How to think about monopolies in terms of total output? For me, the more challenging aspect of this subject is the degree to which tradable and non tradable sectors are affected by centralization and decentralization. Potential monopoly effects can play out quite differently, depending on whether artificial restrictions in basic product formation (i.e. needed by "everyone") affect output aggregates.
Centralization often says "do it this way" (production patterns), which generally works well for tradable goods separate from time value. Repetitive patterns need not affect aggregate quantities, in this instance. However, when centralized services say "do it this way", they do so in an attempt to make fewer time based services necessary. Hence less time based services product, equals less aggregate output. Granted, centralized non tradable sectors do this to save money. But services formation also has the capacity to be organized in ways which generate wealth directly. In other words, time arbitrage would not have to cut back on the services product which is actually sought, as a means to "better" productivity.
An additional aspect of missing output becomes apparent, when important facets of knowledge use are limited to certain regions. Even the output of of housing and business formation, can be directly affected by the degree to which knowledge based services access is ultimately allowed.
When traditional production growth slows - as is presently the case - limits in knowledge based services production can affect housing formation at aggregate output levels. There is a likelihood that restrained housing options negatively affect the Wicksellian rate of interest, for instance. I was reminded of a recent post about this subject when Nick Rowe asked, "Could increasing monopoly explain declining interest rates?" He answered with a tentative "yes". However, monopolies which represent private interests and tradable goods, are less likely to contribute to economic stagnation, than the monopolies of government associated non tradable sectors.
If nominal (aggregate) income is considered, the monopolies which negatively affect total output are more closely associated with time based product. When one simply hears that more productivity is needed in the marketplace for instance, this particular framing of this issue is too vague for concerted action, hence leaves the onus on no one, or no institution, to remedy. In the above linked interview with Ben Bernanke, once again he never mentioned that the Fed made the initial stumble which led to the Great Recession. The Fed let down the marketplace in terms of monetary representation, before the other stumbles which followed. If Bernanke has been aware of the monopolies which limit output, as far as I know he has kept that knowledge to himself.
And after the Great Recession, few policy makers are really getting the message, that more individuals need to be participating in the economy than is presently the case. More productivity also means more economic activity and monetary representation than has actually occurred. Just the same, the way Bernanke framed his message regarding sluggish output, does nothing to clarify that fact.
Think about what happens, when non tradable sectors push services outside the realm of economic measurement. These institutions also "save money" when the client does as much of the service as possible for "free". Indeed, some may even become quite proficient at doing so. Problem solved on the part of institution and client...right?
Not so fast. Someone may have adapted (in spite of unemployment), by generating useful knowledge based habit and ritual. As focused and purposeful as this activity is, it is not economically productive. When individuals are not able to replicate such activity through economic measure and compensation, their efforts gradually lose the ability to contribute to a more stable whole. In other words, too much services product is being generated much as agriculture was once produced: self-sufficiently, with little in the way of added value for groups as a whole.
Many of these activities have little to do with normal domestic responsibilities, and could actually be considered a drag on measured output. There is insufficient organizational capacity for knowledge based services efforts - either economically or socially. Present systems are more fragile than they appear, for too much human capital potential has yet to be harnessed. It's not the digital realm that is problematic for unmeasured wealth, but monopolies in non tradable sectors which leave too many services based maintenance strategies outside of institutional walls.
Some may think that I am arguing for dilution in divisions of labor (i.e. not "sufficiently" specialized), because small population densities would need to share divisions of labor more widely. But present day low population densities result in "do it yourself services" formation which is almost completely non economic, by comparison. In aggregate, the result would eventually be more specialization in knowledge capacity - not less. Systems which bring voluntary service formation into economic measurement, would gain skills capacity over time. The important thing is to work towards a greater degree of knowledge use dispersal than is presently the case. In this new measured productivity, real economic output gains would be the eventual result.
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