Why are productivity gains so important for continued progress? For populations as a whole, it's not just about maintaining standards of living, but also important strides in knowledge use. And when knowledge use is limited to a subset of populations, important facets of it tend to be lost, during historical periods when populations experience extensive setbacks in some capacity. These have also been times when services formation is seen as a drain on wealth, instead of a valuable contributor to wealth formation.
During recent periods of nation building, the wealth of commodities and goods served as a point of origin for (economic) knowledge use dispersal, while governments have used fiat monetary formation to support a knowledge based elite. Unfortunately, access to higher education is hardly the same, as access to knowledge use and vital services formation. Further, this fiscal transmission process remains dependent on continued production gains, to maintain the services marketplace of production and consumption which already exists. What happens then, when productivity slows and negatively affects the structure of a government defined marketplace?
Essentially, smaller pools of revenue from highly productive activity are available, for today's fiscal transmission processes. Are there better ways to boost total factor productivity, given this unfortunate circumstance? Time backed money is one option, which I briefly explained in a post last year. Time backed money would create a base wage to generate local time value, infrastructure and building formation (non tradable sector activity), as contrast with the personal income from all other aspects of (global) resource capacity.
Knowledge use need not be limited to population subsets, because time backed money would make it possible for knowledge use to act as a wealth building component. This form of monetary compensation would allow time value to function as a common denominator to coordinate the scarcities of time use constraints, alongside the normal function of national monies as representative of total resource capacity. Time value would gain the ability to become a reliable local multi-use commodity, for a new form of corporate structure with a dual public/private nature.
Most important, is that time backed money could turn the complex fiscal transmission mechanism for knowledge markets (for small, decentralized groups) into a simpler monetary process. These are the conditions I've referred to as alternative equilibrium potential. When employment for time/knowledge based product can be paid for once instead of twice, there is potential for aggregate output gains. Indeed, similar possibilities existed all along for time based product in general equilibrium conditions, but special interests intervened to prevent the wealth formation of broader knowledge dispersal. This fact has contributed to the mass confusion of today's Republican party in the U.S.
Time backed money would also provide means to support what is often perceived as low productivity activity - particularly that associated with a multitude of maintenance functions. Symmetric compensation can make time value a point of origin for knowledge use, so that other revenue is not constantly necessary to generate knowledge dispersion for economic purposes.
As luck would have it, knowledge - important though it is - is also a highly random variable in terms of perceived value. Not only does a wide range of external factors determine whether time/knowledge based activity is deemed useful, essential or non essential, the reasoning often changes. By creating an economic space where time based coordination is prioritized over perceived values for personal aptitude or knowledge choices, knowledge dispersal can remain a constant economic function.
Thus coordination for time value would provide greater productivity for time based services endeavor, since full skill and/or aptitude is not needed in every instance of knowledge use. While time backed money would support routine elements of economic maintenance, it also provides a base of mutual support, for knowledge use which is difficult to qualify when individuals commit to time investment in personal challenges.
Even though time based product is recognized as important, the fact it only exists in limited free market form, tends to convince populations that time based product does not actually need to contribute to marketplace growth. There's just one problem with this rationale: the overwhelming majority seek education and time investment for the purpose of engaging in and producing time based product as a desired form of employment. This is why a marketplace for time value is needed, so that individuals are better able to discover mutual employment which better approximates the life challenges they imagined.
In all of this, the productivity enigma has a partial solution. Fortunately, the present decline in productivity does not have to result in a indefinite loss of aggregate output. With directly matched time value, higher productivity would not invariably be diminished, by the need to support (also important) lower productivity activities. The option of horizontal economic activity is important, given the fact many aspects of scale have been fully utilized in present day equilibrium conditions. A new form of scale for knowledge use can be built, through locally coordinated time value.
Just the same, time backed money would only be intended as a local base, to provide conditions for living and working alongside coordinated forms of lifetime services and social security. For the first time in half a century, individuals would have good reason to learn and remember the names and economic capacity of their personal neighbors. A time backed monetary base provides a point from which participants can contemplate global possibilities for investment risks and potential income generation. Among the positive attributes of separating wage from income: doing so makes participants aware of the nature of the resource arbitrage gains they would like to secure, and why those arbitrage gains may actually exist in any given moment.
Insofar as productivity value is concerned, often the best arbitrage gain for personal income (via traditional monies) is creating new product where no product existed before. How to think about differences in perceived productivity, especially given the fact what appears productive sometimes represents political capture and arbitrary marketplace limitation? Dietz Vollrath recently wrote a post which looks at productivity levels by industry, in which he understandably questions the ethical nature of apparent productivity.
Despite the fact "apparent" productivity isn't always representative of market broadening innovation, "ill gotten" market gains have - in their own indirect way - contributed to progress over time. Consequently, captured wealth gains aren't always a total negative in terms of marketplace outcome, since captured revenue can contribute to positive government results as well.
To sum up, time backed money could assist total factor productivity by spending once for knowledge use generation, where governments require twice the revenue for the same output. By far this government transmission mechanism was more effective, when total factor productivity was still benefiting from the accrued gains of scale increase. Fortunately, some knowledge transmission can now take place directly and locally, in an era where vast quantities of information and knowledge have become easy to access This fact is good news, for the potential of social organization as a contributor to total factor productivity.
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