Rediscovering Work, and the Double Coincidence of Wants

Addressing the need to redefine knowledge based work on broader economic terms, should be front and center of today's discussions. Particularly when a Nobel prize winning economist (for trade patterns, no less) is right in line with Donald Trump, in suggesting mercantilism as an appropriate policy response. I apologize in advance for the portion of this post which comes across as a rant, but I never would have expected in the course of my lifetime for Paul Krugman to become an advocate for mercantilism.

If society does not create means to incorporate (literally) the knowledge and skill investment already contributed to the marketplace through educational costs, much of that personal commitment and effort will be lost. Seriously, did no one believe it wouldn't become necessary to transform non tradable sectors, once tradable sector production efficiency meant relatively less employment in all parts of the world? How many times have nations squandered economic evolution, on mercantilism, nationalism, and war?

Okay, time to take a deep breath...First, let's consider some of what would be involved, for redefining work on monetary terms. Recently, Nicolas Cachanosky of the Sound Money Project wrote why he believed money became necessary, in environments which did not initially require money:

To make an exchange, both parties need to know what the other party has to offer - this is an important limit to potential exchange known as the double-coincidence of wants. One important benefit of using money is that individuals avoid such situations.

The convenience factor of money as coordinator of economic activity, cannot be dismissed lightly. But what happens when individuals and institutions avoid the need for time based coordination, for too long? A problem has occurred, in that complete reliance on money without recognition of aggregate time value, has generated a limited marketplace for time value on its own terms. In particular: for personal wants and needs, some would benefit from the ability to negotiate for services based on mutual wants, instead of settling for the default product settings of institutions. Product choice options on the part of individuals and institutions - in particular for time based services - are not necessarily one and the same.

Without sufficient capacity to personally negotiate for time based product, the lack of a double coincidence of wants spills over into the personal sphere. As individuals lose sight of what is actually involved for economic reciprocity, social reciprocity also suffers. Indeed, reciprocity is not always correctly defined, by those one would expect to be able to do so. Early in the beginnings of this project (thirteen years ago), an acquaintance gave an example of reciprocity as visiting someone in a nursing home. In spite of the disconnect in this explanation, everyone recognizes what happens when people appear incapable of reciprocity. Such individuals may try to force others to do things for them, or else attempt to do everything on their own.

Reciprocity still involves a double coincidence of wants, whether or not money proves capable of smoothing the process of resource coordination. Without a marketplace for time value, some have few means to solve for the inevitable double coincidence of wants that are part of life. And when time based services markets are institutionally defined, the result does not always resemble what people would choose of their own free will. Not only do knowledge use and skill sets tend to be compromised in the "factory" school model, but also the all too similar model of hospitals and nursing homes.

Also, the lack of a free market for knowledge use, increasingly leads to problems at a monetary level. In spite of money's coordination ability in the marketplace, tradable sector organizational capacity is more effective in this regard than the time based services of non tradable sectors. Consequently, there is insufficient room for lower income levels to negotiate for time based product, without a marketplace for symmetrically coordinated time value.

Why so? Asymmetric compensation was not developed in association with the (monetarily represented) resource capacity actually available to fund participating groups, in nationwide systems. Indeed, determining actual value and resource availability in these circumstance would have been next to impossible - hence fiat monetary formation. Instead, valuations for knowledge use (in time based services) were generated which claimed resource capacity before populations as a whole were represented. As governments sought to extend access to skills sets as defined on those terms, the valuations have gradually became burdens on government budgets - even though only a portion of the public is represented for real time settings in services coordination.

A marketplace for time value, could gradually restore the lack of monetary balance which has resulted from these early prior claims for time value. However, the challenge of a time based marketplace is somewhat daunting, given a steep learning curve for smooth negotiation on these new terms. Consequently, many individuals will have to back up somewhat and ask some very basic questions regarding mutual assistance.

One reason free markets have not been possible for knowledge based services, is that many remain afraid of the very freedom such a market implies. In a sense, life would be a lot easier if government could continue its broad role for knowledge use preservation and services coordination. But many governments no longer have the budgets to do so adequately, for much longer.

Megan McArdle, in "Listen to the victims of the free market", noted how the elite have been reluctant to talk about work in any meaningful way, in a post which is worth reading in its entirety. I'll excerpt some highlights, here:

And the giant hole at the center of this discussion we aren't having is work. We talk a lot about how to palliate the effects of a labor market that no longer offers many rewards to the less educated. We act as if jobs inevitably grow like weeds, in the fertile soil of capitalism. Or worse as if they were a sort of optional intermediary step i.e. the important business of distributing money and fringe benefits. Given how central work is to the lives of the elite, how fearful we are of losing our own careers, this belief is somewhat inexplicable. It's also politically suicidal, as the current moment shows us.

She continues:

There is no better example of the folly of the elites than the current fashion for a universal basic income among both liberals and libertarians. Instead of trying to figure out something hard, like how to build an economy that provides adequate work for everyone, the idea is to do something easy, like give them checks.

Let's hope that policy makers in Washington don't eventually resort to checks as a last out. It's worth the effort required, to rediscover work, instead.

Notes on Defining Economic Access

How might one think about economic access as a potential right, at least in a limited sense? The ability to define one's work on economic terms in relation to others, i.e. create one's work, is an important part of this concept. However, economic access is more than a right to generate work patterns on sustainable terms, because it includes an ongoing ability to take part in the consumption definitions of one's own environment, as well. Presently, our economic environments are externally defined, in ways that can even overwhelm those with professional incomes, to some degree.

Granted, prosperous regions now have the additional burden of an artificially restricted knowledge use marketplace at an international level - hence higher real estate costs. Just the same, many financial burdens are due to a lack of government responsiveness to factors which impact local costs. Externally generated requirements for a wide range of production and consumption in the marketplace, now contribute to uncertainty for a wide range of personal investments.

Jean Twenge, a psychologist at San Diego State University, understands the problems of economic access which also contribute to mental issues for young people. In a recent Quartz article, "Why are our kids so miserable?", Quartz writer Jenny Anderson addressed her concerns:

Twenge has observed a notable shift away from internal, or intrinsic goals, which one can control, toward extrinsic ones, which are set by the world, and which are increasingly unforgiving...The percentage of people who expect to get graduate and professional degrees, for example, has surged as have the number of people who aspire to secure a professional job. But the numbers of people getting these degrees and jobs has stayed flat..."Expectations have risen, but reality has stayed the same", she told Quartz.

A lack of economic access is also associated with inequality. In the past, inequality was most closely linked to whether one was able to derive income from private property. In the present, the most important resource capacity for economic access is knowledge use - particularly as one ages and it becomes difficult to continue the physical labor which many low skill jobs require. In certain respects, higher incomes are representative of a knowledge based marketplace which has yet to be developed. Jonathan Rothwell at Brookings writes about inequality (ht David Henderson):

Curbing this inequality requires a real understanding of its causes. Three of the standard explanations - capital shares, skills and technology - are myths. The real cause of elite inequality is the lack of open access, and market competition in elite investment and labor markets. To bring the elite down to size, we need to make them compete.

While Rothwell's challenge in this article is noteworthy, his suggested strategies are somewhat unrealistic to initiate in general equilibrium conditions. There are also "first mover" issues involved, that would make it difficult to reduce the income expectations for healthcare providers as they are presently construed in the marketplace. Healthcare providers not only face high overhead costs to remain in operation, but their educational expenses take many years to pay off, as well.

This is why an alternative equilibrium setting would work best for vital aspects of knowledge dispersal. Local corporations would design broad infrastructure support, for those who elect to engage in healthcare provision without the income normally associated with this activity. The lack of economic access in terms of inequality, is most problematic for the marketplace which remains missing - both in terms of production and consumption. Hence the problem for economic access is not about differences in income, but the underlying problem of lost marketplace potential.

Right to Work, to Make One's Job, or to Have a Job?

While working on this longish post, I realized the title would scarcely do justice to the scope of what needed inclusion, and some elements were tied together a bit loosely. How to think about rights in terms of working for others, versus making our own forms of work? What has been problematic in this regard? Let's delve into some particulars. First: In a recent Moneywatch article, Mark Thoma asks, "Will election 2016 soothe Americans' job fears?" From the article:

We would all be better off if the large number of people who left the labor force during the recession return to productive employment rather than relying on social services, family, crime or other means to survive. We will be healthier as a nation if the gains from international trade are broadly shared rather than concentrated at the top of the income redistribution.

He continues:

Our future growth will be higher, and the opportunity to find decent jobs will be enhanced, if the U.S. has the infrastructure, educational resources, healthcare and social protections it needs to ensure Americans are as productive and innovative as we can be...Policy makers at the Fed and in Congress must do all they can to create jobs and opportunity for those who feel overlooked and forgotten.

Some might construe part of Mark Thoma's argument, as a right to a job. However, there is no right to a job in the sense of provision from others. Nor would a right to a job be possible for all concerned. The right to work on economic terms, i.e. make one's own compensated work, is most important for survival - yet seemingly all but forgotten. Likewise, even though both the Fed and Congress are responsible for economic prosperity, they do not have the specific means to make automatic job creation a reality.

For instance: like many individuals in the present I have a clearly designated right to work. However, there are few means (in part due to geographical circumstance and health) to make some work options viable on monetary or economic terms. Still, I've maintained a regular work routine in recent years, due to the good fortune of living with another family member, and my daily routine includes work which is quite important to me. Sometimes we forfeit the work which feels most important to us, when it becomes imperative to seek a paying job in the marketplace.

Rights to work discussions - when they take place - are mostly through an economic or monetary lens. Wikipedia provides us with (at least) two understandings regarding the right to work. From the first definition I found:

Right to work laws do not aim to provide general guarantee of employment to people seeking work, but rather a government regulation of the contractual agreements between employees and labor unions that prevents them from excluding non-union workers, or requiring employees to pay a fee to unions that have negotiated the labor contract all the employees work under.

What I want to note about the above definition, is the fact it provides a specific example of economic freedom by corporate design. Even though these employment opportunities are for marketplace "winners" (in terms of today's efficiency and scale expectations), so too the "winners" in terms of marketplace concentration by knowledge use as fiscally defined, in the other Wikipedia definition:

The right to work is the concept that people have a human right to work or engage in productive employment, and may not be prevented from doing so...The phrase "the right to work" was coined by the French socialist leader Louis Blanc in light of the social turmoil of the early 19th century and rising unemployment in the wake of the 1846 financial crisis which led up to the French Revolution of 1848. The right to property was a crucial demand in early quests for political freedom and equality, and against feudal control of property.

Right to work laws apply for tradable sectors in some states, and a right to work (in terms of the above defined concept) often applies to the fiscally supported non tradable sector activity, of knowledge based services. Asymmetrically, these right to work definitions are two sides of the same coin, in terms of organizational capacity and the scale capture which makes both "exclusive", rather than inclusive. Organizational scale contributes not only to variations in income structure, but also the level of economic access that is possible - albeit more in terms of production (work) potential, than consumption potential.

When does organizational capacity (in tradable sectors) become "too" efficient? Excessive consolidation and monopoly remains problematic for free market potential, as has been pointed out by Barry C. Lynn. Regular readers may remember my referencing his book "Cornered: The New Monopoly Capitalism and the Economics of Destruction" several times. From a recent ProMarket article, in a phone interview with Barry Lynn:

The goals of the old antitrust regime were to preserve competition in all parts of the political economy in order to protect the liberties of the individual, our democratic institutions, the stability of our economy, and also local communities. These were all thrown out, and replaced by the idea that we should just have efficient structures that serve the interest of the consumer. 

Another problem in terms of efficiency - is that supposed "efficiency" in terms of less (produced) time based product, only leads to less (consumed) time based product, output and marketplace formation. Whereas efficiency in tradable sectors is still able to maintain a broad marketplace, by comparison. Even so, today's non tradable sectors have doubtless been influenced by the increasingly centralized nature of non tradable sector activity, and have taken advantage of the legal constructs involved. One unfortunate result is a smaller Main Street presence, which is one of the thornier issues for lack of work availability in many counties.

As Barry Lynn noted, Washington was not always so complacent. Indeed, some of America's founders were greatly concerned, about what at the time was little more than a future potential for economic monopoly to occur, due to constant legislative activity. James Madison wrote in this pre-Convention memorandum ("Original Meanings: Politics and Ideas in the Making of the Constitution", page 314) :

II. If the multiplicity and mutability of laws prove a want of wisdom, their injustice betrays a defect still more alarming: more alarming not merely because it is a greater evil in itself, but because it brings more into question the fundamental principle of republicanism Government, that the majority who rule in such Governments are the safest Guardians both of public good and of public rights.

Madison was also concerned that economic legislation would jeopardize "fundamental rights of property". Why has Washington lost its appetite for antitrust legislation in recent decades? I can only surmise a possibility, here. Given the ongoing consolidation in non tradable sector activity, in part spurred by budget restraints, why should policy makers think differently of consolidation in tradable sectors? Possibly, they found themselves in a position where it was no longer possible to have a strong reaction.

The net result - however - is a lack of vital economic activity at local levels, and intervention on the part of state and large interests to diminish the market impact of the small player. Hence even though we can't expect a right to a job from someone else, it has still become more difficult to generate jobs on our own terms. Bonnie Carr inspired me to follow up a recent post with this one, and here' I'll include a portion of a post she wrote several years earlier:

I recall a story about an independent motor carrier being shut down by the Department of Transportation after having an accident a few years back. I was interested in this story because I had watched public testimony at a House Transportation Committee meeting regarding regulatory matters just after the Republicans had retaken the House. I was shocked to see that there was virtually no change in behavior as representatives for large, affiliated carriers were able to secure even more regulatory barriers over the pleas of independents. And regarding this story, I was horrified that the DOT moved in a state licensed, insured and inspected carrier, padlocking the gates and confiscating the busses without a warrant, a hearing or due process while the same thing never occurs when large carriers are involved in similar accidents.

What some among our country's founders had feared, has indeed come to pass - in terms of economic legislation which harms citizens. Today, some Republicans are willing to demean rural residents who were economically left behind, and Democrats may believe that Republicans have no interest in making the winners share. But neither party really has interest in leaving room on Main Street, for the work patterns of normal income gains from small scale employment capacity.

No one - at this juncture - can force either national or state governments, to allow citizens to make their own jobs and economic connections. Plus too many battles would be involved, all around. However, local corporations could be legally constructed so as to provide safe havens, for individuals who wish to create work for themselves in relation to other individuals.

In local corporate structure, competition would of course exist. But not in the sense of people and businesses constantly being knocked out of the workplace, in a race for "perfect" skills or business competition. Much of competition would exist in the shared choices that people routinely make, in a marketplace for time value. Neither would it be necessary for tradable sector activity to constantly scale up, in order to remain viable. Importantly, a right to work in the present also depends on a right to use knowledge properties - much as physical properties were the vital component, for centuries.

What is the Opportunity Cost of Basic Income?

There are days when our little globe feels as though beyond comprehension, and answers to important questions feel even murkier than usual. Today being one of those days, I thought, perhaps a good excuse to ask an "impossible to answer" post title! What are the upsides and downsides, for adopting Universal Basic Income? Is this one of those policy decisions which may not fully face the scrutiny of opportunity cost discussions beforehand, because of underlying budget considerations?

For that matter, opportunity cost as concept, is mostly a brief discussion topic in economic studies. Timothy Taylor makes the point in a recent post, that opportunity cost doesn't receive the educational consideration it would appear to warrant. Taylor cites an essay from Michael Perkins which argues that "opportunity cost is more useful based on the quantity of what is given up, rather than on attempts to calculate the value of what is given up". From the essay:

The idea of opportunity cost helps to address five issues that range from the simple and basic to the complex and sophisticated...the fundamental economic problem: Faced with scarcity we must make choices, and in choosing we are confronted by costs. The second purpose, equally basic, is to see cost as an alternative foregone rather than dollars of expenditure. Its third purpose is to identify, and to correctly establish, what the foregone alternative is. Its fourth purpose is to use the appropriately identified cost alongside an appropriately identified benefit to make (and to analyze) a rational choice. Its fifth purpose, and its most complex and sophisticated, is to derive theorems about the determination of relative prices.

Among the important factors to stress regarding Basic Income, in spite of appearances, is the reality this is a scarcity choice, in the general equilibrium terms of national budgets. Ultimately, one of my main concerns about Basic Income, is the negative effect it could have on a nation's future output potential, due to the marketplace structure which was previously funded by government budgets. Different nations have different approaches, hence outcomes depend on how services organizational patterns contribute to a national medium of account. As Guy Sorman notes in a recent City Journal article, for instance, in the Finnish model, everyone will receive this income, but the welfare bureaucracy will also be shut down.

And that is precisely my concern. Even though welfare bureaucracy is inefficient and worthy of being rid of, knocking something down because it is "tiresome" is no way to maintain structural output at national levels. Worn down by budget battles, some may find it advantageous to be done with various programs and earlier legislative commitments. Even so, are the private marketplace alternatives which comprise aggregate supply, being actively pursued? Left unaddressed, existing limits in private organizational capacity would mean negative supply shocks. Will output in terms of knowledge and time based services, be lost? Even though Basic Income may be touted as bureaucratic innovation, the reality could be a downsizing of economic expectations.

While a Basic Income approach seems improbable for the U.S., deep fissures in the Republican party (ht Arnold Kling) suggest that something similar could occur - simply out of default circumstance. Given the lack of cooperation between parties on policy and programs, budget issues for healthcare in particular could eventually force the issue. One reason Basic Income appears an unlikely fit for the U.S., is the fact that many welfare subsidies tend to be routed to service providers instead of recipients. While grappling with the potential costs re Basic Income, Nick Rowe wrote in comments to a recent post:

When I think about switching to UBI I "see" a graph with disposable income on the Y axis and market income on the X axis, and I see a total mess representing the current system, and I see UBI as using OLS to fit a line through the existing plot. And so it's self-financing by construction assuming no behavioral changes.

Of course politics being what they are, behavioral changes can be expected. What happens, after the implementation of Basic Income? The "money for all" selling point, makes it easy to initially ignore the reality of general equilibrium conditions for services consumption, and their associated level of aggregate demand. Consequently, it's easy to downplay the fact that opportunity cost for Basic Income would be quite real.

Nevertheless, "income for all" is appealing for those who worry about long term job prospects, alongside those now weary of paying for "services for all". What a disparate coalition! In short, Universal Basic Income appears as though a general equilibrium experiment, equivalent to decimating an unwieldy structure without building a replacement. Even though Basic Income would be fiscal policy, in a sense this is fiscal policy which has come up against hard limits. Monetary policy would be better positioned to overcome those limits and resume a strong trajectory for long term growth. Still - in order to regain a strong growth trajectory, production reform is also needed, on real economy terms.

Five Dual Aspects of a New Corporate Structure

What purpose, a new form of corporate organizational capacity, beyond that of adding wealth potential to time value as a whole? This post takes a closer look at some of the duality that would exist, in the local corporate structure of knowledge use systems.

1) Macroeconomic and microeconomic considerations: There's a local to global outlook, which visibly supports worldwide tradable sector activity by defining (or "closing") the loop of local services and asset formation for non tradable sector activity - albeit on a very small scale. Why do so? This would allow knowledge use systems to encourage economic growth potential, which presently faces hard inflation caps from central bankers.

Indeed, governments are becoming equally hesitant as well, regarding sufficient monetary representation for the public. Part of today's economic stagnation is due to the fact non tradable sectors have used the wealth of international tradable sectors as an open checkbook for non tradable needs. Whereas this strategy generated considerable economic growth in the past, it is questioned when worldwide (tradable sector) growth slows. Unfortunately, the wealth of international resources cannot meet services coordination demands for all income levels, and the true extent of aggregate resource capacity (international medium of account) is not known to all participants. This makes it difficult to stake further claims for time value on general equilibrium terms.

As to microeconomic considerations, economic reciprocity is key. How so? Whereas reciprocity is taken for granted at the level of institutions in relation to one another, this is not necessarily the case, for individuals who have lost the ability to negotiate for personal needs on economic terms. Just as it is difficult to understand what one does not directly experience, it is difficult for individuals to understand how reciprocity works, when one is not expected to have negotiation power in workplace or personal settings. A marketplace for time value would allow reciprocity as a part of one's education, from the first compensation for matched time use.

2) The monetary economy and the real economy. Money is representative of personal freedom. However, for money to remain a positive symbol, it needs - at the micro level at least - to remain representative of economic time value. This connection would be emphasized first in the form of compensated wage structure, as internal time value in connection with local resource use. Income would be understood not only as separate from local wage potential, but representative of wealth potential which exists from the tradable goods of international wealth flows. The open economy component of knowledge use systems would treat income as discretionary, as related to national and international wealth.

3) The public and the private. The biggest problem for public versus private designations in the present, is the fact these arbitrary designations are increasingly painting what were major growth components of the economy, into a corner. One experimental aspect of knowledge use systems, is that public and private designations would eventually work together differently, through new definitions of producer and consumer roles. Local participants would learn how to use existing local resources, to generate assets and services structure without revenue imbalances.

4) The producer and the consumer role. Each participant is a producer and consumer within a self contained non tradable sector corporate structure. As a result it is possible to utilize direct democracy for time based services preferences, and representative democracy for other forms of consumption definition. Direct democracy is possible in that time aggregate potential is locally understood - one votes for service formation with their time choices, and services needs can experience considerable change over time.

However, representative democracy is needed for local (physical) environment patterns, because much of this is established at the outset in ways which define unique infrastructure. There is also a clear point of delineation for a consumption base in terms of asset formation (living and working structure) which is provided by wage compensation.  This is important because it recognizes wage potential as a resource base for the group as a whole. Beyond this point, participants have options for asset formation which stem from discretionary income as derived from non time based sources.

5) Time flow and time stock. One of the most flexible components of this system is the way it backs individual choice for asset preferences. The internal flow of wage structure turns into stock over time, in the form of asset choices such as land and building components. Two aspects of this system make internal taxation unnecessary. First, the time based support of services formation, and the return of land shares and building components back into the pool of asset holdings, towards the end of life. As individuals let go of land and asset components they no longer need (as purchased by time based wages, not discretionary income), each of these separate down into the smallest viable denomination, as newly available options for those who are currently building asset formation.

Some Notes on Employment and Production Rights

While the U.S. Constitution includes thoughts from the founders regarding inalienable or natural rights, the meanings of those rights have always remained somewhat open to interpretation. For instance, from "Original Meanings: Politics and Ideas in the Making of the Constitution" by Jack Rakove:

Americans entered the Revolutionary Crisis confident that they knew what their rights were; after independence, they modified those ideas only modestly. What did evolve, far more dramatically and creatively, were their ideas of where the dangers to rights lay and of how rights were to be protected.

Given that America began as an agrarian nation, there appeared little need to explain an individual's right to produce goods which held economic value, so as to enable one's survival. For the most part, citizens of the new nation already held close ties to production, in the form of land. Despite these agrarian beginnings, some recognized that not everyone would become a landowner, hence should be (somehow) accounted for. For instance, from a letter which Thomas Jefferson wrote to James Madison (ht Bonnie Carr):

Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural law. The earth is given as a common stock for man to labor and live on. If, for the encouragement of industry, we allow it to be appropriated, we must take care that other employment be furnished to those excluded from the appropriation.

Jefferson recognized that the right to some form of economic access was paramount, even as the primary production of the day existed in land ownership. Today, however, production rights are defined less in terms of land ownership, and more in terms of time value which includes knowledge use. There's only one problem, given this major shift in economic activity. Aggregate time value has yet to be perceived as necessary for populations as a whole, for either economic access or production means.

As a result, governments now find themselves beholden to those who claimed early stakes for the production of high skill time value. Was one's time value given as a "common stock" as well? Might those existing claims also represent a violation of natural law? The trade-off for knowledge based wealth capture, was that policy makers had little choice but to generate entitlements for others, so that citizens had the chance to stake their own claims on highly valued skill. Much of 21st century politics can be thought of, as an ongoing struggle for high skill services needs, from those previously assigned production rights in knowledge use. Those claims on knowledge based services production, have done much to shape the present day economic landscape.

Let's suppose a charitable interpretation of government's extensive involvement in today's economy. In this interpretation, entitlements (which are now long term budget issues) were attempts on the part of policy makers to be fair and just. However, by declaring some time value not worthy of use, a bottomless pit was generated, for the time value deemed important. Since high skill time value became as important as private (physical) property, it was as though too much property was deemed barren. And yet governments still decreed that "produce" (time based product) from the "special land plots" be shared with as much of the population as possible. With much of today's equivalent of private property "off limits" for productive endeavor, is it any wonder that democracy is threatened?

Thus far - for much needed employment and revenue - policy makers are concerned about reclaiming "lost" tradable goods production which has moved to other shores. However, few have seriously considered the looming non tradable sector problem which is already close to home. Further: how do policy makers rationalize that international corporations should return with "jobs for all", given the fact it was never rational before, for anyone to expect a guaranteed job "just because"?

Just as it is unrealistic for citizens to expect a job or knowledge based service from someone else as an automatic right, it is unrealistic for policy makers to expect tradable sectors to take the losses that would accrue, through U.S. relocation when there are no longer sufficient supply side chains for production needs. A "right" to a job is unrealistic, in the sense that private employers can't be expected to hire more individuals than they actually need. Indeed, employment on such terms would mean a loss of rights, to those who end up forced to employ.

Governmental budgets have become so overwhelmed by subsidies for skills and entitlement claims, there is little remaining fiscal ability to assuage recessionary conditions through further employment or infrastructure. By the same token, it's not reasonable to expect an increased tax base, beyond the government subsidized employment that has already occurred. Far greater efficiency could presently be had by all, through economic environments which remain in a state that makes it possible for individuals to generate production through their own (time based) means.

For economic growth and stability to be recaptured, individuals will (once again) need the right to produce for one another on economic terms. It has become difficult to utilize democracy for knowledge based services needs, given the backlog of investment for knowledge based product which has yet to enter the marketplace.

Fortunately, property rights for knowledge use can be created which need not impose on the existing knowledge use rights or valuations already held by today's professionals. Unlike physical private property, time based knowledge is capable of replication. By hiring time value in mutually supportive settings, citizens would finally gain the chance to recreate personal responsibility for themselves, and for others as well.

Musings on Monetary Flows and Political Circumstance

To what extent could tradable sector wealth be thought of, as an international form of (monetary) medium of account? For me, it is helpful to consider tradable sector formation on these terms, for a number of reasons. Each nation's income "share" of worldwide tradable sector wealth (as contrast with localized tradable sector wages), helps to determine a potential trajectory - or extent - of that nation's non tradable activity and asset formation.

The reason this matters: developed nations continue to maintain vast opportunities for organizational capacity (through financial means) from the wealth of tradable sectors, whether or not production is localized. In other words, the recent push for localized production - and the loss of international trade capacity that could imply, would not necessarily assist further funding and revenue for non tradable sector formation. Attempts to localize tradable production would not only limit worldwide production in aggregate, but also the localized organizational capacity which exists on asymmetric terms.

Regular readers know that I speak (in this post) of the non tradable sector formation which is already possible, without the additional wealth which could accrue from knowledge use systems or time arbitrage. It is better to generate new time based services production for the purpose of economic dynamism, than to attempt to reclaim earlier forms of production. Forward, not backward!

While tradable sector wealth has become - relatively speaking - a smaller component of GDP in more complex developed economies, it remains the most reliable indicator of active monetary flows at a global level. When nominal income is shorted at national levels (due to the targeting of credit instead of income and resource capacity), this international medium of account is also negatively affected.

Non tradable sectors - on the other hand - are (generally) more closely aligned with the medium of account as associated with a (developed) nation's nominal income capacity. Whereas tradable sector wealth is integrated with income flow in an active sense, non tradable sector wealth has a large and passive housing stock component, which is further tapped by governments to activate services income flows. While the process is fairly straightforward for education (in the U.S.), fiat monetary formation is especially important for other time based services on asymmetric terms. The latter is most dependent on globalized stabilization of tradable sector wealth.

An important aspect of the nationalist impulse, is to cease viewing tradable sector wealth as a positive in terms of global wealth potential.  Presently, governments and their populations are reacting to their dependence on tradable sectors by threatening the vitality of worldwide production, instead of looking within to recreate wealth formation on more sustainable, time anchored terms. Nationalist worldviews are constricting worldviews. Some policy makers appear too willing, to forget the hard won economic lessons, how free markets and global trade contributed to worldwide prosperity.

There is a silver lining in the clouds of political and economic uncertainty, if central bankers are willing to help. Should central bankers become more willing to stabilize nominal income - this would provide further stability for the international monetary flows of tradable sector wealth. Which in turn would help to stabilize the fiat monetary formation, which allows so much spontaneous coordination of time based services activity for the middle classes of the present.

Can Education "Grow", as a Services Marketplace?

Formal education at all levels, is facing a series of challenges. Many now question the value of a college degree, as graduates are faced with diminishing returns in the job market. Meanwhile, educators in primary and secondary education continue to seek further revenue, to bolster the chances of success for low income students. A recent Equitable Growth article noted by Mark Thoma, reasoned that students from low income districts benefit from additional funding in programs designed for them. Nevertheless, it's an argument which stands in contrast to a states argument, that throwing money at the problem is no longer working.

Regular readers know that my primary concern is how the marketplace as a whole is already structured. Today's existing work opportunities, can be thought of as part of a platform which is only partially capable of absorbing the personal investment of education. From the beginning of the progressive movement, education as a "social purpose" (rather than personal challenge and practical need), has been too closed ended. However, in fairness to progressive reasoning, institutional formation also responded to a value in exchange economic framework, which had little room for value in use economic definition.

Hence some of the education most needed in the present, would particularly apply in a value in use framework. There are few marketplace opportunities to engage with others in practical or experiential services product, at a personal level. Both production and consumption are compromised in the marketplace, as individuals attempt to coordinate for knowledge use among today's existing institutions.

Invariably, an incomplete platform for work formation in the marketplace, makes it appear that "more money is needed", for what in fact has not worked as planned. Implicit in the "more money for better outcome" requests, is the understandable desire for education to be a growth industry. I am just one of many, who would like for broader educational capacity to contribute to long term growth! That said, more education is not needed just for the sake of more education. More education is needed for a stronger marketplace outcome, than has been the case thus far. And education as a "growth industry" on present day terms, is no longer the way to get there.

"Shifting gears" in this discussion: Not enough attention has been consciously given, to the fact that monetary flows for education (as non tradable sector activity), are mostly to replace already existing asymmetric compensation. By way of example, time bank services are also replacement monetary flows rather than potential growth activity, as noted in the last post. Today's educational compensation exists mostly in a replacement flow category, in that employment capacity was established by associations which assigned compensation value according to their perception of general equilibrium potential. These assignations became a services component of monetary valuations, as national medium of account.

One reason educational compensation can be a notoriously sticky wage (especially for administration), is the fact educational (time based) product is mostly a derivative of preexisting growth. Contrast this to educational product which is (already) capable of contributing to further growth, since product separate from time value can add to marketplace capacity, when cronyism is not involved.

In a marketplace for time value, it is possible for the product of personal time value to achieve the same result. Symmetric compensation (or time matched activity) would generate new wealth instead of drawing from preexisting wealth. Symmetric compensation would provide means for time based educational product to "grow" - not just as a marketplace component but in the more important terms of aggregate growth potential. In other words, growth potential for time based educational product would exist, that need not crowd out other wealth formation. The time arbitrage of symmetrical compensation, would allow time based educational product to escape the derivative or secondary category of wealth creation and monetary flow.

Let's break down the process of educational compensation on asymmetric terms a bit further, in terms of (supposed) economic access. While one hears that a STEM education is more valuable than a humanities education to gain employment, this assumption is nonetheless time and marketplace dependent. Part of the employment result depends on what the marketplace presently needs for STEM, as opposed to job openings in humanities.

Even so, compensation for humanities education, is that which is more clearly limited, in terms of (present) marketplace availability on asymmetric terms. This likely has bearing on the temptation in public dialogue, to discount a humanities education in terms of hiring potential. However, while job opportunities for humanities graduates at times appear equally lucrative to job opportunities for those with a STEM education, this is mostly true in terms of staff replacement within the existing educational structure.

Theoretically, STEM education has a better payoff in terms of job opportunity, because these skills are applicable in the initial wealth structure of tradable sectors. Presently, a STEM education is positioned to be the "logical" provider in terms of potential growth. The symmetrical compensation of time arbitrage, would allow time based product with a humanities perspective, a similar position.

Equal Time Value as a Marketplace Option

William Luther has an understandable response, "On Reimagining Money", to an Atlantic article which has a positive take on time banks. While I mostly agree with his arguments, time value still needs consideration, as means to overcome substantial limits in long term growth potential. Here's William Luther:

Time banks are usually premised on the idea that one hour of labor is equal to another hour of labor. It ignores the simple fact that some people are more productive than others. A heart surgeon creates more value in one hour than a plumber. (Both might replace a valve, but one is literally a matter of life and death.) By failing to take in the varying value of time (i.e. labor hours), time bank coupons offer a cruder record than traditional monies.

Admittedly, time banks do provide a crude monetary record. However, much of their purpose is as a short term response to overly tight monetary conditions. The bigger problem now, is that even when monetary policy is sufficiently accommodating, some regions continue to face problems of monetary liquidity. Especially those which lacked the economic complexity to encourage time banks in the first place.

In the twentieth century, economically sparse regions had more options. For instance: during the Great Depression, some rural residents compensated for a lack of local work by spending their prime working years in prosperous cities. Eventually they would return to the countryside to retire. In the present, it's not always as simple for the great grandchildren of Depression era citizens to continue this strategy.

The lack of economic complexity at local levels, needs recognition - as the long term growth issue it has become. Already existing problems were only exacerbated, by the deprivations of the Great Recession. Worse, some have become willing to blame rural residents for their own lack of economic access, much as blame was assigned to the poor residents of inner cities, decades earlier. Where people once said "get a job", some now say "Get a U-Haul." But does it really make sense to always insist people move elsewhere to find prosperity, especially when so many prosperous places seek to strengthen their own exclusionary walls?

One reason that William Luther didn't find time banks to be a viable employment solution, was the fact that their transaction costs have been too high. Some of these transaction costs represent confusion between broadly available resource capacity, versus the actualities of one's own scarce time. This, and the already existing requirements for special skills use, which impact services as a medium of account in today's marketplace formation. Again, here's William Luther:

I am all for reimagining money. But to do so, we should keep in mind the transaction-cost-reducing role of money.

This is why - in the details of local corporate structure - I have focused on natural divisions between non tradable sector time value (and adjacent asset formation), versus tradable sector activity, as further explained in my last post. In a perfect world, it might be best if no one needed equal time value as a marketplace option for services coordination. But given a smorgasbord of already existing claims on time value, a marketplace for time value would be easier than confronting the reality of sticky wages in general equilibrium. There's also the fact that sticky wages strongly influence asset values, which contribute to the stability of general equilibrium.

What, then, about the more obvious differences in skills aptitude as noted by William Luther? Today's institutions have actually become too efficient in separating the (supposed) wheat from the chaff. The result is an overall negative in terms of time aggregate value, as reflected by a low interest rate environment and low investment. So much aggregate time value has been "set aside", that the workplace "remainder" struggles to maintain broad services coordination, physical infrastructure and social support. Worse, still tight money conditions continue to remove even more "chaff" - albeit in slow motion.

An equal marketplace for time value could also slow the pace, for some who enjoy high skill work but face burnout in a workplace which expects full time commitments for high skills. For instance, healthcare providers are well represented in jobs which carry their own health risks.  Some individuals need means to reduce the repetitive stress, which can lead to unnecessary health problems of one's own. These individuals would likely welcome the introduction of robots to help with high skill repetition. High skill robots would also be a plus for knowledge use systems, which due to low population density would need high quality surgical assistance.

Among the many differences between time banks and a marketplace for time value, is the fact that skills sets would be far more flexible in the latter, and would be responsive toward changing needs over time in ways that group members can readily recognize. Unlike the local currency of time banks which exists solely for services transactions, the local currency of knowledge use systems is a monetary flow which gradually becomes asset stock, for each participant. Eventually, a sufficient degree of wage created stock, makes it possible for participants to gain the option of discretionary income from the monies of surrounding regions.

Services Platform, Services Freedom

In a recent post, Diane Coyle explains today's business platforms, and notes they have replaced traditional business pipelines in some instances:

...the basics are well understood: an entity enabling value creating interactions between different groups of people; with the value coming from network effects (across the sides of the platform) and often also the improved matching of transacting parties enabled reduced information/transaction costs.

She continues:

Platforms do not need the same investment in physical capital as a pipeline business and have no idle capacity. The community can even provide the quality control and certification.

What Coyle describes above, would also be similar to the platforms of future local (dual?) corporations and their knowledge use systems. However, the digital format - rather than coordinating activity across cities and regions - would exist as a small scale internal whole, for the provision of local non tradable sector supply and demand. This pattern would arbitrage time and resources to take advantage of existing complexities, but its complete internal structure would allow it to generate more growth overall from the arbitrage pattern, rather than simple redistribution of already existing growth.

Participants would hold producer and consumer roles, so as to coordinate a broad array of services within the platform framework. The most important "inventory" would be time value, and physical aspects of coordination would affect the dynamics and design of local infrastructure. Rather than hierarchical management for group coordination, participants would be responsible for their own time use patterns, alongside digital algorithms which would assist the process through the course of yearly coordination calendars. This digital algorithm is a form of services based direct democracy. The reason it has been difficult to think in these terms is that the arbitrage of time value is too often confused with the arbitrage of other resources.

However, normal (pipeline) business formation would play various roles in these communities. By generating a stable time value framework and asset base, other aspects of tradable sector production become more feasible due to less overhead. For example, such roles would include a mix of formal and informal coordination settings for restaurants, retail, agriculture, and settings designed for travel accommodations between similar communities.

Local tradable sectors would utilize the same money as surrounding economies. Whereas a parallel or internal money allows the new monies of time based service coordination to create local asset generation and infrastructure. By generating new money for services and utilizing it for asset formation, internal taxation becomes unnecessary for non tradable sector activity.

This form of corporation has a number of dual aspects associated with it. An important designation in this regard is the combination what has normally been associated with divisions between public and private time based services activity. Platform simplification combines coordination on the part of all participants, for what has otherwise existed as local government services, schools, hospitals, medical offices, time based retail services, domestic services, ongoing maintenance and more, as a starting point. Again, the local quality control and certification as mentioned above by Diane Coyle, is a factor.

Also important for a services platform, is intentional design to generate the greatest degree of (small scale) personal and group freedom that is possible. Remember, once sets of activities are scaled up in whole form, many time based freedoms are lost to the need to achieve broader spontaneous societal coordination. Without a conscious and intentional design for a small non tradable whole sector, this process would only break down into yet another hierarchical structure.

It would probably take some years to discover an optimal platform size, which would maintain group coordination through the course of a year with full (time matched) employment. Full employment in this respect is that which individuals hope to achieve in the course of a year, with others. Full employment in terms of non tradable time matched activity is non taxable wages. Additional income in the form of tradable sector activity (and the monies associated with external economies) is externally taxable discretionary income.

Most free market interpretations highlight tradable sector production, but not enough attention has been paid to personal freedom for engaging in non tradable sector organizational capacity. As a result, there is little in today's time based services formation, which provides a reasonable degree of freedom for anyone. While free markets are also important for how physical assets and infrastructure are defined, in the rest of this post I'll focus on three needed freedoms in terms of services formation, which particularly stand out.

1) Freedom of choice in the domestic marketplace. People especially need to be careful about getting what they wish for in this regard. How so? Should economic measure (and monetary compensation) be applied to domestic responsibilities in the home - whether by this new corporate structure or perhaps national dictate - it needs to occur so that one's personal time management remains flexible for work other than in one's home at all times. There is considerable loss of economic freedom when an individual is expected to hold a certain set of duties or responsibilities in the home which preclude other options. A quote attributed to Henry David Thoreau sums up the situation well: "The price of anything is the amount of life you exchange for it." Indeed, this quote serves the idea of a marketplace for time value, quite well.

2) Freedom of choice in an educational marketplace. In other words, freedom to choose one's mentors, assistants and co-learners, so long as participants can find some means to match time value. Many aspects of educational time would not only be self directed, but also take place in ways which do not require entire classroom scenarios. Most important is the need to share practical learning scenarios, for the daily challenges which today individuals are too often expected to figure out on their own. This, alongside original source material which from an early age would reduce the need for today's fiercely fought over school textbooks. Sometimes, just forget textbooks. Source material, or that which is reconsidered by interpreters not associated with educational outcome, is key.

3) Healthcare freedom would allow individuals to reclaim the best of alternative healthcare, and to generate new organizational capacity for the healthcare needs which are most problematic in today's healthcare systems. In many instances, hospitals would be replaced with multiple personalized settings within easy reach of other living and working capacity. In particular, individual entrepreneurial approaches to healthcare can be encouraged.

When is Knowledge Capture a General Equilibrium Problem?

Short answer: when the captured knowledge in question, creates ongoing costs which gradually impact local, state and national budgets over time. Some of the most serious budget issues occur, when knowledge capture protects skills as utilized in basic forms of time based product. The most obvious example is physician compensation, as the highest income in the U.S. This can also be thought of as an instance where the private sector actually encouraged government "crowding out", in order to preserve limits in skills use. In other words, the private sector is not ready to assume a broader healthcare marketplace on monetary terms.

However, it is possible for final product which is independent of time value, to negatively impact budget revenue as well. In particular, costs associated with pharmaceuticals are a stark exception to normally positive tradable goods production - given the fact much of their organizational capacity isn't radically different from other tradable sectors. In the U.S., pharmaceutical companies were able to free ride on the special privileges granted to healthcare associations in the twentieth century. As Washington provided assistance for costs which were becoming prohibitive, the result was higher costs - alongside a tangled web of insurance subsidies and employer obligations which in turn made it more difficult to hire employees.

Knowledge capture in healthcare, has become a formidable general equilibrium problem. This form of wealth capture represents a continuous drain, from fiscal policy which could have been more closely aligned with normal government obligations and infrastructure needs. Healthcare's hidden subsidies matter. They have reduced options which otherwise would have been available to Washington for overcoming economic stagnation, and made it unnecessarily difficult for government to play a role in overcoming the limits of the zero bound.

Government healthcare obligations also contribute to local fiscal problems - especially those embedded in the health benefits of public employee pensions. Too many communities - in order to fulfill already outstanding pension commitments - end up reducing both public services and levels of public sector employment. Still these are temporary measures, before the thicket of subsidies becomes unsustainable. Should asymmetric compensation remain the only option for healthcare services production, it's not difficult to imagine societies replacing ongoing time based physician product with robots, in order to (ultimately) address budgetary concerns.

Clearly, such an approach would also be problematic at an existential level. Already, patients have less time with physicians and other providers than they would prefer. Only consider how often pills are substituted for one on one time with healthcare providers and time based care. Possibly the biggest difference between alternative medical approaches and those of today's traditional care, is the degree to which alternative care is more time intensive.

Yet it would take a marketplace for time value, before time intensive service provision could once again be considered institutionally viable. Only a marketplace for time value would provide greater knowledge diffusion for innovation, as well. How so? Quite unlike tradable sector product, innovation in healthcare thus far tends to create more costs, for time based services which are asymmetrically compensated.

Even though it is widely assumed that physician's work is "safe" from robots, this may be true so long as governments can balance healthcare obligations with other (equally pressing) budgetary demands. Of late, policy makers hardly dare speak of looming government cutbacks for healthcare - even though nothing has occurred yet which would preserve the healthcare marketplace for the long term. As a result, the same knowledge capture and protection which makes these vital skills so monetarily lucrative, also limits the ability of healthcare as the profession it now represents, to remain a viable part of progress and prosperity.

Donald Trump, Protectionism and Income Consumption Ratios

A little advice for Donald Trump, given his protectionist stance: Protectionism won't improve our economy, or the economies of other nations for that matter. There's no sense in politicians chasing after tradable sector wealth and production which exists elsewhere. Even if companies were somehow "forced" to return - an unlikely scenario in any event - tradable sectors would no longer provide employment on the same scale as decades earlier. Greater efficiency for tradable sectors still means more is produced, from fewer time aggregates. There's no getting around that.

That said, I understand why too many are turning to protectionism as a form of political and social retaliation, now. More public dialogue should have already taken place in the last decade or so about future work potential, and this didn't happen. In particular, non tradable sectors have yet to come to terms with their own internal inconsistencies. For non tradable sectors, greater efficiency and productive capacity, means more is ultimately produced (from equal time coordination) from more time aggregates, than is presently the case.

Instead, non tradable sectors have solely relied on the same asymmetric compensation as tradable sectors, which has meant less work and less potential social support, for all concerned. When all knowledge/time based product is compensated on asymmetric terms (i.e. from preexisting wealth), various factions can only struggle over the services pie they believe to be possible. Problems of immigration, race and class are among the unfortunate results of the struggle. And yet, they can be thought of as intentionally defined consumption problems, due to arbitrary limits in supply side services structure.

Early in my studies for this project, I remember arguments that there was little need to be concerned about our economic future, given the fact that everything was still okay in the present. That's precisely the problem. Once problems do appear - especially in the form of serious political backlash - people become overly focused on the resulting chaos, instead of "backing up" mentally to (calmly) consider what might have been accomplished to begin with.

James Pethoukis expresses the problem well, in this recent AEI post titled "Politicians should address the challenges of automation, not try to reverse globalization." He acknowledges that the transition to a digital economy is going to be a bumpy ride. Regular readers are familiar with my suggestions in this regard. New forms of employment and wealth creation in non tradable sectors, would be able to address growing budget deficits on monetary terms. Instead of more deficit creation and wishful fiscal thinking, real progress would be possible.

It's taken me a long time to return to the subject of income consumption ratios, which I touched on in some early posts. How exactly might this term be used? The answer depends on whether one is describing the existing conditions of general equilibrium, or what one would seek to achieve in terms of a small and specific alternate equilibrium. Non tradable sectors do not always consider broad variations in equilibrium conditions. As a result, government attempts to impose production/consumption terms across an entire spectrum can backfire.

In general equilibrium, income consumption ratios apply to given sets of non tradable sector conditions. These conditions in turn affect the bottom line, for costs of living in specific areas. Local areas have specific imprints for non tradable sector costs, due to local monetary flows as captured by income and productive activity in the region. The most prosperous regions benefit from both international and national flows. What might be referred to as second tier areas in this regard, receive some benefit from national monetary flows. Whereas regions with limited economic complexity, tend to be dependent on local production and government redistribution - mostly in terms of fixed income.

The problem in general equilibrium, is that government defined services formation is structurally generated to represent the wealth of the first two regions described above - in spite of many existing claims on the part of fixed income in rural regions. In the U.S., many areas with strong reliance on fixed income, lack economic complexity. This has bearing on the growing struggles for populations to "keep out" anyone perceived to be yet another draw on limited services pools.

Okay I need to back up, briefly. In general equilibrium, an income consumption ratio can be thought of as already existing non tradable structure, due to locally available monetary flows. In alternate equilibrium, local participants would determine local asset values, based on the internally generated monies of time based services formation, over time. One way to think about this, is that neighborhood gentrification also would not occur, because local asset structure values would not be exposed to the monies of international or national redistribution. This lack of exposure to broader non tradable sector flows would preserve a local delicate balance of knowledge based services structure, created over time.

Knowledge use systems would eventually allow local groups to generate valuable services, which need not draw from already existing services capacity elsewhere. In the process, local time value would become anchored to local resource capacity, so that different groups would not end up opposing one another for mutually desired outcomes. This is the income consumption ratio potential which is possible, in small and locally contained group settings. Normal economic porosity still exists for all tradable sector activity.

In a symmetric system, time value purchases time value, while monetary compensation for that time value purchases local asset formation. Most important, the newly generated money from services formation would not be intended for the purchase of asymmetric time based services product of general equilibrium. After all, dependence on today's asymmetrically generated services can put just about anyone in an outsider position. Protectionism - economically devastating though it is - is a rational response, in part because too little has been done to generate a broad services marketplace which needs no government subsidies or protection. Citizens "need" protection now, because of the protection which special interests received at the outset.

Housing, as Alternate Equilibrium Potential

First: what is meant by alternate, or alternative equilibrium? A short version of the answer, is recreating local conditions for non tradable sector activity, which allow groups of individuals to better coordinate needs for both services and local asset production, among themselves. Presently, there are opposing arguments as to whether further housing capacity is even needed. Alongside a growing chorus to generate more housing stock, one also hears arguments to "Stop Encouraging Homeownership", as in this recent post from Ike Brannon:

...an argument could be made that instead of taking measures to boost homeownership, a better approach to jumpstarting the economy might be to reduce incentives to homeownership and let the proportion of people who own homes fall.

How to think about this? First, he's right about the problem of government housing subsidies. Government housing subsidies are no longer a productive approach for encouraging homeownership, if indeed they ever were. Nonetheless, I believe that some form of property ownership - however one might choose to describe personal living quarters - to be important for most individuals. Even ownership in its most basic forms, will generally make one's life more meaningful, predictable and certain.

Alternate paths for ownership are needed, and the more attention such paths are given, the more respectable they can become. Not everyone has the forms of income which are associated with "normal" ownership. Even so: given the chance, most individuals have the capacity to begin asset formation from a young age, from the first monetary compensation provided for mutual assistance, in knowledge use systems.

Many individuals need property ownership options on more flexible terms, than what are now possible. Small scale ownership patterns could decrease the "all or nothing" nature of ownership commitment, which too frequently leads to bankruptcy and/or permanent loss of economic access. Greater flexibility would empower those who sometimes become overwhelmed - due to income or health concerns - by ongoing maintenance responsibilities.

Alternative equilibrium constructs would also address the growing problem of closed housing markets. Closed housing markets reflect what has become a relatively closed marketplace for knowledge use in general equilibrium. Over time, asymmetric compensation has contributed to a preference for higher income consumption patterns in home building. Differences in property values are also exacerbated by market disparities for knowledge use at national levels. The best way to address these problems is to create broader markets for knowledge use in new communities, on symmetric terms. Eventually, doing so would mean new wealth and lifestyle options, without adding undue stress to already existing population densities.

The fact that equilibrium conditions have reached a relative degree of maturity, explains why some arguments for increased density have a forced feel to them. Established neighborhoods (single family dwellings) do not want further density changes in the form of apartments, even if they are intended for high income residents. Likewise, landlords have little to gain from low income renters. For that matter, it can be difficult for would be renters with limited incomes, to feel good about housing they are not personally responsible for, as a lifestyle choice.

Ultimately, part of the solution lies in asking those with limited income, how they feel they might make the best of what they have. How can people best use the time at their disposal, alongside resources which are not overly difficult to procure? How might the marginalized respond, upon discovering they could actually gain monetary compensation through helping one another? Even better, that doing so would eventually mean a paid for roof over one's head, through one's own personal efforts? Even though none of this would be an overnight process, that doesn't mean these possibilities aren't within reach. How much new hope might this mean, for how many?

Do Services Qualify as a Medium of Account Category?

Money as a medium of account, implies relative constants for resource values across a given spectrum of economic conditions. Think of the word medium in this context, as an agency or means of doing something. The medium of account function suggests reliable relationships for the resource aggregates which contribute to a nation's GDP. Money as medium of account, has more potential as a stabilization role than is sometimes recognized. The sum total of international tradable wealth, versus that of national non tradable wealth, can be viewed through the lens of a medium of account perspective.

However, money as a medium of account isn't highlighted in the Wikipedia definition of money, which emphasizes the medium of exchange and unit of account functions. A unit of account describes the particular forms in which given monies are currently being used. Money as medium of exchange, is what gives money "permission" to represent all other resources - a process which vastly decreased the need for barter. Regular readers may recall that I have suggested a parallel role for time value as medium of account (alongside that of money), to address what have become growing imbalances between production capacity for time based product, versus other forms of product.

Tradable sector commodities and goods have proven the easiest way (thus far) to think about monetary representation for medium of account. Durable goods and commodities are known quantities that are currently available in the marketplace, hence expected to be sold as they have in fact been generated. Since it's not difficult to quantify manufactured goods, tradable sector structure includes current nominal income factors which are relatively easy to determine.

Unfortunately, nominal income determinants have not proven as simple for knowledge based services product. This is due in part to the fact only a fraction of personal time investment presently applies (in medium of account time aggregates), toward the goal of economic access and personal production in the marketplace. Imagine for example the chaos that would occur, if asymmetric compensation were applied to the "valuation" of specific (physical) inputs of manufacturing processes - much as what occurs with applied time in today's knowledge use organizational patterns.

The result would be multiple inputs which could not be utilized in final product, hence product costs beyond final product utilization.We can see these additional costs for knowledge goods in the form of national deficits, today. This is one way to describe how non tradable sectors now contribute to overall production inefficiency, in aggregate. Difficult to discern value variance in time coordination, makes nominal income less obvious as well, for non tradable knowledge product. This could partly account for an excess emphasis on the part of central bankers, for nominal income capacity which is largely not questioned in terms of mortgage potential.

Plus, time based services product tends to be hidden within organizational structures which rely on fiscal support. Perhaps this has bearing, why some are reluctant to emphasize a medium of account role for money, as contrast with the medium of exchange role. One problem in particular stands out. Time based product is not yet a well specified quantity, and too many time aggregates (overall) remain excluded from economic coordination.

One reason a marketplace for time value would assist organizational capacity, is that coordinated time value would qualify as an understandable medium of account, for knowledge use systems. An hourly measure of time value (as a parallel medium of account), would contribute to productivity and quantitative structure in services generation. Besides the obvious gain of knowledge use management, there is the potential of better negotiation capacity for individual to group time use preferences.

Like the known quantities of goods and commodities, potential time aggregates are a relatively fixed given. Unlike present services generation which holds a partial association with time based product, time based service product at local levels can be recorded in an ongoing continuum, and quantified as an anchor for resource potential. It would be possible to calculate the characteristics of knowledge which are utilized in these settings, as well.

Re Local Corporations: A "Naming" Issue

Local corporations. It's a term I've increasingly referred to, in my blog posts. But is there a better name for the concept - a more meaningful one which could be included in this year's glossary "mini" project? Specifically, legal constructs for local corporate activity, already exist. Local incorporation also served as a procedure which made it possible for cities and counties to raise taxes to pay public employees. These forms of local incorporation evolved when individual forms of production (self-employment) were the norm (ranches, farms, etc).

However, the local incorporation of cities and counties, served as means for a minimum degree of coordination among individuals, for small sets of agreed upon public services. This, since individual private production once meant spontaneous coordination in multiple population densities. Where prosperous regions now benefit from international production and national redistribution, spontaneous time coordination still works quite well for these regions - much as it did in a wider variety of economic conditions, centuries earlier. It is the places where economic complexity and coordination are most lacking, which need new forms of institutional effort.

Hence more organizational capacity is needed, as knowledge use acquires greater significance for both work generation and participation. A new corporate structure is needed to coordinate locally desired time based services, in areas which lack economic complexity. All the more so, since many forms of economic participation and production were claimed in ways which now bring (further) time investment value into question.

What would a new corporate structure need to accomplish? First, consider what nations have attempted to provide through redistributive taxation, to limited effect. There are at least two facets of wealth creation, which don't respond well to redistribution: the "special" human capital required for time based product, and the coordination value which accrues to specific locales. New corporate structure would need to generate additional value for both time and social coordination, beyond what is possible now.

For instance: additional monies for "special" time value (such as that of physicians), cannot duplicate time based product, regardless of how much redistribution takes place in an economy. In order to generate a broader marketplace for time based product, more time based product is needed.

Another economic value which doesn't respond to monetary redistribution, is that which arises from the serendipitous (spontaneous) gains in the local coordination of prosperous regions. Think land taxes: redistribution along these lines, seeks to smooth consumption capacity through valuable land. While coordination value can be rearranged from within, it cannot be otherwise increased. One cannot tax the valuable land which benefits from coordination gains, and have those gains somehow "multiply", from without. Instead, new societal coordination creates valuable communities elsewhere, in order to generate further growth. Monetary redistribution cannot substitute, for this additional form of social and economic value.

Perhaps "dual corporation" might be an appropriate name, and I'm encouraged by the fact there is no Wikipedia definition. There is a dual nature to this form of organizational capacity in a number of respects. Dual corporations could increase economic time value (in aggregate), and social coordination value at an aggregate level as well. Ultimately this could mean less need for what are often the zero sum circumstance, of taxing time value. Also, less need to tax valuable land in the attempt to provide "more", for those who happen to reside where land has less monetary value.

Other aspects of duality come to mind: the local to global support mentioned in a recent post, and a bridging role between supply side representatives and monetary policy. In spite of all this, the practical purpose for new corporate structure is simply more employment than has been possible, of late. As James Pethokoukis of AEI noted, "If we want more economic growth, we need more workers." More employment potential. More lifestyle potential. That's really what this is all about. With a little luck it's possible.

Notes From a (Crude) Growth Model

Even though my proposed model for long term growth is somewhat "crude", perhaps no more so than the latest political arguments, which have once again become protectionist. While economists often have good explanations for economic circumstance, non economists such as myself could benefit from simple understandings re how the Great Recession came about, and how its aftermath could still be overcome. After years of following economics blogs - especially macroeconomic and monetary blogs - I am slowly learning to express my concerns to other non economists in ways that make sense.

While the worst of the Great Recession was due to monetary fumbling on the part of the Fed (in the U.S.), this recession also had a strong financial imprint. In particular, a housing crisis botched things further, mostly by trying to fit too many square pegs into round holes. However, the problem was not one of "too much" housing wealth, and calls to "burst" housing bubbles have been completely misguided. More housing is needed, but zoning - more than anything - limits housing markets where people desire to live and work. It also doesn't help that most housing is still generated on the non innovated terms of government and special interests - terms which don't always meet the needs of either consumers or local economic conditions.

Too much existing housing stock lacks a clear relation, to actual income capacity at various points along the spectrum. Again, none of this is to suggest that housing stock wealth grew "too much" because it did not. Housing shortages were already problematic before the Great Recession, just as they remain problematic, now. Arbitrary restrictions in housing, negatively affect the growth potential of both tradable sector activity and non tradable sector activity.

In a simplified model for a modern complex economy, housing could be considered the third component in a three part process. Whereas in simpler economies such as existed centuries earlier, housing stock was the second basic component of a two part wealth process. Local production in the form of tradable goods sectors had previously been the general rule, as the first wealth component. Today, many forms of tradable sector production are regional, instead of local.

As a result, some present day prosperous regions gain much of their strength from (nationally redistributed) service sector activity. Nevertheless, aggregate income capacity (nominal income) still proceeds first from tradable sectors. Tradable sector activity tends to be highlighted in times of economic uncertainty, when policy makers attempt to "retrieve" these forms of production so as to "get the jobs back".

Both tradable sectors and their associated asset formation, lead to non tradable sector wealth potential. Most important is that the latter reinforces the growth potential of the first. Non tradable sector work (thus far) has resulted from disposable income on the part of private industry, alongside the redistributed revenue of public wealth. In terms of GDP, services wealth also appears more substantial than tradable sector wealth, because it is directly tied to housing stock. In complex economies, housing and related assets assume both tradable and non tradable sector income. This wealth has been augmented to some degree, by government definitions for housing stock and infrastructure.

How to think about this, in terms of world growth? So long as worldwide tradable sectors continue to expand, it may not really matter, how non tradable sector composition contributes to the mix for growth potential. For instance, so long as international tradable sectors remain strong, they continue to generate time based services, hence additional asymmetrically compensated employment in prosperous regions.

However, when tradable sector wealth slows, governments need to take a closer look at the knowledge based services which have been subject to fiscal constraints. For if they don't, a slowdown in services formation can hasten losses in tradable sectors as well. How much services formation remains absolutely dependent on tradable sector wealth, for revenue? What services are lost in austerity for instance, which private enterprise hasn't structured (yet) to make possible via the monetary offset of central bankers? Given the fact that employment particularly relies on non tradable sector activity, more of it needs to be defined on monetary terms, so that knowledge based services are not lost in times of relative austerity.

The simpler economies which existed prior to today's developed nations, relied on tradable sectors for most forms of production. Given the fact that money was not as widely used as in the present, many communities were built with varying combinations of locally coordinated time and (physical) resource capacity. Today, a broad combination of tradable and non tradable income is responsible for housing stock and local asset formation, in general equilibrium. While local corporations could (once again) reintroduce local time and resource coordination, the process would occur on more formal economic terms.

Most important in all this is the fact that stagnation could be overcome, should time based services become capable of free standing wealth origination and work structure. In order to do so, local corporations would need to assume responsibility for services capacity, alongside broader definitions for the production of housing stock and infrastructure. Local corporations would work to preserve both local and global aspects of growth, through an understanding of the macroeconomic role they would seek to fulfill.

Also, the creation of knowledge based systems would address the now growing problem of government budgets - particularly that of the U.S. However, it is important to note that private sector special interests actually encouraged government "crowding out" to some degree, in general equilibrium conditions. Among other problems, crowding out could eventually lead to a diminished marketplace for time based services, if it is not addressed. This is why it is so important to tackle diminished marketplace capacity at the margins, through alternative equilibrium.

Preserve Local. Preserve Global.

One important aspect of preservation has been missed, in society's encouragement to preserve environments both locally and globally: time value. When potential time value is only partially represented (in aggregate), those left incapable of utilizing time value on economic terms, are often unable to give their environments special consideration, as well.

Presently, only specific forms of time value have been allowed sufficient representation - and by extension, preservation. As a result, the time value which is lost at economic levels, poses incredible challenges to society. All too often, both investment and organizational potential go begging, as people seek means for survival beyond the limited resource capacity of today's institutions. In order to preserve the definitions of civilization that matter most, a new institution is needed, which can preserve time value.

What does this mean, practically speaking? Through the compensation (creation of new money) of locally coordinated mutual assistance, wealth could be generated which doesn't require any siphoning of already existing monetary wealth. This is what a new legal construct for local corporations would make possible. In the process, it would also generate monetary options which can alleviate the long term budget deficits which governments face.

Just as those with low income would gain means to tap into world abundance, high income individuals would gradually become less inclined to siphon already existing wealth from one another, as resource capacity and time value gradually come into better balance. As recent struggles finally ease between nations and their states, so too the struggles between nations, through the creation of much needed wealth capacity.

Even though asymmetric compensation is a rational response for spontaneous coordination, it has proven incapable of full labor force participation at equilibrium levels. Hence whenever worldwide growth slows, a lack of labor force participation puts additional pressures on the valuation of worldwide GDP levels.

Equally important, is the fact that when skill value is compensated instead of aggregate time value, populations have little choice but to redistribute away from ongoing extraction capacity from raw materials, for services needs - a process which threatens fiat money formation. And how can populations do so reliably, when the valuations of raw goods and commodities have also been threatened by low labor force participation? By assigning economic value to time as a raw commodity good, people gain means to utilize the earth's physical resources they need for themselves, instead of having to rely on the earth's physical resources to support and maintain time value and knowledge use. By making the process more direct, less material waste is involved.

Today, nations and their states believe other nations pose a threat, in terms of job allocation. However, this perception exists because tradable sector wealth is first mover wealth, which in turn contributes to asset formation and knowledge based services structure. Fortunately, symmetric compensation of time value would make knowledge based services a first mover of wealth formation. By easing the reliance of knowledge based services wealth on tradable sectors, nations would eventually no longer feel the need to retrieve tradable sector capacity (with its associated jobs) from other nations. As a result, nations would be able to maintain the tradable sector activity over time, which also serves their own citizens best.

Local corporations would allow one's time use to exist as private property, with recognizable boundaries, rights of negotiation, and community support. Knowledge is today's "soil" to be gardened, and it represents potential resource capacity on the part of the entire globe, at a digital level. Even so, one's time is not really one's own, if too little can be grown (economically crafted) through the soil of knowledge use.

Thus far, private property as marketplace concept, has largely been understood in terms of physical property. But physical property does not need to be utilized the world over, in every place, to generate the resource capacity which the world needs most. None of us should allow our nations to attempt to wrest tradable sector production capacity away from other nations, when we are all capable of generating new wealth on knowledge based terms. Now, the creation of new private property is best understood in terms of time use, on direct monetary terms. This is the 21st century version of free markets which local corporations could make possible, for new global wealth.