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.