would only limit other means of production output as well.
Not so long ago, few in power questioned the benefits of the fiat monetary system which developed in the twentieth century. In a sense, fiat monetary formation contributed to new forms of knowledge based services during those decades. However, the resources which Washington once had to do so, are mostly earmarked for other purposes. Even though knowledge use needs to be locally reconfigured by the private sector, no one has begun to initiate the process. In all of this, states still rely on Washington for their own participation in services systems. As Scott Sumner recently noted, states have little choice but to be conservative at local levels, by the nature of their (much smaller) budgets:
Two aspects of a potential services wealth process, are particularly important. First, individuals need to be able to help one another through both formal and informal means. In other words, one needs to be able to arbitrage time value which works best for entrepreneurial providers and recipients, instead of relying on outdated and externally defined services roles. Even though such limitations tend to be attributed to government, often they are first imposed by private special interests, with government's approval.
Second: investment for lower income levels is generally more centered around economic activity which holds personal meaning. Hence it often involves considerable sacrifice and commitment, and needs structures which can provide a gradual and incremental process. This form of investment needs a completely different design, from the large scale investments which are intended for large groups seeking monetary gain instead of personal involvement.
Another aspect of large investment holdings (as opposed to what is needed), is the fact they realize gains from the use of time and other resources in a rival context. Rival context by necessity of design, leaves someone or something out. This is why - for instance - it is not logical for governments to invest on behalf of everyone, when they utilize (what has to be) a broad exclusionary framework in order to generate profit.
Local investment pools for knowledge use systems wouldn't need to exclude (local) time aggregates in order to generate profit, because they would optimize a wide range of related factors close at hand, in mutual support settings. Time would be rival only in the sense of spatial match possibilities. This process would also align with specific individual and group preferences. In those inevitable moments when individual risks prove too great, the group would still benefit from other shared investment sets.
Governments are able to maintain stability by making certain the things that are economic, also remain a vital part of the life of their own citizens. Any region in the U.S. which experiences problems with unemployment and services limitations, deserves a chance to start anew. Even though decentralized settings are not a direct part of government wealth, they are still able to contribute to a nation's wealth in many ways. Secession possibilities should not even be on the table - particularly for states in the U.S. Instead, a greater understanding is needed, how to remain independent, and yet together, at the same time.
Traditional Republicans view calls for secession as ludicrous and quite unimaginable - as do Democrats - and understandably so. But both parties need to be paying closer attention, to a segment of the population which is now being swayed by secession and anti-fiat monetary system talk. Gridlock in Washington is beginning to breed a "do something" mentality, but this reaction would hardly be a proactive step. Presently, states are equally inclined to follow the nature of special interest requests, which would only further limit both service formation and knowledge use. What states legislatures might not realize, is that doing so would only limit other means of production output as well.
Not so long ago, few in power questioned the benefits of the fiat monetary system which developed in the twentieth century. In a sense, fiat monetary formation contributed to new forms of knowledge based services during those decades. However, the resources which Washington once had to do so, are mostly earmarked for other purposes. Even though knowledge use needs to be locally reconfigured by the private sector, no one has begun to initiate the process. In all of this, states still rely on Washington for their own participation in services systems. As Scott Sumner recently noted, states have little choice but to be conservative at local levels, by the nature of their (much smaller) budgets:
2) The hard constraint imposed by a single currency makes European countries behave more like (American) states than countries. Think about it. State debts tend to be much smaller than the Federal debt. States are desperately struggling to bring pension costs under control, while 70 Congressional Democrats call for "expanding" Social Security benefits.Unfortunately, expanding Social Security is likely not an option, particularly for lower income levels which will need to create local investment in the future. Even the wealth still available to Washington (such as recent profits on student loans), is earmarked for already existing obligations. Washington's role in the housing market has likely peaked, as well. It's time for citizens to become a real part of all that is economic, once again. Otherwise, the fiat monetary systems which brought so many new options in the twentieth century, could end up in jeopardy. Human capital needs to become a direct component of wealth creation, in order for this all too recent monetary standard to flourish.
Two aspects of a potential services wealth process, are particularly important. First, individuals need to be able to help one another through both formal and informal means. In other words, one needs to be able to arbitrage time value which works best for entrepreneurial providers and recipients, instead of relying on outdated and externally defined services roles. Even though such limitations tend to be attributed to government, often they are first imposed by private special interests, with government's approval.
Second: investment for lower income levels is generally more centered around economic activity which holds personal meaning. Hence it often involves considerable sacrifice and commitment, and needs structures which can provide a gradual and incremental process. This form of investment needs a completely different design, from the large scale investments which are intended for large groups seeking monetary gain instead of personal involvement.
Another aspect of large investment holdings (as opposed to what is needed), is the fact they realize gains from the use of time and other resources in a rival context. Rival context by necessity of design, leaves someone or something out. This is why - for instance - it is not logical for governments to invest on behalf of everyone, when they utilize (what has to be) a broad exclusionary framework in order to generate profit.
Local investment pools for knowledge use systems wouldn't need to exclude (local) time aggregates in order to generate profit, because they would optimize a wide range of related factors close at hand, in mutual support settings. Time would be rival only in the sense of spatial match possibilities. This process would also align with specific individual and group preferences. In those inevitable moments when individual risks prove too great, the group would still benefit from other shared investment sets.
Governments are able to maintain stability by making certain the things that are economic, also remain a vital part of the life of their own citizens. Any region in the U.S. which experiences problems with unemployment and services limitations, deserves a chance to start anew. Even though decentralized settings are not a direct part of government wealth, they are still able to contribute to a nation's wealth in many ways. Secession possibilities should not even be on the table - particularly for states in the U.S. Instead, a greater understanding is needed, how to remain independent, and yet together, at the same time.
Monday, July 13, 2015
Thoughts on Greece, Services, the Medium of Account and More
There's plenty of space between the problems of the moment, and how it might all play out in the future. Earlier today, John Cochrane wonders, "What about the banks?...Greece is basically off the euro now." Cochrane didn't consider fiscal union to be the primary issue. He continues:
One of my primary concerns of course, is that time aggregates are not even a recognizable component of a nation's general equilibrium. Only consider the degree to which Greece has suffered from extensive unemployment - a problem which neither their government or business interests have been able to address. Greece is hardly alone, in the fact that more fiscal policy has been needed for services sector employment than they can now maintain. Many governments will gradually need to retrench on the promises they made in that regard.
Problems also arise when the wealth of housing assets and services formations becomes dependent on international monetary flows, because these flows are often subject to change. Some would logically ask, why should this be a problem for the U.S.? Presently it does not appear to be so. Just the same, there always needs to be at least one Plan B in place when international flows falter, as the example of Greece clearly shows. Knowledge use systems would provide at least one Plan B, so as to maintain employment levels when it is not possible to do so, otherwise.
How is it that prosperous cities and regions can rely on international monetary flows, if this is problematic for a nation's government? Local economies have multiple points of responsibility for budgets and adaptive circumstance. As Cochrane noted, Chicago would not have to start from scratch with a completely new standard. Whereas national governments often end up with a single "all purpose" budget, which cannot readily adapt as international monetary flows gradually change.
An important takeaway for any nation in all this, is simply to be careful. Don't just assume that problems of this magnitude can't - or won't - "happen here". It is best by far, for governments not to privilege special interests to the point that too many citizens are excluded from economic activity along a wide scale. Even though some cities and prosperous regions have the luxury of creating an exclusive equilibrium, governments need to resist the impulse to make those terms the norm for places with different resource capacities. Governments need to do their level best to allow a wide range of settings which include as many participants as possible. Otherwise, forced austerity can become problematic for a nation's productive capacity when monetary policy falls short - as is presently the case.
...each country has its own banks, and each government uses its banks as piggybanks to stuff with government debt. Then, if the government defaults the whole system is dragged down with it...government default means the country must change the units of its currency. If Chicago defaults on its debts, nobody thinks it must introduce a new currency or that Chicago's banks will fail.In the meantime, the euro has become - in the words of Lars Christensen, a "growth killing machine." One wonders, along with David Glasner, why Germany would willingly force Greece into bankruptcy. Recently, Nick Rowe responded to a post from JP Koning, "There won't be a drachma-induced recovery." If a reintroduction of the drachma were to occur, how difficult would this be, to implement? Here's Koning:
But as long as Greek prices continue to be expressed in euros, drachmas will simply swim within the existing euro standard fish bowl. All sorts of mountains must be crossed before the penultimate switch of standards. This isn't "snap of the fingers" territory.Even in the best of circumstance, a return to the drachma would take time. Only consider that when policy makers don't agree on monetary policy roles, the public is also confused, as to what money is expected to accomplish in the marketplace. Money as a medium of account, experiences ongoing friction between local flows, international flows, and the flows of tradable and non tradable sectors as well. In particular, the unique features of non tradable structures can make them a nation's wild card. Non tradable equilibrium needs to exist in better balance with the wealth of tradable sectors, before a national medium of account can be better understood.
One of my primary concerns of course, is that time aggregates are not even a recognizable component of a nation's general equilibrium. Only consider the degree to which Greece has suffered from extensive unemployment - a problem which neither their government or business interests have been able to address. Greece is hardly alone, in the fact that more fiscal policy has been needed for services sector employment than they can now maintain. Many governments will gradually need to retrench on the promises they made in that regard.
Problems also arise when the wealth of housing assets and services formations becomes dependent on international monetary flows, because these flows are often subject to change. Some would logically ask, why should this be a problem for the U.S.? Presently it does not appear to be so. Just the same, there always needs to be at least one Plan B in place when international flows falter, as the example of Greece clearly shows. Knowledge use systems would provide at least one Plan B, so as to maintain employment levels when it is not possible to do so, otherwise.
How is it that prosperous cities and regions can rely on international monetary flows, if this is problematic for a nation's government? Local economies have multiple points of responsibility for budgets and adaptive circumstance. As Cochrane noted, Chicago would not have to start from scratch with a completely new standard. Whereas national governments often end up with a single "all purpose" budget, which cannot readily adapt as international monetary flows gradually change.
An important takeaway for any nation in all this, is simply to be careful. Don't just assume that problems of this magnitude can't - or won't - "happen here". It is best by far, for governments not to privilege special interests to the point that too many citizens are excluded from economic activity along a wide scale. Even though some cities and prosperous regions have the luxury of creating an exclusive equilibrium, governments need to resist the impulse to make those terms the norm for places with different resource capacities. Governments need to do their level best to allow a wide range of settings which include as many participants as possible. Otherwise, forced austerity can become problematic for a nation's productive capacity when monetary policy falls short - as is presently the case.
Saturday, July 11, 2015
Follow Up Notes on Rival and Non Rival Time Value
First, a quick addendum in reference to yesterday's post. The non rival time value of (local) knowledge use systems, still has a rival time value aspect which needs to be noted. Consider that rival time value in general equilibrium means some level of unemployment is necessary. However, time value in alternate equilibrium, would include rival qualities for small groupings which nonetheless have full employment goals. How so? Despite the fact that time value compensation is equal (with further monetary incentives for group investment structures) one's time availability is not possible to distribute equally.
And the actual time that individuals hold in relation to one another, has tremendous value which can't be expressed when time is compensated asymmetrically. Multiple incentives still exist (beyond money in these circumstance) to work towards one's personal "best" in relation to others. Whenever it isn't possible to match time with existing servicesproviders entrepreneurs, individuals and groups alike have plenty of incentive to fill the missing gaps. Perhaps a marketplace for time could be likened to an Olympian challenge, for self directed time use fulfillment .
Rival time value - in terms of time based product - has faced a double exclusionary circumstance in general (or primary) equilibrium. First, there is the matter of arbitrary limits on knowledge use, in time aggregate terms. This reduces the numbers for services practitioners who are available to the public as a whole. Then, the matter of one's personal limits, in the hours of a day that are actually available for the wants and needs of others.
Harsh limitations re the creation of time based product have not been adequately considered, in relation to the abundance of tradable product formation throughout the world. One way to think about this is the difficulties which the U.S. military face, in accessing adequate healthcare. That double limitation on time based product is the only explanation for insufficient healthcare, given existing military budgets in relation to other budgets. How so? This quote from Malala Yousafzai regarding education, provides some perspective:
Another important aspect of (equally compensated) matched time is the ability to "back" one's ideas with mutual assistance. The point is not to pay another local for their specific talent through the shared system, but to seek out other forms of economic activity with them because of their unique status in this regard. By way of example, writers, artists and musicians might provide various services for one another. This would be an option, if and when individuals are in the midst of projects which don't offer the opportunity to promote one's personal challenges directly to the community. Neighbors could provide indirect idea or personal project "backing", through their willingness to provide (time arbitrage compensated) assistance for one another in other ongoing aspects of daily life.
The benefit in this, is that ideas and projects would not necessarily have to be diminished in either political or ideological context, in order for societies to support them. Knowledge use through indirect support settings would also be non rival, because time value is being compensated instead of specific forms or applications of knowledge. No one is pressured to assign societal value to ideas or projects at the outset, which allows more potential innovation to flourish. This gives new ideas a better chance than might otherwise be the case. Generally, new ideas emerge in a society when individuals have other means of support which are not specifically related to the work at hand. This form of local community support, would make it possible for more forms of innovation to find useful context in daily life.
And the actual time that individuals hold in relation to one another, has tremendous value which can't be expressed when time is compensated asymmetrically. Multiple incentives still exist (beyond money in these circumstance) to work towards one's personal "best" in relation to others. Whenever it isn't possible to match time with existing services
Rival time value - in terms of time based product - has faced a double exclusionary circumstance in general (or primary) equilibrium. First, there is the matter of arbitrary limits on knowledge use, in time aggregate terms. This reduces the numbers for services practitioners who are available to the public as a whole. Then, the matter of one's personal limits, in the hours of a day that are actually available for the wants and needs of others.
Harsh limitations re the creation of time based product have not been adequately considered, in relation to the abundance of tradable product formation throughout the world. One way to think about this is the difficulties which the U.S. military face, in accessing adequate healthcare. That double limitation on time based product is the only explanation for insufficient healthcare, given existing military budgets in relation to other budgets. How so? This quote from Malala Yousafzai regarding education, provides some perspective:
If the whole world stopped spending money on military for just 8 days, we could provide 12 years of free quality education to every child on the planet.Many in the U.S. are used to thinking that 1) services formation would be adequate if only services weren't given to the "wrong" people, and 2) services already in place are not "affordable" for anyone's budgets. If services were thought of in terms of potential wealth creation, both of these points would be moot - which fortunately could stop a lot of political bickering in its tracks. If someone were to even make an informal tally of the times that individuals give up on needed services access, the result would be astounding. Why have people convinced themselves that desirable forms of product - particularly in a time of vast knowledge use potential - are not possible?
Another important aspect of (equally compensated) matched time is the ability to "back" one's ideas with mutual assistance. The point is not to pay another local for their specific talent through the shared system, but to seek out other forms of economic activity with them because of their unique status in this regard. By way of example, writers, artists and musicians might provide various services for one another. This would be an option, if and when individuals are in the midst of projects which don't offer the opportunity to promote one's personal challenges directly to the community. Neighbors could provide indirect idea or personal project "backing", through their willingness to provide (time arbitrage compensated) assistance for one another in other ongoing aspects of daily life.
The benefit in this, is that ideas and projects would not necessarily have to be diminished in either political or ideological context, in order for societies to support them. Knowledge use through indirect support settings would also be non rival, because time value is being compensated instead of specific forms or applications of knowledge. No one is pressured to assign societal value to ideas or projects at the outset, which allows more potential innovation to flourish. This gives new ideas a better chance than might otherwise be the case. Generally, new ideas emerge in a society when individuals have other means of support which are not specifically related to the work at hand. This form of local community support, would make it possible for more forms of innovation to find useful context in daily life.
Friday, July 10, 2015
Services Production: The Potential for Non-Rival Time Value
Why are some individuals so disaffected with the present day economy? There is too little social context for coordinated work efforts, outside of normal workplace norms. The use of rival time value in most workplaces, has also meant uneven workplace distributions across the U.S. Centuries of agriculture - for instance - took place in coordinated and widely dispersed non rival conditions. For the most part, everyone's time could contribute to the output of group efforts. Families similarly reflected this structure, and non rival time in these circumstance contributed to multiple aspects of productive labor.
However, these earlier forms of spontaneous coordination are no longer needed. Most workplaces evolved into patterns of externally provided coordination, which added value from rival time use. Recently, holes have begun to appear in these workplace distribution patterns. Rival time use involves exclusionary methods, and relies on highly specific means of resource aggregation. If one has insufficient access to these forms of work patterns, it may be difficult to live out one's life through normal means - especially if full time self employment is not an option.
Somehow, populations will eventually adapt. But will they opt to create new non rival forms of work, which take the place of earlier patterns of local group coordination? Some potential methods do not have the capacity to move societies forward, which is something policy makers need to consider. The more this issue gets neglected, the more crude any "solutions" might become.
For example: reversions to "sustainable agriculture" can be confusing to economists, when they are taking place alongside more efficient means of production. What's the point? Even so, this form of adaptation is by no means restricted to particular income levels. And for anyone with insufficient economic access, the efficiency gains of modern production don't always apply - particularly when political parties find it desirable to abolish food stamp programs. Whether or not self sufficiency is treated as a desirable experiential good, it provides economic options when society does not see fit to do so.
Without sufficient attention from policy makers, reversals in labor force participation could eventually lead to informal economies that don't benefit from or contribute to the formal economies of the present. Services production could be a positive exception in this regard. Knowledge based services are a potential choice for non-rival time value which needs to be taken seriously. Why so?
The marketplace for knowledge based service formation is woefully incomplete, for rival time value diminishes marketplace potential and range for time based product. Whereas slow food movements represent (relatively) more work for less product, non rival time value for services production is more work for more product. By adding non rival time value for services creation instead of traditional production (as a sustainable option), non rival time value would not displace a more efficient marketplace.
Time arbitrage could also reconcile monetary compensation with the time limit realities so many individuals face. One often hears, "You don't pay for things with money, you pay for things with hours of your life." People are reluctant to trust money (and by extension, capitalism), when time has insufficient value to contribute to a good life.
Consider the psychological and social effects, when most time value is treated as rival to other time value. In school playgrounds, children often act out the ongoing struggles of their parents in the workplace. When time is rival in most circumstance, there are constant efforts to remove anyone and anything deemed not "good enough". Even the minimum wage is another rationale for further exclusion, through the rival selection of stamina and character traits deemed desirable. Populations resort to this sorting mechanism, even though rising minimum wages make it difficult for businesses to survive the changes in local equilibrium.
Services need not be thought of strictly as obligations for governments and traditional producers in the economy. It is every bit as possible for human capital to organize for services production, as for other forms of capital to organize for traditional production. But in order to to so, services need organizational capacity in non rival context. Otherwise, it's not possible to use time value to generate free flows of knowledge and information. Nor is it possible for human capital to become a direct source of wealth, because asymmetric time value has to be compensated from other forms of value. Services production is a worthy option for the future, because it would allow individuals and groups to add more value to the marketplace than presently exists.
However, these earlier forms of spontaneous coordination are no longer needed. Most workplaces evolved into patterns of externally provided coordination, which added value from rival time use. Recently, holes have begun to appear in these workplace distribution patterns. Rival time use involves exclusionary methods, and relies on highly specific means of resource aggregation. If one has insufficient access to these forms of work patterns, it may be difficult to live out one's life through normal means - especially if full time self employment is not an option.
Somehow, populations will eventually adapt. But will they opt to create new non rival forms of work, which take the place of earlier patterns of local group coordination? Some potential methods do not have the capacity to move societies forward, which is something policy makers need to consider. The more this issue gets neglected, the more crude any "solutions" might become.
For example: reversions to "sustainable agriculture" can be confusing to economists, when they are taking place alongside more efficient means of production. What's the point? Even so, this form of adaptation is by no means restricted to particular income levels. And for anyone with insufficient economic access, the efficiency gains of modern production don't always apply - particularly when political parties find it desirable to abolish food stamp programs. Whether or not self sufficiency is treated as a desirable experiential good, it provides economic options when society does not see fit to do so.
Without sufficient attention from policy makers, reversals in labor force participation could eventually lead to informal economies that don't benefit from or contribute to the formal economies of the present. Services production could be a positive exception in this regard. Knowledge based services are a potential choice for non-rival time value which needs to be taken seriously. Why so?
The marketplace for knowledge based service formation is woefully incomplete, for rival time value diminishes marketplace potential and range for time based product. Whereas slow food movements represent (relatively) more work for less product, non rival time value for services production is more work for more product. By adding non rival time value for services creation instead of traditional production (as a sustainable option), non rival time value would not displace a more efficient marketplace.
Time arbitrage could also reconcile monetary compensation with the time limit realities so many individuals face. One often hears, "You don't pay for things with money, you pay for things with hours of your life." People are reluctant to trust money (and by extension, capitalism), when time has insufficient value to contribute to a good life.
Consider the psychological and social effects, when most time value is treated as rival to other time value. In school playgrounds, children often act out the ongoing struggles of their parents in the workplace. When time is rival in most circumstance, there are constant efforts to remove anyone and anything deemed not "good enough". Even the minimum wage is another rationale for further exclusion, through the rival selection of stamina and character traits deemed desirable. Populations resort to this sorting mechanism, even though rising minimum wages make it difficult for businesses to survive the changes in local equilibrium.
Services need not be thought of strictly as obligations for governments and traditional producers in the economy. It is every bit as possible for human capital to organize for services production, as for other forms of capital to organize for traditional production. But in order to to so, services need organizational capacity in non rival context. Otherwise, it's not possible to use time value to generate free flows of knowledge and information. Nor is it possible for human capital to become a direct source of wealth, because asymmetric time value has to be compensated from other forms of value. Services production is a worthy option for the future, because it would allow individuals and groups to add more value to the marketplace than presently exists.
Thursday, July 9, 2015
Matched Services Time, and the Trust Factor
When did governments assume so much of the role of time coordination, for services obligations? As it turns out, decades earlier. In the U.S. many retirement costs, pensions and government subsidies are now associated with healthcare services. Expenditures for government investments and entitlements exchanged places in the early seventies, and even the military has difficulty keeping up with healthcare needs. One way to think about services coordination, is that governments have defined areas which were once cultural responsibilities, as more aspects of life transitioned into the formal economy. Services time coordination became an important component of fiat money, as it evolved in the twentieth century.
What about revenue for these still growing obligations? Income taxes are the most reliable source, and housing is an indirect contributor for services revenue. However, the housing market - as presently structured - is now limited to higher income brackets. Consequently, there are fewer sources of wealth for government to tap into, in order to meet the ongoing burden of asymmetric services coordination. In all of this, citizens are less inclined to trust Washington. Indeed, governments have made more promises than they will be able to keep in the near future.
As Nick Rowe indicated in a recent post, trust can also be a "time-inconsistency" problem. Incentives to pay for debts in the future, do not always match up with the decisions to buy a portion of that future now. Trust issues can become all the more difficult, when government promises appear uncertain. Services coordination presents another time inconsistency problem, of compensated rival (asymmetric) time value. How does one know if revenue can keep up with the services obligations which governments hold? In order for populations to keep faith in monetary systems, they have to believe in the promises which governments make.
The uncertain nature of matched services time capacity, has become one of the larger questions about future growth potential. Member of both political parties have become suspicious of present day monetary policy, but the wish to return to a gold standard is in many respects a blatant rejection of current services obligations. Tight money advocates have plenty of backing, because while some see little room for services growth, other see a diminished role for growth in terms of traditional production.
Part of the confusion regarding fiat money, is the compensation of rival time contributions to the services sector. Asymmetric time compensation makes it difficult to determine service sector value, in relation to the wealth of traditional manufacture. Also, think how some services sectors have responded. Due to reliance on government budgets, they gain respectability by utilizing the same "efficiency" dynamic which makes rival time so valuable for the tradable goods sector.
But all this has really accomplished is a partial destruction of countless hours in time investment. Hence there is little trust in services sector potential as a source of future growth, as human capital continues to be sacrificed. Unfortunately however, scaling back the services sector also means scaling back on traditional production, as labor force participation continues to be shorted. Is it possible for the symmetric value of time arbitrage to reverse this process?
Understandably, it is easier to compensate time value in relation to the skills sets of others. But there is only so much growth capacity for this method, in the present. Those who are willing to consider symmetrically matched time value, would be able to contribute to greater innovation and knowledge diffusion in the marketplace. Matched time would also provide clear record keeping, for coordinated services activity. It will not be easy to restore trust, regarding the debt loads which governments can reasonably carry. Even so, a better understanding of actual services capacity, would greatly aid the process.
What about revenue for these still growing obligations? Income taxes are the most reliable source, and housing is an indirect contributor for services revenue. However, the housing market - as presently structured - is now limited to higher income brackets. Consequently, there are fewer sources of wealth for government to tap into, in order to meet the ongoing burden of asymmetric services coordination. In all of this, citizens are less inclined to trust Washington. Indeed, governments have made more promises than they will be able to keep in the near future.
As Nick Rowe indicated in a recent post, trust can also be a "time-inconsistency" problem. Incentives to pay for debts in the future, do not always match up with the decisions to buy a portion of that future now. Trust issues can become all the more difficult, when government promises appear uncertain. Services coordination presents another time inconsistency problem, of compensated rival (asymmetric) time value. How does one know if revenue can keep up with the services obligations which governments hold? In order for populations to keep faith in monetary systems, they have to believe in the promises which governments make.
The uncertain nature of matched services time capacity, has become one of the larger questions about future growth potential. Member of both political parties have become suspicious of present day monetary policy, but the wish to return to a gold standard is in many respects a blatant rejection of current services obligations. Tight money advocates have plenty of backing, because while some see little room for services growth, other see a diminished role for growth in terms of traditional production.
Part of the confusion regarding fiat money, is the compensation of rival time contributions to the services sector. Asymmetric time compensation makes it difficult to determine service sector value, in relation to the wealth of traditional manufacture. Also, think how some services sectors have responded. Due to reliance on government budgets, they gain respectability by utilizing the same "efficiency" dynamic which makes rival time so valuable for the tradable goods sector.
But all this has really accomplished is a partial destruction of countless hours in time investment. Hence there is little trust in services sector potential as a source of future growth, as human capital continues to be sacrificed. Unfortunately however, scaling back the services sector also means scaling back on traditional production, as labor force participation continues to be shorted. Is it possible for the symmetric value of time arbitrage to reverse this process?
Understandably, it is easier to compensate time value in relation to the skills sets of others. But there is only so much growth capacity for this method, in the present. Those who are willing to consider symmetrically matched time value, would be able to contribute to greater innovation and knowledge diffusion in the marketplace. Matched time would also provide clear record keeping, for coordinated services activity. It will not be easy to restore trust, regarding the debt loads which governments can reasonably carry. Even so, a better understanding of actual services capacity, would greatly aid the process.
Wednesday, July 8, 2015
Notes on Innovation, Rival and Non Rival Time Value
What to make of this rationale from the Organization for Economic Cooperation and Development?
Because much of tradable goods production exists separately from time input, tradable goods production generally responds to scale. Not only does this process decrease costs, it results in a positive supply shock which reduces inflation. Time value as rival is helpful for tradable goods production, because differences in skills levels are paramount to the end product. Not only is less time input needed for tradable goods, this form of production provides gains in aggregate supply and demand. Whereas time based product can only provide gains for aggregate supply and demand, when time value also utilized in a non rival capacity.
Gains to scale aren't possible for time based services product. Consequently, internal cutbacks for "more efficient" labor force participation to increase profit structure, become cutbacks in both aggregate supply and aggregate demand. A lack of time based product in the marketplace translates into increased costs and higher inflation, due to an ongoing negative shock of constrained supply. Worse, these arbitrary limits on labor force participation, mean cutbacks to the time based settings where knowledge and innovation diffusion take place.
However the supply side response so far has been to diminish services growth - a misbegotten approach which leads to insufficient knowledge product - and participation - in the marketplace. Service product needs the innovation which time arbitrage could provide, through non rival time value. The time based value of service product, resides wholly in the moments during which it takes place, and the challenge is to acknowledge that reality. Without sufficient room for time value in the marketplace, innovation and knowledge are also lost.
When Paul Romer speaks of human capital as strictly rival, he is referencing gains which are the hallmark of tradable goods production. Rival time value can mean exponential differences for profit potential in tradable goods, but not time based services. Plus, consider what people tend to do with those profit gains: they "save" for what are eventual services needs. And these services needs now exist in a diminished marketplace which is also attempting to meet the service needs of lower income levels. When time value exists only in rival capacity for basic services, consumption smoothing becomes more difficult than would otherwise be the case.
Time value also needs a non rival context. Providing this would not only mean knowledge use gains, but also much needed growth in aggregate supply and demand. By making better use of aggregate time value, more ideas and innovation would have room to come into their own. Fortunately, there are ways to bring non rival time value back into the marketplace.
We haven't stopped having good ideas, but those we do have aren't spreading as quickly as they once did.They explain further:
The main source of the productivity slowdown, is not so much a slowing of innovation by the most globally advanced firms, but rather a slowing of the pace at which innovations spread throughout the economy - a breakdown of the diffusion machine.Why is it becoming difficult, to realize further gains through the diffusion of innovation and knowledge? The pace of knowledge diffusion, depends on whether the results are tradable goods or (non tradable) time based service product. How much of a time based context is actually allotted for the latter? Even though time based product has become more important in recent decades, time value is still sought on the "more efficient" terms for time value which are required for tradable goods production. As a result, time aggregates in the workplace are gradually being shorted, in an ongoing institutional search for rival time value.
Because much of tradable goods production exists separately from time input, tradable goods production generally responds to scale. Not only does this process decrease costs, it results in a positive supply shock which reduces inflation. Time value as rival is helpful for tradable goods production, because differences in skills levels are paramount to the end product. Not only is less time input needed for tradable goods, this form of production provides gains in aggregate supply and demand. Whereas time based product can only provide gains for aggregate supply and demand, when time value also utilized in a non rival capacity.
Gains to scale aren't possible for time based services product. Consequently, internal cutbacks for "more efficient" labor force participation to increase profit structure, become cutbacks in both aggregate supply and aggregate demand. A lack of time based product in the marketplace translates into increased costs and higher inflation, due to an ongoing negative shock of constrained supply. Worse, these arbitrary limits on labor force participation, mean cutbacks to the time based settings where knowledge and innovation diffusion take place.
However the supply side response so far has been to diminish services growth - a misbegotten approach which leads to insufficient knowledge product - and participation - in the marketplace. Service product needs the innovation which time arbitrage could provide, through non rival time value. The time based value of service product, resides wholly in the moments during which it takes place, and the challenge is to acknowledge that reality. Without sufficient room for time value in the marketplace, innovation and knowledge are also lost.
When Paul Romer speaks of human capital as strictly rival, he is referencing gains which are the hallmark of tradable goods production. Rival time value can mean exponential differences for profit potential in tradable goods, but not time based services. Plus, consider what people tend to do with those profit gains: they "save" for what are eventual services needs. And these services needs now exist in a diminished marketplace which is also attempting to meet the service needs of lower income levels. When time value exists only in rival capacity for basic services, consumption smoothing becomes more difficult than would otherwise be the case.
Time value also needs a non rival context. Providing this would not only mean knowledge use gains, but also much needed growth in aggregate supply and demand. By making better use of aggregate time value, more ideas and innovation would have room to come into their own. Fortunately, there are ways to bring non rival time value back into the marketplace.
Midweek Market Monetarist Links and Summaries - 7/8/15
The most important monetary lessons have yet to be learned (Marcus Nunes) https://thefaintofheart.wordpress.com/2015/07/01/the-beatles-sing-about-greece-the-troika-you-say-yes-i-say-no-you-say-stop-but-i-say-go-go-go-oh-no-you-say-goodbye-and-i-say-hello-hello-hello-i-dont-know-why-you-say-goodb/
Milton Friedman had a pretty good idea what might happen: https://thefaintofheart.wordpress.com/2015/07/01/recasting-views/
Even Bill McBride has scaled back his expectations somewhat https://thefaintofheart.wordpress.com/2015/07/02/the-eager-beavers-at-the-fomc-must-be-disappointed/
...but how well is this strategy working out? https://thefaintofheart.wordpress.com/2015/07/02/germans-we-have-them-greeks-and-the-other-lot-by-the-balls/
Without adequate consideration of these charts, perhaps some could be forgiven for thinking that Greece is just experiencing slow growth: https://thefaintofheart.wordpress.com/2015/07/06/theres-something-very-wrong-going-on/
Part 3 of series (Mark Sadowski) https://thefaintofheart.wordpress.com/2015/07/02/a-simple-baseline-var-for-studying-the-us-monetary-base-and-the-channels-of-monetary-transmission-in-the-age-of-zirp-part-3/
Does QE drive down nominal treasury yields? https://thefaintofheart.wordpress.com/2015/07/03/the-monetary-base-and-the-inflation-expectations-channel-of-monetary-transmission-in-the-age-of-zirp/
Mark adds US bond yields to the baseline VAR: https://thefaintofheart.wordpress.com/2015/07/06/the-monetary-base-and-the-bond-yield-channel-of-monetary-transmission-in-the-age-of-zirp/
Debate can be fun! (Lars Christensen) http://marketmonetarist.com/2015/07/04/you-are-both-gentlemen-or-something-debating-greece-with-lorcan-roche-kelly/
Why is Turkey in a better position? http://marketmonetarist.com/2015/07/07/greece-versus-turkey-its-the-exchange-rate-exchange-rate-regime-stupid/
"If this is what an exit from the Euro looks like, who wants to follow Greece in exiting the Euro?" (Nick Rowe) http://worthwhile.typepad.com/worthwhile_canadian_initi/2015/07/thoughts-on-the-news-from-greece.html
At first, a gold standard without a (national) gold currency seemed impossible (David Glasner) http://uneasymoney.com/2015/07/01/gold-standard-or-gold-exchange-standard-whats-the-difference/
"The point of the gold-exchange standard was thus to reduce the world's monetary demand for gold, thereby limiting the tendency of gold to appreciate and for prices in terms of gold to fall." http://uneasymoney.com/2015/07/03/misess-unwitting-affirmation-of-the-hawtrey-cassel-explanation-of-the-great-depression/
"Greece needed monetary support in order to make the reforms palatable and they did not get it." (Bonnie Carr) https://dajeeps.wordpress.com/2015/07/05/greeks-votes-no-on-bailout/
A chart which shows the extent of the supply constraint (Kevin Erdmann) http://idiosyncraticwhisk.blogspot.com/2015/07/the-naive-rentier-economy.html
From Scott Sumner (*apologies for missing links, see below) "...U-6 is still falling rapidly, and will soon arrive in the 8% to 10% range considered normal for U-6." The new jobs report (July 2)
"It's smooth sailing in Denmark." Don't bet against the Danes (July 4)
"...as China and Denmark become more capitalist, Argentina and Greece become more statist." Independence Day for Greece! (July 5)
"...the EU did not provide for any backup plan." When Friedman and Krugman agree (July 7)
Scott at Econlog
"...when you are both a supply and demand-sider, the choices don't look quite as easy." Why I'm a supply and demand-sider
A positive supply shock or a positive demand shock? The difference matters. The Fed shouldn't reason from a quantity change
Probably yes. Does Germany "care" more about Greece more than America "cares" about Puerto Rico?
"The no vote will probably have a net negative effect on the global economy." Greece: What are the markets telling us?
"In macro, look at the speedometer (NGDP futures prices) not the position of the accelerator pedal (interest rates). If the Fed switched from interest rate targeting to NGDP futures targeting, the market rate of interest would always be exactly equal to the Wicksellian rate of interest." Raising rates tightens money, but isn't (necessarily) tight money
How can the forecast be so low? (Justin Irving) http://economicsophisms.com/2015/07/05/an-update-on-efficient-forecast-gdp-and-gdi/
Justin takes a look at the ongoing Greek saga: http://economicsophisms.com/2015/07/05/hellas-well-done/
*Every once in a while, there's a technical glitch this tech challenged blogger can't remedy! Now is one of those times, as my home computer isn't presently able to access posts from The Money Illusion. Since these weekly links are quite dependent on Scott's posts, it's probably best that I take a break from MM links - at least for now. I have been grateful for the chance to provide the Wednesday morning posts for almost two years, and it has been quite a learning experience for me. Hopefully these links have helped out some of my readers from time to time, as well.
Milton Friedman had a pretty good idea what might happen: https://thefaintofheart.wordpress.com/2015/07/01/recasting-views/
Even Bill McBride has scaled back his expectations somewhat https://thefaintofheart.wordpress.com/2015/07/02/the-eager-beavers-at-the-fomc-must-be-disappointed/
...but how well is this strategy working out? https://thefaintofheart.wordpress.com/2015/07/02/germans-we-have-them-greeks-and-the-other-lot-by-the-balls/
Without adequate consideration of these charts, perhaps some could be forgiven for thinking that Greece is just experiencing slow growth: https://thefaintofheart.wordpress.com/2015/07/06/theres-something-very-wrong-going-on/
Part 3 of series (Mark Sadowski) https://thefaintofheart.wordpress.com/2015/07/02/a-simple-baseline-var-for-studying-the-us-monetary-base-and-the-channels-of-monetary-transmission-in-the-age-of-zirp-part-3/
Does QE drive down nominal treasury yields? https://thefaintofheart.wordpress.com/2015/07/03/the-monetary-base-and-the-inflation-expectations-channel-of-monetary-transmission-in-the-age-of-zirp/
Mark adds US bond yields to the baseline VAR: https://thefaintofheart.wordpress.com/2015/07/06/the-monetary-base-and-the-bond-yield-channel-of-monetary-transmission-in-the-age-of-zirp/
Debate can be fun! (Lars Christensen) http://marketmonetarist.com/2015/07/04/you-are-both-gentlemen-or-something-debating-greece-with-lorcan-roche-kelly/
Why is Turkey in a better position? http://marketmonetarist.com/2015/07/07/greece-versus-turkey-its-the-exchange-rate-exchange-rate-regime-stupid/
"If this is what an exit from the Euro looks like, who wants to follow Greece in exiting the Euro?" (Nick Rowe) http://worthwhile.typepad.com/worthwhile_canadian_initi/2015/07/thoughts-on-the-news-from-greece.html
At first, a gold standard without a (national) gold currency seemed impossible (David Glasner) http://uneasymoney.com/2015/07/01/gold-standard-or-gold-exchange-standard-whats-the-difference/
"The point of the gold-exchange standard was thus to reduce the world's monetary demand for gold, thereby limiting the tendency of gold to appreciate and for prices in terms of gold to fall." http://uneasymoney.com/2015/07/03/misess-unwitting-affirmation-of-the-hawtrey-cassel-explanation-of-the-great-depression/
"Greece needed monetary support in order to make the reforms palatable and they did not get it." (Bonnie Carr) https://dajeeps.wordpress.com/2015/07/05/greeks-votes-no-on-bailout/
A chart which shows the extent of the supply constraint (Kevin Erdmann) http://idiosyncraticwhisk.blogspot.com/2015/07/the-naive-rentier-economy.html
From Scott Sumner (*apologies for missing links, see below) "...U-6 is still falling rapidly, and will soon arrive in the 8% to 10% range considered normal for U-6." The new jobs report (July 2)
"It's smooth sailing in Denmark." Don't bet against the Danes (July 4)
"...as China and Denmark become more capitalist, Argentina and Greece become more statist." Independence Day for Greece! (July 5)
"...the EU did not provide for any backup plan." When Friedman and Krugman agree (July 7)
Scott at Econlog
"...when you are both a supply and demand-sider, the choices don't look quite as easy." Why I'm a supply and demand-sider
A positive supply shock or a positive demand shock? The difference matters. The Fed shouldn't reason from a quantity change
Probably yes. Does Germany "care" more about Greece more than America "cares" about Puerto Rico?
"The no vote will probably have a net negative effect on the global economy." Greece: What are the markets telling us?
"In macro, look at the speedometer (NGDP futures prices) not the position of the accelerator pedal (interest rates). If the Fed switched from interest rate targeting to NGDP futures targeting, the market rate of interest would always be exactly equal to the Wicksellian rate of interest." Raising rates tightens money, but isn't (necessarily) tight money
How can the forecast be so low? (Justin Irving) http://economicsophisms.com/2015/07/05/an-update-on-efficient-forecast-gdp-and-gdi/
Justin takes a look at the ongoing Greek saga: http://economicsophisms.com/2015/07/05/hellas-well-done/
*Every once in a while, there's a technical glitch this tech challenged blogger can't remedy! Now is one of those times, as my home computer isn't presently able to access posts from The Money Illusion. Since these weekly links are quite dependent on Scott's posts, it's probably best that I take a break from MM links - at least for now. I have been grateful for the chance to provide the Wednesday morning posts for almost two years, and it has been quite a learning experience for me. Hopefully these links have helped out some of my readers from time to time, as well.
Monday, July 6, 2015
Where Does Sustainability Begin?
Sustainability is often spoken of as "protecting the environment". However, this intention is somewhat vague. After all, this language suggests what shouldn't be done, instead of seeking the positives which could take place regardless of "undesirable" elements. Those who have kept up with my posts, know that I usually speak of environment - and sustainability - in specific local and economic context.
The difference matters, because stewardship of the environment involves multiple incentives, in terms of both practical and experiential goods. Sustainability is not just about "needs" of the earth, because those needs also correlate with the ways that individuals interact with their environments. Once populations have a chance to flourish, they promptly turn their attention to making certain the earth can flourish as well. Beauty - both natural and planned - arise from circumstance which have to begin from pragmatic understandings.
Too many are inclined to gloss over the need for economic sustainability, as a vital factor of the earth's relative condition. When people suffer, the earth is going to reflect that suffering - even if only indirectly. Recently I came across an expression which seems apropos: "The earth doesn't need saving - we do." "Saving" should not be simply thought of in religious or ideological terms. Economic terminology is also important - because ultimately, one's survival depends on economic circumstance.
Unfortunately, the personal perspective for survival has too little economic context, in the confused dialogue of the present. Often, the individual impulse to thrive gets defined as greed. Or worse, others insist that personal perspective doesn't even matter, for the goals of the majority. In all of this, a reactive mentality is becoming more commonplace. When people begin to focus on the negative, that negativity will be reflected in too many physical environments as well. This is why I suggest thinking about sustainability on economic terms.
Consider the fact that political parties attempt to gain progress by the use of force. For instance, instead of creating sustainable economic options, opposing factions have preferred to cancel out what they perceive as negative, rather than building new positives. Why not build walkable communities for living and working, instead of imposing more limits on fossil fuels production which is already needed? Be proactive, not reactive!
Another problematic response has been tight monetary conditions, which are imposed on those who don't meet government mandated consumption levels. Many environments are already showing the effects, as populations struggle to meet lifestyle expectations mostly designed for middle to upper income levels. There is far too much hand wringing about the ones who need help getting to the "appropriate" level of lifestyle, instead of efforts for more inclusive lifestyle options which do not need such high resource utilization.
Sustainability begins with everyone. Design a world which does not require pensions in order to live a decent, respectable life. It serves little purpose to chastise or threaten the dismantling of institutions which are only following the incentives that have already been established. Instead, change the incentives, to provide more inclusive means for both survival, and economic choice.
The difference matters, because stewardship of the environment involves multiple incentives, in terms of both practical and experiential goods. Sustainability is not just about "needs" of the earth, because those needs also correlate with the ways that individuals interact with their environments. Once populations have a chance to flourish, they promptly turn their attention to making certain the earth can flourish as well. Beauty - both natural and planned - arise from circumstance which have to begin from pragmatic understandings.
Too many are inclined to gloss over the need for economic sustainability, as a vital factor of the earth's relative condition. When people suffer, the earth is going to reflect that suffering - even if only indirectly. Recently I came across an expression which seems apropos: "The earth doesn't need saving - we do." "Saving" should not be simply thought of in religious or ideological terms. Economic terminology is also important - because ultimately, one's survival depends on economic circumstance.
Unfortunately, the personal perspective for survival has too little economic context, in the confused dialogue of the present. Often, the individual impulse to thrive gets defined as greed. Or worse, others insist that personal perspective doesn't even matter, for the goals of the majority. In all of this, a reactive mentality is becoming more commonplace. When people begin to focus on the negative, that negativity will be reflected in too many physical environments as well. This is why I suggest thinking about sustainability on economic terms.
Consider the fact that political parties attempt to gain progress by the use of force. For instance, instead of creating sustainable economic options, opposing factions have preferred to cancel out what they perceive as negative, rather than building new positives. Why not build walkable communities for living and working, instead of imposing more limits on fossil fuels production which is already needed? Be proactive, not reactive!
Another problematic response has been tight monetary conditions, which are imposed on those who don't meet government mandated consumption levels. Many environments are already showing the effects, as populations struggle to meet lifestyle expectations mostly designed for middle to upper income levels. There is far too much hand wringing about the ones who need help getting to the "appropriate" level of lifestyle, instead of efforts for more inclusive lifestyle options which do not need such high resource utilization.
Sustainability begins with everyone. Design a world which does not require pensions in order to live a decent, respectable life. It serves little purpose to chastise or threaten the dismantling of institutions which are only following the incentives that have already been established. Instead, change the incentives, to provide more inclusive means for both survival, and economic choice.
Sunday, July 5, 2015
Notes on Decentralization and Centralization
Complex economies which include a wide range of income levels, need centralization and decentralization, for economic balance and stability. However, the structural components which could make decentralization possible, have yet to be developed - at least in the U.S. Also, these forms of decentralization would primarily exist as relative degrees of separation, "cocooned" within the larger centralized institutions of the present.
Decentralization in complex economies, means determining the resource use capacity which is best suited for local management, versus resource patterns which work effectively through centralized structures. Since non tradable sectors rely on resources and time value that are closely associated with individual effort, these are the areas which could benefit most from decentralization.
Time based product has unfortunately been subjected to centralization, in many areas of the economy. As a result, lower income levels do not have adequate access to services coordination. Knowledge use systems would allow fuller engagement in time based production capacity, than is possible through the institutions which have mostly centralized. Opportunities exist to tap into local time and knowledge value - not to consolidate organizational capacity for a services marketplace, but to fully engage it. Think - perhaps - of an overlay safety net, with the "small economic weaves" of time arbitrage which would mean fewer individuals falling through the "holes".
While governments have attempted to coordinate time based product (safety nets) for citizens, not enough time aggregates are fully engaged in the process. Government centralization in this regard might be likened to a safety net - only with the weave of giant, widely spaced ropes. In other words the net is strong, but many individuals are falling through the broadly spaced weave, just the same. Local safety nets for time value, would generate a strong "weave" - one with fine and closely spaced "threads" which are difficult to fall through.
Governments and other institutions flourish when they get the components of centralization right, because tradable goods respond well to the consolidation of knowledge use, human capital and economies of scale. So long as governments focus on their natural strengths, they remain able to encourage a marketplace which increases both aggregate supply and aggregate demand. It is only when governments attempt the same process of resource consolidation for non tradable sectors, that aggregate supply and aggregate demand are both diminished in the marketplace.
Decentralization in complex economies, means determining the resource use capacity which is best suited for local management, versus resource patterns which work effectively through centralized structures. Since non tradable sectors rely on resources and time value that are closely associated with individual effort, these are the areas which could benefit most from decentralization.
Time based product has unfortunately been subjected to centralization, in many areas of the economy. As a result, lower income levels do not have adequate access to services coordination. Knowledge use systems would allow fuller engagement in time based production capacity, than is possible through the institutions which have mostly centralized. Opportunities exist to tap into local time and knowledge value - not to consolidate organizational capacity for a services marketplace, but to fully engage it. Think - perhaps - of an overlay safety net, with the "small economic weaves" of time arbitrage which would mean fewer individuals falling through the "holes".
While governments have attempted to coordinate time based product (safety nets) for citizens, not enough time aggregates are fully engaged in the process. Government centralization in this regard might be likened to a safety net - only with the weave of giant, widely spaced ropes. In other words the net is strong, but many individuals are falling through the broadly spaced weave, just the same. Local safety nets for time value, would generate a strong "weave" - one with fine and closely spaced "threads" which are difficult to fall through.
Governments and other institutions flourish when they get the components of centralization right, because tradable goods respond well to the consolidation of knowledge use, human capital and economies of scale. So long as governments focus on their natural strengths, they remain able to encourage a marketplace which increases both aggregate supply and aggregate demand. It is only when governments attempt the same process of resource consolidation for non tradable sectors, that aggregate supply and aggregate demand are both diminished in the marketplace.
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