Wednesday, January 6, 2016

Comparative Advantage and the Marketplace for Time Value

In a recent article from The Freeman, Michael Munger suggests that comparative advantage should be downgraded as a primary concept, and that trade has evolved in ways which appear to make other factors more important. Here's Munger:
Comparative advantage is not a separate concept at all. It is simply an explanation of the implications of the division of labor and opportunity cost.
For tradable goods sectors, Munger's arguments are reasonably solid - in terms of untapped potential in these areas. As to non tradable sectors, however, comparative advantage has scarcely been utilized in the immediate or personal sense, where time based services particularly count. Not only would comparative advantage in service formation allow for a freer market in services, this concept also suggests organizational shifts in time utilization which have yet to be explored. Until now, comparative advantage in services has often been replaced with hierarchical expectations which have also substituted for knowledge use options.

There are other market considerations where comparative advantage will continue to hold importance as well. The most obvious example of comparative advantage in tradable sectors, is agricultural product which often needs specific geographic circumstance. Geography is also important for comparative advantage, in locally managed (non tradable sector) wealth endowments such as natural beauty, historical tourism and multiple forms of group coordinated experiential product.

How to think about comparative advantage in terms of time use, when time value is an important part of the final product? Unlike product which essentially exists separately from time use, service product not only includes how we feel about the production or consumption process, that impression becomes an actual component of the economic interaction.

This is why comparative advantages between providers, consumers and their mutually associated time/place agreements are so important. Whereas coordinated time and place for tradable goods is often not a central component of these forms of exchange, because tradable goods are mostly utilized - or otherwise experienced - separately, after the point of purchase.

Internally (group) coordinated time based product, would include comparative advantage of one's "basket" of time use options, in the decision to produce or consume. Personal concerns for production and consumption of time based product, would not be about "best bargains" or the like, but rather meaningfulness and effectiveness for mutually shared time. Even so, comparative advantage would benefit from a marketplace for time value (alongside money), for these elements of personal choice to be possible.

A marketplace for time value, would generate local conditions for time to serve (alongside money) as a medium of account, a medium of exchange and also a store of value - albeit in far simpler terms than these associations carry through monetary exchange. Granted, a time based marketplace would be neither possible or desirable, in the normal value in exchange conditions of general equilibrium. Just the same, the spontaneous nature of external coordination also carries asymmetrical costs which automatically limit the services that are possible in general equilibrum.

Time arbitrage would provide the option of symmetrical costs for time value, which could both simplify and increase the availability of services production. To be an entrepreneur of one's own time production, is to add real value. Indeed, it is fair to suggest that - in the eye of the beholder - possibly as much value as any new tradable good in the marketplace.

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