Friday, May 27, 2016

Production Rights Versus Consumption "Rights"

If only it were possible to connect the dots, between so called consumption "rights" to healthcare and education, versus a far more logical framework of production rights in the marketplace. In a recent Dissent magazine article, Patrick Iber and Mike Konczal ask:
Should healthcare and education be rights, or products that those with enough money can purchase in markets?
Iber and Konczal also referenced the additional services gains which occurred after the Great Depression. However, it helps to remember that much of the twentieth century wealth - as it once existed - has basically been tapped, while today's wealth holdings are greatly changed. For instance, some of today's most important wealth holdings involve knowledge based product. Much of this wealth has little to do with increased gains in scale, such as tradable goods production once made possible. What's more, other aspects of today's wealth exist in the relatively passive holdings of housing and retirement accounts. For instance, as Timothy Taylor noted:
It used to be that most US corporate stock was held by taxable US investors. Now, most corporate stock is owned by a mixture of tax-deferred retirement accounts and foreign investors.
Again, governments are trying to find more money (more promises of consumption "rights" in education and healthcare?) from revenue sources which are already highly distorted from earlier subsidies and handouts. Barring any further consumption promises, governments still disregard the slow motion budget train wreck of earlier consumption "right" promises. The only real beneficiaries in all of this - the ones most responsible for today's fragile civilization - are those who benefit from purposely limited production rights.

What's wrong with this picture? Besides the civilizational aspect (cough cough), progressive hopes will be dashed, since non tradable product is a completely different dynamic than the expansive wealth of twentieth century tradable sectors. In other words, the supply of time/knowledge based product is possible, only insofar as society elects to make it possible. Nothing of this sort has yet occurred. One cannot grant consumption rights to a time based product which in relative population terms, scarcely even exists. Indeed, consumption rights are never truly possible, except in temporary supply side conditions. In fortunate circumstance, production rights are - at the very least - a possibility.

The hidden and somewhat confusing nature of today's wealth creation, represents a danger zone for any nation which might attempt fiscal measures to address inequality. Even though many nations would not allow substantial inflation to occur (this time), some political candidates - and I'm not convinced it would strictly be a progressive national leader problem - will nonetheless attempt to "promise the moon" to their preferred constituents.

Inequality that results from the limitations of time based product, is a problem which extends across the entire spectrum of supply and demand. Hence it can only be addressed by the creation of more time based product. Remember that arbitrary limits on production rights, have also meant limits this time on housing and access to the regions which continue to prosper. Should nations choose to generate more production rights, they would make possible a broader and stronger marketplace foundation.

But what happens, if policy makers and the elite choose instead to continue limits on the production rights of time/knowledge based product? Should policy makers and leaders decide to pursue "greater equality" in today's mature general equilibrium conditions, they may attempt to do so with little increase in inflation. But what if private interests become spooked just the same? Bad deflation could result, such as Taiwan is now experiencing. While I understand the desire to address inequality, this time - in the 21st century - inequality needs to be addressed on supply side and monetary terms.

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