Monday, November 30, 2015

Wrap Up for November '15

2015...another month to go. If there were anything I could wish for the coming year, it would be that more public dialogue take place in terms that people from all walks of life can understand, and be able to discuss without reactive dismissal. I know that's asking a lot. But I at least have to hope, in a time frame which feels as though an economic pause...

Perhaps the singularity is not really so near...

Lars Christensen provides a link to his recent lecture at Columbia University on the Euro crisis:

James Alexander and Mark Sadowski make an important point:

Jeffrey Hummel notes that faith in the Federal Reserve system, is similar to an unreflective faith in government economic management.

A paper from Emily Washington and Sanford Ikeda, "How land use regulations hurt the poor".

James Pethokoukis, "Rise of the Robots: Nearly half of all work activities can be automated with current tech". My response: consider that future automation will vary considerably, in part due to a region's prosperity...or lack of it. Areas with less access to global capital may not substantially automate (even should they wish to), hence respond with some version of "slow economies" and other activities involving less skilled labor. The same would be just as true for areas in developed countries, as anywhere. In these circumstance - without knowledge use systems (or some equivalent) for services formation - many locations would remain dependent on government programs, the already stretched services capacity of prosperous regions, and of course the hopeful redistribution of robot wealth from elsewhere, as opposed to the potential wealth of human capital.

The loss of the physician patient relationship, is by far the best example of a growing need for symmetric time value, in order to generate new services product. Unlike asymmetric compensation (where institutions compete by gradually devolving to the least amount of compensated time value possible) symmetric compensation allows people to rediscover social and intellectual interactions which matter at a personal level, given the scarcity of one's own time use options. And do so on terms which generate new wealth.

"The Great Reversal in the Demand for Skill and Cognitive Tasks" by Beaudry, Green and Sand, November 2013. I would have provided a link for this study some time ago, but the link which had previously come up appeared to be broken, and this one should be good:

Greg Mankiw points out the fact that Obamacare is as much about redistribution, as reform. Regular readers certainly know how I feel. Not much "reform" occurred. Service providers were actually further constrained through Obamacare, even as healthcare services will lose more input from time value in response to gradual monetary tightening in the U.S. The income loss across most sectors would not be necessary, if more individuals received the right to heal and participate in knowledge based services production at local levels. More wealth in aggregate for all income capacity would be the result.

James Alexander explains Why the huge expansion in base money hasn't produced inflation and only slow growth.

Again, readers may realize how I feel about civil forfeiture: the growing lack of balance between aggregate resource capacity versus the capacity of time aggregates, desperately needs to be addressed. Otherwise governments will have insufficient money for budgets, even though they find reason to confiscate more and more of what citizens have.

Next step: bring the old and the young out of their segregated status, so as to make them a renewed part of the marketplace:

Scott Sumner offers a simple version of how he views macro in this Econlog post. 
Also, from the Cato conference:

This cartoon provides a bit of (much needed) humor for the month!

In this post about his new book on the Great Depression, Scott Sumner also provides a useful flowchart summary:

Lingering effects of the recession: 63% of millennials don't own a single credit card.

"In many of these countries, manufacturing's share of economic output continued rising even after the employment share peaked."

Dani Rodrik's revised paper on premature deindustrialization:

Saturday, November 28, 2015

Gig Economies, Local Corporations and Social Contracts

Could gig economies contribute to long term growth patterns? It's important to note, that this form of digital coordination is mostly a business response at the margins of prosperous regions. These recent efforts - disruptive though they appear - are a logical extension for resource use in the complex economies of general equilibrium. Whereas insufficient diversity exists in less developed areas, for gig economies to sufficiently contribute to wealth formation.

Gig economies have also been associated with personal vulnerability, despite the fact (too) few recognize that earlier benefit patterns aren't sustainable in aggregate. Even so, requests for the usual worker protections (on emerging digital platforms), could short circuit what are still emerging patterns of organization. Laura Tyson and Lenny Mendonca are concerned about "Worker Protection in the Gig Economy" in a Project Syndicate article:
The trouble is that even as these sites provide new opportunities for workers and companies, they are bypassing the traditional channels through which the US and many countries deliver benefits and protections to their workforces. In the US in particular, the "social contract" has long relied on employers to deliver unemployment insurance, disability insurance, pensions and retirement plans, workers' compensation for job-related injuries, paid time off, and protections under the Fair Labor Standards Act. Although the Affordable Care Act has made it easier for workers to acquire health insurance on their own, most workers continue to receive health insurance through their employers.
For many small businesses - especially in less than prosperous areas - these requirements for hiring employees can be quite daunting. However - much as the perspective of the Project Syndicate authors - policy makers tend to legislate with mostly prosperous regions and businesses in mind. This common mindset only sets up even more difficult circumstance for business formation, overall. It's too easy to forget that when small businesses suffer, individuals just like the rest of us lose their personal means of support - and security - in the process.

A new form of corporate structure is needed, to assist workers and business owners alike who are willing to pursue new entrepreneurial strategies. While local corporations would protect owners, they would also provide mutual support systems for those who actively participate, both as consumers and producers. However, means of support would be internally based on local resources, rather than driven by expectations of external wealth which exists elsewhere.

Local business formation would be structured to take into account, that alternative equilibrium formation lacks access to international monetary flows. Those additional flows determine many of the patterns, by which physical and intellectual environments are shaped in general equilibrium. While local corporations would share some functions of today's gig economies, the digital and coordinating aspects of the latter nonetheless serve mostly as a starting point.

Consider these features for local corporate structure, which could approach social contracts more directly:

Ownership as a soft tangible asset. In other words, ownership is structured through simpler means - so as to foster the greatest degree of local economic diversity possible. Each community would define a simple but effective production/consumption base, which participants can fall back on whenever personal efforts fall short of success. Communities would generate a unique environment, through a set of base preferences which are determined by citizens at the outset. These are in turn backed with monetary and time based commitments. Participants would hold flexible ownership options in all phases of the resulting operation. Ownership would be a gradual and incremental process, so that loans (now difficult for lower income levels in the US) would not be necessary.

Services coordination as a memory creating system. Even though digital platforms can assist local coordination patterns for skills/time in an immediate sense, the system is also structured for medium and long term educational considerations in this regard. Knowledge use in alternative equilibrium would be applicable across time, based on both earlier contributions and that of society at large, in a commonly held pool. Even though common knowledge functionality exists in general equilibrium, much of it lies buried in institutional structures, which are not able to give many valuable options sufficient consideration. Without a marketplace for time value, there's not enough economic "room" to do so.

Services coordination as time backed social security. One reason that service obligations present such a financial burden for today's corporations, is the fact that these markets have been generated inefficiently. Internally generated services structures are at the heart of long term security needs, and knowledge use systems could eventually help to relieve some of the larger societal imbalance. Only consider how many of the requirements in the above mentioned "social contract", have hindered small business formation in general equilibrium. Small wonder that the gig economy first emerged without them.

Friday, November 27, 2015

Preserving Economic Freedom in an Uncertain World

A decade earlier, who could have imagined that our economic freedoms would begin to feel so imperiled?  If only the news were better. Scott Sumner noted that New Zealand will no longer be able to carry the market monetarist prediction market, and Lars Christensen wrote a good post recently. Here's Lars:
I am trying very hard not to become alarmist, but I must admit that I see very little positive news at the moment and I continue to see three elements - monetary policy failure/weak growth, the rise of extremist politics (Trump, Orban, Erdogan, Putin, ISIS etc.) and sharply rising geopolitical tensions coming together to a very unpleasant cocktail that brings back memories of the 1930s and the run up to the second World War. 
It has long been my hypothesis that the contraction in the global economy on the back of the Great Recession - which in my view mostly is a result of monetary policy failure - is causing a rise in political extremism both in Europe (Syriza, Golden Dawn, Orban etc.) and the US (Trump) and also to a fractionalization and polarization of politics in normally democratic nations.
Today's social media tells the story. Many in the U.S. - as elsewhere - don't have a problem with extremist politics at all. Even on Thanksgiving Day: often - in place of the usual holiday greetings - online political diatribes continued with scarcely a break. The paradox in all of this is that so few realize, what is actually at stake. In some important respects, normal economic conditions are beginning to shut down. Why?

Much of today's economy is structured for forms of access which are anything but incremental, in spite of those who could grow stronger from incremental ownership options. One is either able to scale the currently high levels of expectation for living and working, or else exists in a sort of endless limbo, from which it is all but impossible to escape. Because everyone has to work so hard at what access requires, few are willing to see anyone gain access on easier terms. This is why alternative equilibrium is needed: to make further economic access possible, in a world which is quickly donning "no vacancy" signs in prosperous areas.

Nations are reluctant to allow the level of economic freedom that people now need for services formation, because structural evolution in this regard would also require some loss of centralized control. Just the same, doing so is necessary, in order for economic, social and political stability to be maintained in the years ahead. Too much centralization in today's services centered economy, would further destabilize areas which lack sufficient complexity to begin with. Worse, hollowed out regions would become vulnerable to terrorism, extremism or both.

In order to strengthen freedom through greater economic complexity, populations need access to knowledge use in a full range of diversity at local levels. Even so, populations are woefully unaware of an overall lack of monetary representation, which poses systemic threats at multiple levels. Policy makers need to provide faithful monetary representation for their citizens, before any issues regarding long term growth can be realistically addressed.

The challenges of the present are immense, and considerable effort will be needed, to raise the level of awareness that citizens desperately need. Governments jump at the chance to fight for "freedom" on military terms, but the underlying reasons for war have been covered up too many times. One can only hope that the most important battles ahead, will be fought for greater economic freedom, instead of blindly maintaining the status quo.

Wednesday, November 25, 2015

The Real Test for Innovation

When something gets promoted as innovation, does it actually increase market size or availability for populations as a whole? After all, this is the primary test for innovation, and "access" isn't the same thing if the marketplace is essentially unchanged. Whereas if more of a marketplace becomes available to consumers in a real sense, what gets promoted as innovative action can be deemed accurate.

For instance, Obamacare as "improved" marketplace access was never real, because none of this frenzied organizational capacity ever increased the amount of time/knowledge based services product. There is no getting around the fact that increased demand (particularly for time based product) depends on increased supply, as well.

Innovation as concept, can be thought of in numerous ways. Whether or not a process proves innovative, also relies on other economic framing and circumstance which could potentially change the result. While many innovations result from internal technological processes, much depends on how organizational structures interact with one another, in the broader marketplace. Noah Smith wrote recently about the minimum wage as a form of innovation, in a long term sense: the very long term, minimum wage laws might force companies to do what they otherwise wouldn't do--make risky bets on new technologies. And as workers raise their own skill levels, that new technology would raise their wages as well. The entire economy, including any workers who temporarily lost their low wage jobs, would benefit in the long run.
Granted, it's not difficult to imagine how this scenario plays out. Someone with reliable city access (through family, etc.) decides to go back to school, after a series of low skill jobs upon high school graduation. One could imagine local restaurants upgrading in ways which require less help, as contributing to the city dweller's decision. Some sorting along these lines toward higher skill work has indeed taken place. Just the same, asymmetric compensation is a polarizing factor, for time aggregates as a whole. As a result, some individuals may be tapped for a mere fraction of their skills potential - or possibly not at all, in areas which already suffer from a lack of economic complexity.

What of Noah Smith's tentative argument, for long term benefit from higher wages? Presently, more income at all levels is set aside for the necessities of non tradable sectors than was previously the case. This means higher wages will not have the same chance as before, to contribute to a tradable goods marketplace capable of providing further growth. Instead, income capacity is simply being shifted about in non tradable sectors, which are presently holding back production both in services formation and housing. For this reason, I would question higher wages - at least in the present - of providing sufficient contribution to marketplace capacity and growth.

When are firms inclined to innovate - i.e. generate more product for the marketplace than would otherwise exist? In the past, innovation has been most closely associated with tradable goods, which otherwise might not even be recognized as consumer options. Whereas for non tradable knowledge based services product, innovation for a particular product may appear completely new, but it nonetheless represents product which people expect on a regular basis. Until now, non tradable sectors have been less inclined to innovate for broader access, because of a ready made marketplace for their product under any circumstance.

Can non tradable sectors adapt, and begin the structural reforms which would contribute to marketplace growth and political stability? For a long time these sectors didn't have to, as tradable goods production provided the impetus for worldwide growth and prosperity. However, the time has come for entrenched interests to embark on production reforms, before political circumstance and monetary policy only become worse. Those who have the courage to do so, would be providing a service of value beyond measure. Innovation is always about a marketplace which provides greater access and more hope for the future. Otherwise, "innovation" is mostly about temporary profits, uncertainty and further instability.

Monday, November 23, 2015

Notes on Crowdfunding as Concept

Arnold Kling recently responded to a Project Syndicate post from Robert Shiller regarding crowdfunding. Here, Shiller explains some technicalities:
True crowdfunding, or equity crowdfunding, refers to the activities of online platforms that sell shares of startup companies directly to large numbers of small investors, bypassing traditional venture capital or investment banking.
Arnold wasn't particularly impressed with crowdfunding as an investment opportunity, so he made some suggestions (which I'll return to shortly). What interests me, is crowdfunding as a recent version of so many group activities which - while generally thought of in a financial or economic context, also correlate with the "group sourcing" of basic political expectations. And instead of investment opportunity, the context is one of taxation "benefits", so to speak.

Only one problem: government "crowdfunding" in the U.S. is slowly leading to diminishing returns for the population as a whole. Expectations for fiscal policy were once quite simple, compared to what they ultimately became in the twentieth century. Somehow, income taxation in particular, has morphed into a labyrinth of subsidies which are impossible to decipher. Who could have predicted - when arguments for the U.S. Constitution were still occurring - that "crowdfunding" for the new nation would end up well beyond the basic needs of military, justice and provisions for public safety? When taxation inroads did eventually take place, their implications were seldom thought through, in terms of efficiency. Consider these startling arguments Alexander Hamilton made, in "Original Meanings: Politics and Ideas in the Making of the Constitution" (page 196):
Over time, the wants of the States will naturally reduce themselves within a very narrow compass, he predicted in Federalist 34, while those of the Union will ultimately prove "altogether unlimited." Anti-Federalists need feel no alarm over the national advantage in taxation, Hamilton implied, because the revenue needs of the states would verge on insignificance!
One is reminded how Keynes also expected people to have their working hours gradually reduced, as few individuals would supposedly need to work anymore once progress reached a certain point. But who can afford to give up working...if in fact their work pays the bills? Even though working hours have been reduced, governments and special interests alike haven't wanted to give up the benefits of rigid structures for asset and consumption patterns. Those consumption requirements translate into higher profits and more taxation revenue from asset formation.

None of this is to say that crowdfunding - government style - is a mistake. Rather, it is an incomplete setting for overall economic access and employment. The fiat monetary policy which originated in the twentieth century, brought greater liquidity to monetary transmission and remains capable of generating spontaneous services formation in prosperous regions. However, the gradual growth of asymmetric compensation now contributes to inequality, decreased labor force participation, and hollowed out economic formation in less prosperous areas.

When the "crowdfunding" concept of the Constitution was set, it would have been difficult for the founders to imagine, the degree to which individual sovereignty for production capacity, would gradually be transferred to external production processes. This also matters because government primarily exists in labor creating service terms which are difficult to quantify.

In a recent post I noted how losses in labor force participation are also reflected in recent losses of input as contrast with output, per Dietz Vollrath. He also highlighted government composition as pure labor and housing services as all capital and no labor. When trying to sort out current production mysteries, it helps to remember government's large role in services labor - alongside the fact that labor aggregates and housing wealth accurately reflect one another.

There's a graph in Vollrath's above linked post which illustrates the degree to which capital's share of costs have skyrocketed since 2000. Given the tight market in housing - in spite of capital's share - this only further illustrates the degree of input which has been sacrificed. To what degree is a nation's "altogether unlimited" wants represented by the growing pattern of capital, minus labor representation? Government as crowdfunding, hasn't quite gone as planned.

All of which brings me to Arnold Kling's suggestions for crowdfunding. First, note that national governments and business interests work within a general equilibrium which exists as a basic given. General equilibrium remains open ended for international flows, in the sense of Wall Street and in terms of bond creation. I only reference this because I find Kling's suggestions more applicable for alternative equilibrium settings. Monetary transmission would reflect the local circumstance of time arbitrage, alongside local resource application and asset formation. Here's Arnold's first suggestion:
1) Suppose that people are only asked to invest in companies where they want to buy the company's offering.
Local corporations could be thought of as a combined government/business interest "crowdfunding" approach, in which participants "buy" a unique non tradable environment as it is physically and intellectually constructed. Time value and monetary investment both count for ownership capacity, rather than taxation. And service formation represents shared choices for "taxation" of time aggregates. Again, from Arnold:
Suppose that the crowdfunding platforms provide some of the legal protection that venture capitalists and other high rollers are able to give themselves against subsequent misbehavior by founders or follow-on financiers.
Local corporations would need legal protections in particular, for small and (relatively) spontaneous business formation which has become otherwise difficult to achieve. Another concern: rights to knowledge use would need basic, long term protections. Research which originates in knowledge use systems, could not be appropriated by private interests elsewhere. Others could freely use what is developed, but not in ways that would render this mutually supported work unusable in low cost settings. In all likelihood, knowledge use systems would gain knowledge protection through means similar to creative commons.

Sunday, November 22, 2015

Use Production Potential to Create a Better Foundation

Organizational patterns determine the roles that human capital can play in an economy. They can also provide much needed balance between aggregate supply and demand, which is presently out of balance.

In particular, those who have been marginalized in some capacity, need a chance to redefine production potential on more inclusive terms. But it has been oddly difficult to envision the lack of a marketplace for skills capacity, given much of its (present) fiscal definition. Instead, more schemes are continually hatched to "grant" access to existing services systems, while it is left to housing shortages to reflect a lack of overall participation. more artificial access strategies! Fortunately, the underlying lack of human capital in productive capacity, is starting to get noticed. For instance, consider this discussion about input versus output, from Dietz Vollrath.
What we've got going on in the last few years is that MFP reflects our economy using fewer inputs to produce the same output, rather than producing more output using our existing inputs.
Dietz Vollrath makes an important observation, how multi (or total) factor productivity has changed, more or less since 2005. Too many have either insisted that this won't happen, or that it somehow doesn't matter if it does happen. In a recent post link, Tyler Cowen even referred to Vollrath's findings as "a scary form of productivity growth". Just the same, this present lack of input is partly intentional, given the special interests which seek to dictate the terms of knowledge use for service product, instead of replicating knowledge use through time based input.

It helps to remember: this "lack of input" phenomenon also reflects the lower growth trajectory of aggregate spending capacity, of which the Fed has yet to come to terms with the public. Thus far, the ridiculous focus on interest rates and imaginary inflation, has allowed policy makers to get away with obscuring a dramatic shift in economic activity. Just the same, this discussion needs to take place sooner, rather than later. Honesty from central bankers is greatly needed, to assist the process of improving production potential.

How to think about a better economic foundation, for human capital? In some instances - especially where economies aren't sufficiently complex - people need to work with knowledge in relation to one another as independent economic actors within local organized groups. Knowledge use systems, through symmetric compensation, would allow service formation as new wealth on monetary terms, instead of (wealth dependent) fiscal terms.

This process would also allow local corporations to introduce knowledge based service activity in developing nations which would otherwise need entire systems of complex economic activity, in order to generate broad services formation. Even though special interests and governments alike would question the process, budgetary relief is sorely needed at all governmental levels. The time has come, to create much needed new growth.

When people worked more directly with resources (as independent actors), the organizational patterns they adopted were locally organized and spontaneous in many instances. For instance, time spent working the soil was compensated time value - both in value in use, and value in exchange terms. Even if someone was not "completely skilled" in gardening (perhaps as compared to one's neighbor), one's efforts nonetheless contributed to sustenance. The system did not have to find a way to "deal" with the less skilled because he/she was still economically responsible. Plus, the actively engaged individual didn't have to worry about being "fired" for relative skill differences, because resource use was still structured on productive terms.

Can groups organize to make multiple skills levels count, economically? This is the production potential which needs to be recaptured: time value as a direct contributor to wealth creation and sustainability. Meanwhile, economic time use mostly exists in an either/or capacity for one's own personal responsibilities and participation in life. The system - not to mention countless families - struggles to make room for the many who sought access and failed.

Too often, value in use activity has been left out of sustenance equations, when means to make these skills sets matter economically have been lost. Symmetric compensation needs to echo the organizational patterns which existed prior to employment as externally determined. The best part about symmetric compensation, is that it allows time use to exist both as measured input and product. This is exactly how - and why - service formation has the complete ability in productivity terms, to overcome Baumol's cost disease.

Friday, November 20, 2015

When Wells Run Dry...

Lost in the discussions about future growth trends, is much of the earlier confidence regarding human capital. Indeed, human capital - as a component of wealth - became taken for granted as the twentieth century progressed, only to begin losing its prominence in the 21st. Much as central bankers have become reluctant to provide clarity about monetary policy, policy makers aren't clear about the economic roles that are relevant for citizens. From "Poor Richard's Almanac" (Benjamin Franklin):
When the well is dry, we know the worth of water.
Does anyone really believe technology can - or "should" - replace human capital? Will everyone wait for the well to go dry, before realizing that broad labor force participation was a desirable component of our economic realities? Perhaps we will know the worth of human capital, once it finally becomes evident that strict knowledge use limits will not suffice! Why is it so difficult to envision human capital as vital resource capacity which needs to be extended to everyone - not just for formal workplaces, but for any work that individuals provide for one another through the course of their lives?

Prosperity is not just a matter of capital which is separate from human capabilities and aspirations. Should human capital lose its importance, other forms of wealth creation would not be far behind. Odd indeed, that the earth and its resources get so much attention on a daily basis, when few stop to consider how the wellspring of human capital is threatened to a greater degree, than the earth (from human activity).

When nations reserve the bulk of high value skills capacity for the most talented and accomplished, more is at stake than is realized. Everyone takes the chance that populations will not only lose access to important facets of knowledge use, but also the reasoning capacity which underlies all learning and human interaction. Wealth generation begins with knowledge use, but this process can also be reversed, when asymmetric monetary compensation has no counterbalance from symmetric coordination among groups. When the asymmetric compensation of knowledge based wages makes too many demands on existing resource capacity, the result is political instability.

Like an aquifer that is drawn from without replenishment, human capital in aggregate becomes diminished as governments and special interests divide the spoils of knowledge based wealth among the elite. What few have recognized, is that asset and commodity formation alone aren't enough to sustain wealth for all comers. In the meantime, continued monetary tightening only reduces the wealth of traditional production that has been necessary for asymmetric compensation.

Policy makers have become confused about the forms of knowledge use complexity that are actually important. Consider for instance the rudimentary forms of services which now comprise education and healthcare at local levels. How can these disciplines become transformed, so that they can be integrated with other economic activity in the places where many live out the course of their lives?

As people in developed nations struggle for access to cities, and people in broken nations struggle for access to prosperous nations, not all will be able to gain economic momentum from escape, alone. In a sense, economies are no different from individuals in this regard. When something is broken, there are times when the only solutions to be found, are internal - especially when there are no easy answers. It's time to look inward, for the economic solutions of the future.

Thursday, November 19, 2015

When Does Inequality Present Problems?

James Pethokoukis noted recently that Angus Deaton had some thoughtful things to say about inequality. How much of inequality is a result of private and public interests which stand in the way of free market prosperity? Neither the political left or right are blameless in this regard. From Deaton's interview in the WSJ article:
Inequality is partly a marker of success. If someone thinks of something, some new innovation that benefits us all, and the market works properly, they get richly rewarded...[But what] I worry about is that some of the enormous riches we're seeing in the U.S. today are coming from the activities that are in social doubt. 
Regular readers are familiar with my concerns in this regard. Instead of a marketplace which represents a wide range of income potential, too many basic features have been defined on the "hostage taking" wealth capture terms of non tradable sectors. For a long time, "raising the bar" nonetheless meant more wealth for all concerned, which could explain why few questioned the process. Now, a growing number of individuals and institutions alike, struggle to meet what have become rigid terms of engagement.

Growth potential in this environment, is mostly limited to further options for high income levels - on the part of governments and private interests alike. But just as government infrastructure holds no multiplier capacity through choice for those who already have access options, the same is true of private investment which competes for an already saturated consumer base. Plenty of growth potential still exists, but it needs to be generated through broader means for access and economic engagement.

Economic stagnation, is little more than policy maker reluctance to define economic conditions on more inclusive terms. Unfortunately, too much discussion regarding inequality focuses on income differences, instead of the underlying factors which place too much consumption beyond the reach of lower income levels. One social media meme put it well: "Sorry, the lifestyle you were seeking is currently out of stock."

In other words, inequality presents problems when neither public or private interests are really paying attention, to segments of the marketplace which could benefit from further investment and labor force participation. While prosperous regions could still take in newcomers to some degree, nations need to focus on the regions which have been left behind, where internal solutions can ultimately be found.

Today's inequality is not so much about income differences, as the distortions in housing, healthcare and other service formation which are in need of resolution. As a result, non tradable sectors have become largely identified with status signals and struggles for access. Just as today's high bar is problematic for individuals, it negatively impacts new business formation, and hampers the ability of local governments to find sufficient revenue in struggling regions.

Angus Deaton reflected on a political aspect of inequality in the above linked interview, as well:
[Former Supreme Court Justice Louis] Brandeis said a long time ago that you can't have an extreme distribution of income and democracy at the same time.
Fortunately, there are ways to utilize knowledge that would sustain local democracies for service formation, when national redistribution can no longer do the job. This would not only make digital educational options worthwhile, but also provide means to disperse knowledge without the expense associated with general equilibrium. Otherwise, the lack of a marketplace for knowledge use, would leave little capacity for potential digital benefits in service production.

Inequality becomes problematic when people build rigid systems, and then force others out of those systems when the least deviation in aptitude or ability makes it difficult to remain connected. Hopefully, policy makers will focus on the domestic issues that matter most in the years ahead, instead of allowing present economic and political uncertainties to grow.

Tuesday, November 17, 2015

Money and the Double Coincidence of Wants

Does money always satisfy an otherwise double coincidence of wants? In many instances, yes. Even so, a practical response is needed when results are less than satisfactory - as has been the case with services formation. All too often, both services providers and consumers end up disappointed, when institutions (externally) set the terms of coordination processes. From Nick Rowe's macro framework:
3. But (double) coincidence of wants is rare, so they use money as a medium of exchange (and medium of account).
Resource coordination issues are a primary reason why money replaced barter, centuries earlier. When product formation exists separately from time value, money remains ideal as a medium of exchange. However, when time value is closely tied to product, asymmetric pricing for services coordination becomes difficult for the marginalized and for knowledge dispersal as well. Symmetric compensation for wage structure, would allow time value to play a greater role alongside skills and organizational capacity.

Knowledge use systems could generate a much needed marketplace for time value. This would allow time value to exist in relation to itself - in both personal and group capacities. It is easier for individuals to discover a double coincidence of wants, when they can coordinate in relation to the time and skills potential others also hold for personal exchange. Time arbitrage would provide the base monetary compensation, from which additional elements of the system would be built.

There's another benefit to making time value a part of the coordination equation. Through seeking out double coincidence of wants in services formation, populations would gain the ability to quantify services production. As things now stand, uncertainties involving asymmetric compensation and redistribution, continue to impact both service formation and monetary policy. Further, government responsibility in this regard, has made it difficult to understand how services product even exists in relation to other resource capacity.

Fortunately, skills possibilities are vastly more diverse in today's marketplace, than was once the case for anyone who sought to match skills capacity. Today, the digital realm could help individuals and groups to discover mutual, services based possibilities at local levels.

Also, there are psychological advantages: everyone learns to negotiate for reciprocal tasks and voluntary responsibilities from a young age. This translates into better relationships with family and friends; and over time, a gradual return of societal trust. Granted, it's hard to imagine a world capable of trust in the present. But this is no time to give up, on the hope of a return to stability and prosperity.

Monday, November 16, 2015

Sticky Wages in Price Taker vs. Price Maker Context

Often I get excited about concepts before I really have a chance to take a closer look, at what existing literature has to say. That's partly a result of feeling pressured for time (to learn and apply), since I was almost fifty years old before I finally allowed myself the luxury of studying economics on a regular basis. A recent challenge in this regard is the interaction of price taking and price making mechanisms in the economy. About price taking, InvestorWords has this to say, "An individual or company which is not influential enough to affect the price of an item." And, from Wikipedia, regarding price taking in "Market Power":
In perfectly competitive markets, market participants have no power.
How do we square this with the fact more competition is needed in a broader range of the marketplace...not less? Price making mechanisms are overtaking (good deflationary) price taking mechanisms to such a degree, they now impact monetary policy around the world. Does potential exist for a more inclusive, hence fully competitive price taking marketplace? It's somewhat of a tricky question, and one which also affects the sticky wages which can limit labor force participation.

In a recent post about macroeconomic frameworks, Nick Rowe noted the role of sticky wages, and the fact they contribute to coordination problems. For understandable reasons - given the nature of today's asymmetric wage compensation - he classifies labor as a single existing endowment. Indeed, this is often the case for expectations in high skills investment, given service formation in non tradable sectors.

The twentieth century saw a vast increase, in the ability of knowledge based careers to command price maker functions. This temporary increase was possible until only recently, given the degree to which higher education became associated with economic access. Just the same, existing revenue available for these positions is gradually becoming less certain. More of the faculty in the universities which remain viable, will need to make greater use of price taking wage structures.

However, there's still a problem for aggregate output and labor force participation, even though wages are gradually being adjusted downward. Even though universities and other knowledge based institutions have accounted for the revenue losses of recent recessions, addressing the sticky wage factor doesn't quite have the same effect, as what occurs in tradable sectors. Indeed, some element of implied knowledge use loss - and consequently time value - is involved. To some degree, the loss accrues across public and private sectors. This is why knowledge use systems need to position knowledge use in a sustainable price taker context - for both labor force participation and output potential.

Of course, government isn't really all that different from private interests, which encourage knowledge use limits to generate price maker income. Sticky wages from a price maker perspective, is as much about preserving marketplace power, as anything. But ultimately, price maker tactics backfire, in terms of marketplace competition and labor force participation. This is a reality which local corporations would (eventually) need to acknowledge, as they develop local patterns for economic viability.

My biggest concern regarding a base wage for mutual assistance, is the fact it has to exist on price taking terms. In other words, compensated wages would be less than currently defined minimum wages. Otherwise there would be too many pressures on knowledge use systems - both internally and externally. Internally: should groups attempt to adopt a price making wage (minimum wage or above), exclusionary rationale for some locals would be the quick result. And everyone would be right back to problematic unemployment.

Hence it is imperative to generate time/money investment and social security mechanisms which negate the need for price making wages. Likewise, should local corporations set wages too high, this would be externally counterproductive as a direct competition to general equilibrium. Why would specialists (from general equilibrium) provide their expertise to knowledge based systems...if those systems eventually plan to compete with them? The most important competition for alternative equilibrium rests in time value, so that one's personal preferences and skill sets have a chance to remain in balance over the course of a lifetime. In order to effectively break sticky wages in a long term sense, some trade-offs and backup plans are necessary.

One way to back the limited "power" of (fully competitive) local corporations, is to define economic environments with clear starting or base points for access and entry. By doing so, one's compensated wage would not present a constant struggle for access and participation, as has been the case for so long. Over and over, people gave up their desires to assist one another, to a marketplace of economic access which overcame entire realms of practical knowledge use. As a result, too many individuals eventually found themselves all but unable to reach out to others.

A marketplace for time value, would ensure that knowledge maintains "value in use" characteristics in a high skill, "value in exchange" economy. While price maker dynamics will always exist for high skill levels, a price taker marketplace for knowledge use would still go a long way, to restore normalcy.

Saturday, November 14, 2015

Considering a Macroeconomic Framework

These recent posts from Tyler Cowen and Scott Sumner, encourage everyone to take a closer look at their own beliefs regarding macroeconomics. If only my own understanding was more complete! For example: even though I'd like to call a "time out" (to condense what I've written thus far into easier to read formats), I know I'm not ready. For me, this whole process is still evolving, and regular blogging keeps me connected and engaged.

What mental clarity I had yesterday, has also been thwarted by the terrorist attacks in Paris. The tragedy only deepens my resolve to do something. Surely, one way a productive world could remain strong, is for people to monetarily compensate one another for mutual and voluntary assistance. As things stand now, many still expect the strong to help the weak...even though the strong may be struggling to maintain their own economic circumstance.

One aspect of my thinking has not changed, since I began blogging. Through government policies, monetary transmission mechanisms ultimately distribute wealth towards service formation and time based product. Even though much of this occurs at national levels on the part of central banks, local factors need a chance to reemerge. Local corollaries for wealth creation and monetary transmission are possible, through closely coordinated services and investment formation.

Decentralized economic activity would allow time based product to become a stronger economic component, and it would reverse the slow motion train wreck of hollowed out work structures. I believe that local economies could generate sufficient complexity, to create simplified versions of a monetary transmission process. Even though wealth originates from tradable goods production in general equilibrium, new wealth is also possible from coordinated systems of symmetric time value. This process would generate an observable alternative equilibrium, as well.

Since many governments work with wealth creation results (in the form of income derivatives), they cannot contribute more to growth, than the fiscal flows which result from prior wealth formation. Monetary activity accounts for those initial flows. Monetarism is crucial, to provide accurate monetary representation and the acknowledgement of individuals as central to real economy conditions. Wages and income need to be dynamic - not static - to maintain ongoing activity. Market monetarism adds to this process, through representation based on what market participants are actively planning for the near future.

In order for the macroeconomic discipline to further evolve, it needs better definition and production capacity for services formation, than has been provided thus far. In particular, time aggregates are at stake, given the fact that services coordination faces growing imbalances. The dynamics of time and knowledge based service product are quite different from those of tradable goods. Most important: time based services capacity exists along a fixed spectrum or continuum. When that continuum is not followed in terms of coordination, services product is lost in ways that cannot be recaptured for the currently participating groups.

Fortunately, this single continuum is not a problem for tradable goods which exist separately from time, in that their volume can take place in multiple time periods without distorting product potential in aggregate. There's a simple way to think about the process: even though we can never regain lost time, we can often regain other lost resources.

Time based product, as a fixed component of a single continuum of time based possibility, needs knowledge use as a conduit between economic actors for better coordination. Even though individuals partake in intensive time based investments for healthcare, their time use continuum for actual participation, is a mere fraction of what insurance programs or governments may imply. Time aggregate value, instead of having broad applicability in production terms, exists mostly in consumer context.

By no means is the present the first occasion, in which time aggregate value has been inadvertently lost. This is partly why I disagree with Tyler Cowen's assertion (the first point in the above MR link), that 99% of all business cycles are real business cycles. Granted, traditional production (product separate from time value) can sometimes function for a long time, before aggregate capacity begins to shift in relation to the formation of time based product. But when that shift occurs, time based services coordination becomes increasingly difficult - both for budgets and the individuals who lose their roles in the process.

While everyone has understandably grown weary of hearing about tipping points - especially given the fact so many have already occurred - there is still one more which is important. The wealth of traditional production can no longer support all the needs of time based product through asymmetric compensation. Fortunately, this is only a problem insofar as it remains unacknowledged. Symmetric time value could provide much needed wealth creation, at the moment it is most needed.

There is more at stake, than just gaps in services coordination for consumption needs. Time based product exists in both consumption and production dimensions. The potential for broad based service structure, translates into human capital as a direct source of wealth. Through symmetric compensation, services could provide a starting point for new economic formation, as well as secure backing for more traditional production. This process would place new services into a monetary context, to buttress still existing fiscal capacity. And even though the real economy is responsible for growth potential, monetary policy is responsible for the maintenance of what the real economy creates.

Thursday, November 12, 2015

Notes on Planning and Land Use

Timothy Taylor highlighted a recent Cato article which asked, "Can 'Planning' Deregulate Land Use?" While initially the title could be confusing, the authors explain:
To overcome NIMBY politics and development constraints, urban areas should consider binding, comprehensive, citywide plans.
An important reason why cities can end up with inflexible plans for property use, is the fact that individual negotiations aren't just messy and uncertain; they can also detract from land value. Easily ascertained boundaries are important, and development proceeds more readily when economic options are obvious from the beginning. In their study, Roderick Hills and David Schleicher conclude:
Paradoxically, sometimes rigidity and centralization of a general framework for buying and selling land is more market-friendly than the bargaining free-for-all that keeps everyone guessing - and paying lobbyists to improve the odds of their guesses.
How to square this reality, with the need for more options and diversity in land use? Decentralization could contribute to environments with distinct or unique forms of land use, instead of multiple usage seemingly all in one place. Groups also function more effectively, when common patterns exist within a close range.

The problem - however - is that the same economic patterns have been imposed time and again, in the U.S. A prime example is infrastructure which accommodates automobile use first, and everything else afterward. Even though many legal impositions begin at national levels, some state legislatures don't hesitate to impose one size fits all rules for cities, as well. Ultimately, the refusal to make room for economic diversity, creates problems for long term growth.

Decentralization in land use planning, would give a much needed unique character to land use. Of course, some states would be more amenable than others, to permitting the variance which would be needed at local levels. With a little luck, these states could provide early arenas, to restore economic vitality and long term growth.

Wednesday, November 11, 2015

Price Takers, Price Makers and Other Equilibrium Mysteries

Nick Rowe, in "Robots and the Core", was the beginning point of inspiration for this post. Even if I'm not quite sure how to relate these thoughts to his musings, I need to at least make sense of several pages of notes! First I referenced Wikipedia, for competitive equilibrium and general equilibrium. From the definition for competitive equilibrium (also called Walrasian equilibrium):
Competitive equilibrium is the traditional concept of economic equilibrium, appropriate for the analysis of commodity markets with flexible prices and many traders, and serving as the benchmark of efficiency in economic analysis. It relies crucially on the assumption of a competitive environment where each trader decides on a quantity that is so small compared to the total quantity traded in the market that their individual transactions have no effect on the prices. 
Given the fact that Nick Rowe was asking a general equilibrium question, some Wikipedia notes for general equilibrum theory:
...attempts to explain the behavior of supply, demand and prices in a whole economy with several or many interacting markets, by seeking to prove that a set of prices exists that will result in an overall (or "general") equilibrium. 
One more quote would be helpful, from the opening of a paper provided to Nick by a commenter, "Markets With a Continuum of Traders" by Robert J. Aumann:
It is suggested that the most natural mathematical model for a market with "perfect competition" is one in which there is a continuum of traders (like the continuum of points on a line). It is shown that the core of such a market coincides with the set of its "equilibrium allocation", i.e. allocations which constitute a competitive equilibrium.
In earlier posts I spoke of a continuum for potential time use value. Now, imagine continuum in terms of overall wealth generation. The initial component consists of price takers in competitive equilibrium, which generates further settings for asset and income formation. This tradable goods component of competitive equilibrium is where - in the U.S. - one "votes" for product preferences through the use of dollars.

However, in general equilibrium, both the price taker dynamic and voting mechanism start to break down, as price makers isolate multiple characteristics of time based knowledge use to their advantage. Since time based aggregates are fixed in relation to (other) resource aggregates and their representative monetary component, voluntary services coordination may become limited to subsets of equilibrium (Little about prison confinement is voluntary). While price making is prevalent in services formation, it can also be problematic when employment capacity for technological gains is captured by special interests - such as the auto maintenance and repair of recent decades.

Imagine general equilibrium as two parallel continuum. On the one side, tradable goods wealth and that of asset formation. On the other, exists services formation, employment and knowledge use. Crucially, non tradable sector representation extends across both of these continuum. Hence asset formation is somewhat complicated by the fact it represents income wealth from both tradable and non tradable sectors.

An important consideration regarding price takers versus price makers, is what Nick Rowe states as an obvious preference if new technology "reduces worker's wages and capitalists' rate of profit":
If it reduces both workers' wages and capitalists' rate of profit, why would workers and capitalists ever adopt that new technology?
Nick just beautifully illustrated the ongoing tension between tradable sectors and non tradable sectors in general equilibrium - indeed, the very struggle that local corporations would need to overcome by allowing citizens to innovate both infrastructure and asset formation. The price taking mechanism of time arbitrage would allow comparable price structures for an alternative equilibrium, which would benefit from a broader definition of good deflation than is now possible.

Price making occurs when wealth capture leads to means (let me count the ways) for resisting innovation. The price takers of tradable sectors became flexible and "escaped" local conditions in recent centuries, in part due to necessity. New technology was adopted not necessarily because of better wages and profits, but because producers were increasingly faced with global competition in tradable goods. Since better technology meant more (lower cost) product in aggregate, profit was achieved by maximizing a marketplace, instead of imposing demands on a naturally limited marketplace.

Still, non tradable sectors did not always have the same options for innovation which exist today. The immense gains of technology and organizational capacity, could potentially bring good deflation to non tradable sectors. But centuries of price maker mechanisms stand in the way. Why would the producers for what are essentially "captured" markets, want to reduce their profits by innovating in ways which mean fewer rewards?*

Again - as Nick Rowe asked - why adopt new technology if it means less profit or lower wages? While tradable sector price takers contribute to good deflation through innovation, price makers of non tradable sectors create bad (internal) inflation through regional wealth capture. Worse, even as housing and services contribute to internal inflation, they can just as easily suffer bad deflation (asset depreciation and services "austerity"), if and when monetary policy overreacts by tightening monetary conditions.

Another consideration in Rowe's post was land. Both income and land in highly sought after cities benefit from international wealth flows. There is a growing argument for equilibrium alignment, which consists of moving more people to more prosperous areas. However, what is most needed for greater growth capacity, is greater dispersal of knowledge use. Presently, limits in this regard are diminishing total resource capacity.

This is why new wealth needs to be generated outside of primary equilibrium. Even though more housing could be built in highly desired cities, knowledge wealth cannot just "open the floodgates" to accommodate an equilibrium which in many respects relies on international wealth flows. Indeed, land is intricately tied with the international wealth of primary equilibrium. Land aggregates are mostly difficult to access, insofar as knowledge use is also difficult to access.

General equilibrium, with its multidimensional arena of goods and services, includes a still growing price maker environment in search of greater profit. But a long trail of preexisting claims on international wealth, accounts for the fact that some now call for a return to a gold standard. Instead of a gold standard, give fiat monetary formation and non tradable sectors a realistic outlet for alternative equilibrium, which includes an innovative price taker framework. For knowledge use systems, aggregate time value provides a much needed price taker context for service formation. In short, I long for the day when time value can be exposed to competitive equilibrium.

The fact that non tradable sectors chose not to innovate wouldn't be so problematic...except these sectors were structured to rely on the monetary redistribution of traditional manufacture. Over time, tradable sectors generated less wealth for the needs of non tradable sectors because they did not cost as much to produce in aggregate! Hence the upside down world of monetary policy, until some balance finally takes place between the two.

There is only so much room for a general equilibrium which prefers the (internal) inflationary practice of price making for greater profits, all the while still dependent on the good deflationary wealth of the price takers. For all the accolades that free markets deserve, nations forget the degree to which broader markets are the result of "escaped" (global) competition, as opposed to the "contained" (local) competition, which is more inclined to generate wealth by claiming local "hostages". In other words, by actively working against free markets. Supply side? Heal thyself. If this post includes something which offends everyone (and there's a good chance it does), please accept my apologies. And I must confess that sorting through all of this was a pleasant challenge.

*Granted, some tradable goods - especially those with large knowledge use components - are willing to take a page from the price making of non tradable sectors, by seeking more ways to limit duplication. Hence the dubious nature of some trade agreements which are more about creating limits to product formation, rather than aggregate gains in product formation.

Monday, November 9, 2015

Monetary Tightening is the Wrong Trade-off

Sometimes when I insist that monetary conditions are still too tight, I feel as if I am raining on everyone's parade. What monetary tightening? After all, the official word - from the Fed - is that the economy is doing reasonably well. Supposedly, nothing is "broken" any longer, since the financial system was rescued. Just the same, the drumbeat for further fiscal stimulus remains in the background.

But underlying economic factors which contributed to the Great Recession have yet to be addressed, and fiscal stimulus cannot play a leading role as a driver of future growth. Fiscal policies originate from preexisting wealth formation, a fact which has been obscured by increased governmental activity in the economy. One caveat: there's a notable exception for fiscal stimulus benefit in recent history, which may explain why some believe government could still contribute to growth. Before it took on the weight of entitlements and massive redistribution, Washington was able to assist in the creation of valuable infrastructure, in the earlier part of the twentieth century.

Those infrastructure gains - especially electrification and transportation - did much to reinvigorate an economic growth trajectory which had yet to complete its shift from agricultural employment. Before massive consolidation and centralization took place in the latter twentieth century, growth in commerce and related activity had taken hold at local levels, even in the far corners where new highways were built.

During that time, economic participation experienced a dramatic rise in ways that were broadly distributed - especially in the South. The government assistance of that time frame, doubtless contributes to the mistaken belief that Washington could still contribute to growth potential...if only it really wanted to.

However, Washington scored a win for the twentieth century economy, because these forms of infrastructure made everyone more productive. Today, governments and special interests more often seek greater productivity in the form of wealth capture from a select few, instead of populations as a whole. For non tradable sectors, that translates into an insufficient amount of product, in contrast with what is actually demanded. (This can be confusing, if and when recession is associated with too much product in tradables sectors.) As a result, too many discussions regarding growth either fall into the camp of what government could potentially do, or else reasoning that further growth is not even necessary.

Marcus Nunes also reminded everyone in a recent post, that circumstance are not quite as rosy as they may seem. Both the Fed and Ben Bernanke continue to perpetuate the myth that nothing was lost from the Great Recession, and that bailing out banks was all anyone needed. Every time I see the 2012 Atlantic article cover of Bernanke, I recall the Time magazine cover when he was named person of the year in December 2009. Even prior to becoming a regular reader of Scott Sumner's blog, I remember feeling a bit dubious about the honor he received for that earlier award.

By refusing to acknowledge the importance of a level spending target, the Fed is implicitly unwilling to admit it is still engaged in monetary tightening. Likewise, the Fed hasn't acknowledged what has become a trade-off, between full monetary representation versus the continued support of financial sectors. For one, governments have yet to adjust twentieth century consumption models to the changing realities of the 21st century. Even as populations continue preparing for knowledge use roles, today's institutions have little room for the services production capacity which populations seek.

In particular, people need new production roles in order to maintain long term growth levels. Instead, production capacity is being defined in terms which diminish both marketplace output and income aggregates. There's a simple way to think about what has occurred. Since hard restraints exist in basic production such as housing and services, opposing viewpoints believe the only way to "win" is by forcing one's opponents to lose.

The result is a diminished workplace and marketplace: the real economy equivalent of monetary tightening. Too much knowledge is now used for smoke screens and obfuscation, instead of broad economic participation. Bernanke and company claimed victory after the Great Recession, due to the fact that the financial system was saved. Even so, saving the banks should not have been the end of the story. It should have been the beginning point for a more productive response - in both monetary and real terms.

Saturday, November 7, 2015

The Long Term Benefit of Symmetric Time Value

Initially, arguments for symmetric time value might not make sense to my new readers. Indeed: given the vast differences between individual abilities and aptitudes, arguments against equal time compensation can be more compelling in some respects. Fortunately, local organizational capacity would help to smooth out the differences that matter most, in conjunction with applied technology and "just in time" knowledge use.

Lest anyone mistake my argument for symmetric compensation as somehow better than asymmetric compensation, that's not the point. The combination of symmetric and asymmetric time value, would eventually make a more complete marketplace possible for services formation. Symmetric time value could provide additional employment capacity, and considerable social benefit. Even though the job market has recently improved, many individuals would still welcome the options that symmetric time value could provide.

Symmetric time value would address present day imbalances in labor force participation, which have resulted from both government and supply side constraints. Not only has labor force participation declined in recent years, but also the knowledge use component of labor value, which began its descent in the new century. Symmetric time value would help to reverse the decline in labor force participation, and in knowledge use as a work based option, as well.

Even though knowledge use is central to wealth creation, the asymmetric compensation which is representative of varying skill levels, makes it necessary to reimburse knowledge from preexisting forms of wealth. Consequently, skills, time value and knowledge application need to be reimbursed as budget responsibilities, instead of the wealth contributors they could otherwise represent. This limits their use in aggregate, which has in turn become increasingly reflected in monetary policy.

Since organizations only have so much room for asymmetric time value in their budgets, time and knowledge value tend to be approached as given amounts of stock, instead of ongoing economic flow. The need for symmetric time value actually began prior to the new century, but was held at bay, so long as it remained possible to increase asset value as an alternative. Only when it became more difficult to increase asset value (aggregates) in the face of declining labor force participation, did knowledge use as a constant become less certain, in work patterns and services formation.

While technology allows institutions to treat time value as stock (rather than flow), patents and other forms of knowledge protection provide the same function. Even though these protections supposedly exist to encourage innovation, paradoxically they serve to decrease the compensated time based interaction which could lead to more innovation. Consequently, knowledge duplication takes precedence over knowledge evolution wherever possible. Just the same, time and knowledge value still need to be able to exist as flow, in order for economies to maintain economic stability over time. This is where the overall benefit of symmetric time value, would matter most.

Not only would symmetric time value preserve applied knowledge use in broader settings, it would also preserve the integrity of applied time value, as central to economic activity. In the past, direct interaction with resource use, meant that time value as economic flow was taken for granted. Now that many production functions have become centralized, people need more direct interaction with one another, in part to make up for the lack of interaction with other aspects of production .

Because time arbitrage would coordinate time value equally, symmetric time value can generate new wealth in aggregate. Groups would only face limits to growth, to the degree they fall (internally) short of service production options. Even though symmetric time value would prove useful in the immediate sense of budget relief, that would only be a beginning. Eventually, these forms of local coordination could improve the outlook for long term growth, and create a stronger growth trajectory, as well.

Friday, November 6, 2015

More Thoughts on Longevity

A recent post from Scott Sumner, ("Lateral Thinking") encouraged more debate in comments about a recent study on longevity for American whites. While there are obvious issues regarding separation of race and age in the study, the paper at least holds value for prompting these discussions. In short: a certain degree of longevity decline has occurred in the U.S. However, the decline has occurred in a broader context than the authors were able to take into consideration.

In this post I'll just touch on a few issues that contribute to health problems for anyone, which can affect longevity. Chief among these are economic uncertainty, which can be problematic for anyone regardless of income or current economic access. Any time that one's economic activities and patterns are disturbed, their health is going to suffer. As one gets older, maintaining health will only become more of an issue. In spite of recent jobs gains in the marketplace, certainties in job formation remain in doubt for the near future.

The emphasis on drugs and suicide in the above linked paper was somewhat misleading, given the fact these exist both as coping mechanisms and reactions to previously existing problems. It's unfortunate that studies such as this - which too often address narrow sets of particulars - consequently frame important dialogues so that basic underlying issues are not easily addressed.

Worse, ill defined particulars tend to become talking points or fodder for opposing sides. The older I get, the more difficult it becomes for me to identify with political (or social) "tribes". Among other things, these groups generate policies which mostly mean more economic uncertainty for the "opposing" side. Wouldn't it be better to encourage institutions which generate less economic uncertainty, to begin with?

Today's healthcare - for instance - can actually contribute to worse health outcomes in a financial sense. People try to joke about it, but opening the medical bills after the last hospital visit can actually restart a cycle of illness. The possibility of healthcare needs can especially be problematic, if undue worry or stress also contributes to job loss.

One reason individuals sometimes opt out of borderline employment, is because of the possibility of work stress generating healthcare bills they might otherwise avoid. By borderline, I mean taking a job with limited pay (or requirements which tax resource capacity) that could even shorten one's lifespan, once substantial health concerns start to set in.

When it comes to longevity, so many issues are at stake that it's not easy to make broad generalizations about the issue. Even so, there's little doubt that environments with more economic certainty - such as less difficult consumption expectations  - would be a boost for overall longevity. One caveat: production reform needs to occur in terms of both services and asset formation. It is simply unreasonable to expect all incomes to match the demands of general equilibrium.

Before wrapping up this post, some thoughts on cultural and geographic circumstance for white Americans. Many who came from rural areas, have had extra hurdles for economic access after high school graduation, which affect lifetime trajectories and longevity. At the top of the list is regular transportation to and from cities, for work and also any further education one may seek.

Rural areas suffer from a lack of local work options, which can mean problems for "liftoff" upon high school graduation. At this time, the graduate is already in need of a car, but he or she already needed prior work, to be able to purchase one. Young adults deserve the chance to set aside money for this time of change, years before they are actually expected to go out on their own and make their own destinies. Economic participation from a young age, in the form of compensated time arbitrage on the part of local corporations, would ease burdens on both individuals and families.

Culturally, as at least one commenter noted at Scott Sumner's above linked post, the nuclear family (in the U.S.) is "supposed" to be prepared to support one's own children. Even extended families here have long accepted this as a sort of silent "rule". Just the same: should parents be facing their own economic struggles when a young adult is about to graduate high school, they may not be able to provide substantial assistance to their children in this time of transition.

Instead of blaming the families involved, why not create institutions which are more supportive of individuals at local levels? Stasis in longevity is not necessary, in the U.S. But it needs to be dealt with in terms of the circumstance which people actually face in their lives, instead of constant judgments as to what people are doing wrong.

Thursday, November 5, 2015

Knowledge Use is the "Why" of Retrieval Methodology

The post title is simply to point out that no discussion regarding educational goals is complete, without considering how knowledge use can be better applied in aggregate, for populations as a whole. Does anyone think that young students haven't figured out the true limits of today's workplace access, outside their classrooms? Otherwise, the daily newscasts of student/teacher/police brawls in the classrooms - something I never could have imagined as a young student - would make little sense at all.

No one is going to get anywhere with discussions regarding education, until students have better defined ways to make those educational years matter - otherwise everyone is wasting their time. Therefore, discussions regarding knowledge retrieval - for instance - matter well beyond the "hows" of signalling and personal success. Rather, retrieval as method should be part of the strategy for shifting to economies which can better accommodate the knowledge use investments of recent decades, on everyone's part.

In the knowledge use systems of local corporations, retrieval method would be central to the incremental growth which is time arbitrage. Because this form of time arbitrage would be symmetrically compensated (thus creating new time based product) it can be used for basic knowledge components alongside high skills value. In other words, repetition becomes a possibility for ongoing economic activity, instead of being mostly delegated to assistance from family and friends if one is "lucky" enough.

When time value is asymmetrically compensated, knowledge repetition is not always possible (economically), because repetition appears less important, than the knowledge which present institutions feel most compelled to compensate. In earlier posts for instance, I emphasized that (asymmetric) services formation in healthcare often defaults to "after the fact" or worst case scenarios (leaving little room for preventative maintenance) which require high skill levels. Even though today's healthcare institutions broadcast "one size fits all" preventative knowledge as advertisement, they have little (economic) room for the specific circumstance, which preventative maintenance actually needs.

Knowledge retrieval is more than just a useful strategy, for either educational purposes or present day workplace concepts. For instance, retrieval methods to regain productive habits, could assist the homeless who have lost the ability to maintain housing, despite the fact that housing assistance has been provided by a caring community. Anyone who would be reimbursed for assistance in this local capacity, would not be classified as for profit or not for profit - but simply part of ongoing local corporate activity.

Shane Parrish highlights some important aspects of retrieval (as method) from the book "Making It Stick: The Science of Successful Learning", and notes:
Francis Bacon and William James also wrote about this phenomenon. Retrieval makes things stick better than re-exposure to the original material. This is the testing effect.
Parrish continues:
Repeated retrieval not only makes memories more durable but produces knowledge that can be retrieved more readily, in more varied settings, and applied to a wider variety of problems. 
He also notes that testing need not be provided by the teacher, for students to gain from testing situations. When one hears complaints about testing, it helps to remember that too much testing hasn't appeared helpful because it has not translated into something that students can ultimately use.

Testing is most helpful, when knowledge is going to be utilized or otherwise applied to ongoing activities in the near future. Given the fact students in knowledge use systems would be compensated for helping other students with educational material, this gives an immediacy to what they learn, which otherwise might not exist. This process would generate a central component of local corporations: incremental ownership of skill, as one proceeds through educational and working environments. Fortunately, incremental ownership of skill would provide further credence to the value of testing, as well.

How might one think about these processes in terms of general IQ? Memorization and IQ are not so much the (observable) point of the matter, as whether or not one has a pragmatic environment of incremental ownership for knowledge retrieval. To what degree have present day institutions actually provided this? Not enough, as far as I am concerned. From the Amazon review for "Hive Mind", the new book from Garett Jones (which was highlighted by Tyler Cowen):
On average, people who do better on standardized tests are more patient, more cooperative, and have better memories. As a result, these qualities - and others necessary to take on the complexity of a modern economy - become more prevalent in a society as national test scores rise. What's more, when we are surrounded by slightly more patient, informed and cooperative neighbors we take on these qualities a bit more ourselves.
What needs to be considered regarding national averages for IQ levels, is the degree to which a nation's institutions actually provide room for knowledge use, for populations as a whole. Further, this is not something easily observable in statistics. Even so, we know plenty of circumstance where individuals are not particularly inclined to be cooperative and patient - cue the latest classroom brawl caught on someone's smartphone.

While the hive mind is quite real, it exists insofar as family formation and work formation are capable of generating these fortunate circumstance. However, more than familial or work circumstance are needed now to preserve knowledge use, particularly as long term economic growth threatens to stall. Knowledge use systems could provide the institutional capacity to expand - and preserve - what present day institutions are still struggling to make available, to those who seek economic entry.

Tuesday, November 3, 2015

Services as Technological Progress

Regular readers know that I view services production as the unnoticed elephant in the room. So long as time based service product remains attached to fiscal budgets, it will not be capable of providing substantial economic growth. Without a marketplace for time value, skills capacity and personal time investments (in aggregate) can be likened to the poorly understood dark matter of the universe. Of all the candidates for technological progress and production gains, service capacity tops the list.

Why aren't knowledge based services considered a valid component of economic potential? Important though knowledge is, the asymmetric compensation of skills is tangled in administrative complexity. This confusion has skewed statistics to a degree, that some wonder whether statistics hold hidden clues for economic vitality. In a recent post, Diane Coyle writes:
I guess my hope is that modernising economic statistics would inject some humility about taking the GDP statistics as accurate gospel, and ultimately lead to some conceptual work on measuring economic welfare better than current statistics allow us to do.
The problem is not just statistics alone, for a tremendous degree of time value needs to be recognized as measurable wealth. Even so, validation in this regard, would need to come from those who wish to take part in the process. Knowledge use systems could provide one of the missing wealth components of the present. Plus, participants in these systems would be able to provide accurate measure on their own, instead of being forced to spend taxpayer dollars on more experts to decipher their input.

Local corporations - through the coordination of knowledge use systems - would capture unused or underutilized talents. Results could be compared to a complete harvest of - say, apples. Where many stores (institutions) prefer to "sell" (hire) unblemished apples (skills capacity), local corporations would generate value from the entire harvest of time, skill and human capital. Ultimately, this is wealth which translates into additional production capacity and economic growth.

Despite the fact nations experience services issues somewhat differently, healthcare production and consumption have been the main problems for the U.S. As a result, a lack of sufficient healthcare access may also contribute to lower life expectancy for middle aged Americans. Even for those of us who aren't surprised by lower life expectancy, newspaper obituaries for anyone in their forties and fifties can still be unsettling.

While the above linked WP article cited drugs, alcohol and suicide, the WSJ article also notes that Anne Case and Angus Deaton suggested "economic insecurity" as a possible contributor to lower life expectancy. Also, note the relative lack of access to healthcare in the U.S., as contrast with other advanced nations, per the first chart in a post from Timothy Taylor. Lower labor force participation in the U.S., than what exists in other advanced economies, is also being discussed. Fortunately, the WSJ article spoke of the lack of economic access in rural areas, which is one of my primary concerns.

These articles tell several stories, in which a lack of labor force participation and healthcare production in the U.S. play leading roles. Demand for services product has been thwarted by complex layers of administration in prosperous regions, which has largely supplanted time based services product at local levels. Many healthcare providers also have little choice but to locate where real estate is also in high demand, in order to cover their own expenses and investments.

Even though structural factors have long since been "baked into the cake" of U.S. healthcare, healthcare providers could assist in the creation of local knowledge use systems. Those who are willing, could provide instruction for basic areas which present real burdens in today's healthcare budgets. Local knowledge use systems would give asymmetrically compensated healthcare, a chance to focus on cutting edge research and development. This process could also help the U.S. to regain its footing, in terms of life expectancy.

Of course, more than accessible healthcare is involved. Again, this particular service is but a starting point, by which local communities could reorganize and reconsider new service and investment options. Just being a part of other existing local systems, would encourage individuals to remain hopeful for a better future. These are the kinds of connections, which local corporations could eventually create.

Monday, November 2, 2015

Some Notes on Services Formation

Services formation is becoming more important for communities, particularly since tradable goods production is not always a dominant factor for local economies. Unfortunately, services formation in general equilibrium is still dependent on the wealth of traditional production. In the future, services need to provide a direct source of wealth which also contributes to traditional production. New services formation is needed on monetary terms, instead of the fiscal terms which centralize services and often limit them to prosperous regions.

Government subsidies for services formation have proven increasingly difficult in recent decades. In many instances, these subsidies have reimbursed time based product which provides neither sufficient production or consumption options for the marketplace. Subsidies for healthcare in particular, have meant further distortions in the coordination of time aggregates than should have been the case.

As it becomes more difficult to provide services with existing governmental revenues, services formation is also emerging as a primary source of inequality. How so? Given the fact budgets can only go so far for still expanding services needs, a polarized income structure has been the response - even as tradables sectors have moved towards a less polarized workplace.

Present day services formation has contributed to the wage stickiness which affects monetary conditions. Wages in tradable sectors have been somewhat more flexible, given the fact that skills sets in these areas are more interchangeable. Whereas the sunk costs in time investments for knowledge based services, have detracted from wage flexibility in knowledge based services at administrative levels.

Knowledge based systems would seek greater flexibility, both in terms of skills capacity and knowledge use. Students would participate in services coordination patterns which would include monetary compensation from a young age. This "pay as you go" approach would apply both in terms of time use and monetary investments. Individuals with the most experience would provide starter mechanisms for the process, and make room for individualized instruction when others don't yet have the experience (or possibly the time) to provide sufficient instruction.

Even though time arbitrage would be compensated as a minimal (and equal) base, compensation accrues over the course of one's lifetime and is also integrated with local investment. Contrast this to normal employment scenarios, which cause problematic earnings gaps for both young adults and older citizens. Because compensated time value would be directly associated with local resource capacity, citizens of all ages would be able to participate in a diverse services environment.