Monday, August 3, 2015

Time as Basic Commodity in Alternative Equilibrium

This post "argues" for the inclusion of (still missing) time aggregates as a basic commodity or good, in future growth capacity. Monetary compensation would be minimal, but this form of coordination would open the door to shared options in local non tradable sector investments and more. Time as a basic commodity, i.e. "raw" resource - would respond to time value in relation to other time value, rather than "waiting" for the wealth capacity of other resources to compensate skills levels asymmetrically.

Given the fact symmetric time value would not be contrast with other value in these circumstance, time value becomes accessible as direct wealth creation in its own right. Most important, time value becomes wealth on the terms which are negotiated by the providers who are involved in the mutual exchange. In simple terms, this process would revive the economic coordination which existed before employer and employee roles came to define most working relationships - a process which inevitably led to exclusion in employment at some level.

Local coordination processes are needed, so that further growth does not have to rely on traditional employment in order to occur. General equilibrium is already "full", due to earlier positioning of "special" time values (sticky wages) within nominal income. Both private and public interests have strong commitments to these relative income levels - as reflected in contractual arrangements. However these commitments are gradually displacing both infrastructure and maintenance needs. Not only is there insufficient room in government budgets; there are few enticements for private interests to prioritize infrastructure in a low growth equilibrium.

Despite the fact infrastructure costs are problematic, there are numerous examples of more cost effective measures from around the world, which local corporations could consider. In a recent post I highlighted potential corporate structure for time value as a starting point for further organization. One could think of this process as internally driven growth (individual, local group, knowledge, experience) in contrast to the externally growth sought by traditional corporations. Local corporations would seek to reverse the roles of determinacy for time aggregates versus resources separate from time.

How so? In general equilibrium, separately existing resources are determinate because they respond to pricing which is able to take a worldwide marketplace into account, in contrast to time aggregates which only have partial marketplace representation. As a result of incomplete pricing (medium of account) for time aggregates, nominal income levels respond to the determinacy of tradables sectors. Plus, central bankers attempt to keep asset pricing determinate as well. In all of this, local corporations would seek more stable representation for the value of time aggregates.

Locally owned corporations can provide a safety valve for the staked value claims of human capital, by offering an alternative equilibrium to general equilibrium conditions. Why is this needed? Consider Matthew Kahn's response to changes in belief patterns regarding minimum wages:
As a 49 year old Ph.D. in economics (from Chicago) I am an interested party. My human capital is locked in. Did I make the wrong bet? Is the spot market of economic knowledge about to decline?
It wasn't always this way. In 1987, even the New York Times ran an article titled "The Right Minimum Wage: $0.00." However, this article appeared long before entire sectors of the economy became financially dependent on the rewards of high income. Non tradable sectors in particular grew more dependent, hence individuals with varying income levels became less free to choose the regions where they wished to live and work. Had non tradable sectors experienced the innovation which has been the hallmark of tradable goods sectors, arguments for a higher floor on minimum wages would likely have never gained traction.

Unfortunately, higher minimum wages will only mean more shocks and less labor force participation in general equilibrium, given the tight money environments central bankers already favor. Even though too many "first mover" problems prohibit supply side solutions for general equilibrium, local corporations can set into motion the kinds of changes which would provide an eventual safety valve. Time value as a basic commodity would be an important part of the process. When individuals and groups are able to utilize the time they actually have in direct relation with one another, social mobility will once again become a possibility.

Time as a basic commodity, would mean that time value would have its own marketplace. The lack of a marketplace for time, has contributed to the lack of knowledge diffusion of the present. Even though it still would not be possible to reward innovation directly, local corporations can provide mutual support for all who wish to make innovation and creativity a part of their working lives. And when time is the point of arbitrage, knowledge use does not have to exist in direct competition with other forms of knowledge which appear more appropriate to the situation at hand.

Even though time as commodity does not provide immediate reward for specific skill, the ability to coordinate one's personal time with others provides a freedom which isn't possible when "certain" knowledge has prior claims to compensation, importance and time constraints. For some individuals, the ability to pursue one's challenges and interests in settings of mutual support, would be worth more than the additional compensation which general equilibrium provides.


  1. Hello Becky! I never knew you had a blog. You have an interesting if somewhat esoteric style. "Most important, time value becomes wealth on the terms which are negotiated by the providers who are involved in the mutual exchange. In simple terms, this process would revive the economic coordination which existed before employer and employee roles came to define most working relationships - a process which inevitably led to exclusion in employment at some level."

    The best I can tell is you believe that time-a shortage of it?-is a problem that leads to 'employer and employee?'

    I'm curious though-you talk as if this move to employers and employees was a definite event at a definite time. If so, when?

    Is employer/employee really a new thing? What preceded it then? The only thing that comes to my mind is Vassal-Serf which was worse.

    Anyway, now that I know about you I'll check in sometimes. You of course are always welcome at my blog. If it makes it more attractive for you, I've had to swear off 'hating Republicans.'

    To please the sponsors that is.

  2. One other thing I meant to say is that according to what the mainstream economists say, money is the reason we have recessions-Nick Roew has said this many times and I believe many agree with him.

    In theory then if we had barter there'd be no unemployment. Of course, barter is pretty inconvenient to say the least.

    1. Indeed barter is inconvenient. However we are not doing as good a job of coordinating in services sectors, as in tradable goods. Like Timothy Taylor asked (re the financial sector), "Where are the economies of scale?"