Wrap Up for June 2016

In the most recent recovery, "just 20 counties have generated half the growth". By way of comparison, 125 counties generated half of new business establishment growth in the early 1990s recovery. Rural areas have of course been hardest hit. From the WP article, "A very bad sign for all but America's biggest cities."

"It's going to get much worse," said John Lettieri, a former Republican congressional aide who is a co-founder of the Economic Innovation Group. "As bleak as these numbers are now, these may be the good years."

This growing divergence of fortune between prosperous cities and other areas, has received too little attention. While there are class and cultural considerations, they are not necessarily fundamental to the underlying economic dynamics which continue to play out. Politicians need to become more cognizant of this fact, instead of exacerbating social differences as an "easy way out" (see Brexit...).

Logistically as well, it is somewhat difficult to reach out to smaller communities. There are so many, yet each must deal with the economic realities of Main Street on their own terms. How might prosperous cities help smaller communities in the near future, given the fact their circumstance are so different from the areas that are suffering? Yet this is the challenge. Highly educated urbanites may ultimately need to share - at least to some extent - their knowledge sets with small communities, to help them take part in the knowledge based economies of the 21st century.

Eduardo Porter knows that "A Universal Basic Income is a Poor Tool to Fight Poverty"

Alas, I can only contribute to macroeconomic discussions as a layperson. But that makes it no less important for me to try, given the present uncertain nature of macroeconomic dialogue. In particular, Olivier Blanchard wants greater emphasis on what is precisely non monetary. However, this emphasis tends to take populations out of the economic equation, at the very moment when governments most need the contributions of their citizens for 21st century challenges. To ignore the vital role of supply and demand in economic structure, would be to discount the real economy solutions that are possible. Nick Rowe was concerned about Blanchard's article, and so too, Scott Sumner.

Charles Murray created a stir recently, with this article:
http://www.wsj.com/articles/a-guaranteed-income-for-every-american-1464969586

National socialism is a confusing mix of policy recommendations and thought processes.
Alberto Mingardi responds to Anne Applebaum's article with a thoughtful post.

Have yet to get over the fact that Edmund Phelps wrote this Project Syndicate article in 2006 in support of low wage subsidies, yet apparently, no response from Washington. Had this approach been enacted, one has to wonder whether some rural area business losses might have been prevented, particularly since the Great Recession. Given the "one size fits all" regulatory patterns for business formation, it is not as easy for small town businesses to automate, to respond to higher minimum wage requirements as the sole responsibility of business owners.

Ambrose Evans-Pritchard writes an incisive article on Brexit and Dani Rodrik responds.

The Economist takes a look at teachers:
http://www.economist.com/news/briefing/21700385-great-teaching-has-long-been-seen-innate-skill-reformers-are-showing-best?curator=MediaREDEF

I'd like to have one of those t-shirts! from Narayana Kockerlakota http://www.bloomberg.com/view/articles/2016-06-15/the-fed-needs-more-than-one-direction

Shane Greenstein on Robert Gordon's book:

By the final chapter the ebullient economic historian disappears, replaced by a downbeat macroeconomic forecaster.

Scott Sumner takes a close look at NeoFisherism: http://www.themoneyillusion.com/?p=31807

Ryan Avent notes that James Bullard's conclusions are a little off: http://www.economist.com/blogs/freeexchange/2016/06/expect-worst?fsrc=rss

Regional patterns matter for employment: http://www.brookings.edu/blogs/the-avenue/posts/2016/06/21-nonworking-prime-age-men-berube

And the remainder for June goes to Brexit...

WSJ on Brexit http://www.wsj.com/articles/brexit-a-very-british-revolution-1466800383

Josh Hendrickson: Just because the public may think differently about negative externalities than economists do, does not necessarily mean they are "stupid" https://everydayecon.wordpress.com/2016/06/26/on-a-pascalian-theory-of-political-economy/

Economic policy uncertainty is higher this time...http://econbrowser.com/archives/2016/06/policy-uncertainty-in-america-in-the-wake-of-brexit

The role of immigrants, from Slate: http://www.slate.com/articles/news_and_politics/politics/2016/06/immigration_and_brexit_how_a_rising_tide_of_european_immigrants_fueled_the.html

Ouch! Everyone lost with this vote.

Time Value as a Basic Commodity Good

Why might a more basic designation for time value, prove helpful? Time value - in aggregate - is not well represented in relation to other forms of resource capacity. As a result, total aggregates for the economic viability of human capital - in spite of massive investment and personal commitment - have not kept pace with other forms of international resource capacity. Since time value is also a perishable commodity, the losses continue to mount. Kevin Erdmann's concerns regarding housing, are just one of the problems in this regard. As he recently noted:

All finance institutions have been nudged to a posture where mortgage finance is unavailable to the bottom half of the economic distribution.

One reason housing is such a disconcerting factor, is that mortgage finance is practically a cultural determinant for access in general equilibrium conditions. But instead of addressing the need for economic access on more practical terms, policy makers and central bankers are drifting even further, from economic and monetary representation for all citizens. How do governments and policy makers live with arbitrary central banker assessments, given the fact government budget projections rely on long term nominal income stability as well? Progressives and conservatives alike, have become more inclined to rationalize limits to growth. Possibly the only difference, is that progressives are more disturbed by a desire to return to a gold standard, given the implications such a standard holds for services formation.

Regular readers already know how I feel about arbitrary limits to growth. After all, did policy makers ever inquire of their their citizens, whether they believe this to be a logical response? Still, growth needs to be redefined, so that time value can forge a stronger alignment with other forms of resource capacity. Human capital in aggregate, would greatly benefit from a stabilization process. For starters, time value can be utilized not only as asymmetric income, but also as a basic commodity good on symmetric terms. How might this occur?

An equilibrium corporation would "process" time value as a "raw commodity", allowing participants to contribute time value for housing and services formation which normally tend to lie beyond the reach of moderate incomes. This form of corporate structure would generate greater velocity for time based product transactions, which also translate into asset gains. Human capital is today's low hanging fruit, which - astonishingly - has yet to be picked. As Adam Smith once noted:

The most advantageous employment of any capital to the country to which it belongs, is that which maintains the greatest quantity of productive labor, and increases the most annual produce of the land and labor of that country. 

Time value as a basic commodity good, makes it possible to generate more labor force participation and non tradable sector wealth, without the high bar that is required for both in general equilibrium conditions. Each rise in the minimum wage can mean further labor market restrictions for all concerned - restrictions which continue to be papered over with Phillips Curve musings.

However, there's good reason why higher minimum wages still win the day: neither public or private interests have sufficient incentive to change the consumption requirements which can be a struggle for those with limited income. What point freeing up labor capacity, if doing so only leaves these groups of workers dependent on others with higher income? Economic freedom can be hard to find, if freedoms to produce and define consumption are left out of the equation.

Indeed, production reform for small configurations of non tradable sector activity, is the only way that an equilibrium corporation could compensate time value solely as a basic commodity good. Otherwise, without the ability to define alternative equilibrium, few individuals would be willing to assist assist these groups in their new endeavor, because any long term gains would be negligible at best.

Even though time value serves as a beginning point for the process, it eventually provides a stable base by which one can explore income potential. From this secure point, it would be possible to pursue the greater risks of economic freedom without becoming overwhelmed. All of this takes place from a vantage point which need not disturb the resource capacity of asymmetric wealth. Perhaps think of symmetric wealth as a "new colony", i.e. a new market which doesn't detract from the wealth of the old. Of those earlier "new colonies", Adam Smith wrote:

The new market, without drawing any thing from the old one, would create, if one may say so, a new product for its own supply; and that new product would constitute a new capital for carrying on the new employment, which, in the same manner, would draw nothing from the old one.

Considering Time Value

Why is it so helpful to think about time value, as both product and concept? What we perceive as time value exists in various dimensions - not all of which are economic in nature. However, money has become such an important part of life, that more of what we presently consider personal time value, would benefit from a clearly understood economic approach. Time value need not solely represent that which is assigned to individuals via their institutions, but also that which individuals are capable of assigning to one other as well.

Providing new economic frameworks for time value is not so difficult as it may seem. One of the best ways to think about this process, is the added value it would make possible in contrast to the UBI approach of paying individuals not to work or otherwise assist one another. In the near future, prosperous regions will provide less compensation for physical labor and/or repetitive work, in relation to work requiring non routine thought processes. Might a similar economic future also hold true for communities in general? A positive answer to this question, depends on whether time based knowledge product is encouraged more broadly, and whether average citizens are invited to take part in the process.

Economic time value is about more than just skill capacity. Think for a moment. How often, when we seek out time based product from others, do we appreciate most their focused attention on our circumstantial efforts, even more than specific skill sets they may have? A marketplace for time value would more readily account for differences between subjective product quality, versus "not always necessary" skill sets or objective outcomes (i.e. "I mostly just wanted him or her to listen"). Subjective time based product is more closely associated with the interactions of both participants as well - such as peer to peer learning, for instance.

One of the biggest problems for those who lack economic access in the present, is the way they are categorized, in spite of widely varying circumstance. In particular, there is a real need to get beyond the "low skill" mindset - a coarse brush which paints the vast majority of those not presently engaged in the workplace. Low skilled on whose or what terms? Without a marketplace for time value, there's a tremendous range of activities, interests and challenges that neither individuals or institutions are able to even represent, as available economic options. "Low skill" as a term, mostly indicates that societies have given excessive attention to specific forms of time value, knowledge and skill, instead of increasing market capacity for time value and knowledge use as a whole.

Also important, is the fact that those with limited economic access, have difficulty contributing to important public discourse - especially anyone who is not, or has not been previously employed in a professional capacity. Knowledge use systems could eventually provide a middle ground for the average citizen, between the separation of discussion at academic levels, versus the watered down media versions which are now adding instability in the political arena. Recent world events, of which Brexit is only the latest, highlight the need for all citizens to be a part of the economic arena which daily affects their lives.

Random Thoughts on Knowledge Use Systems

Per the post title: Sometimes, part of the accumulating notes on my desk end up getting tossed, for no better reason than they lack a cohesive framework! I started out however, by questioning some of the similarities and differences that could occur in communities based along the lines of knowledge use systems.

Presently, I'm leaning towards "equilibrium corporation" as an appropriate name for a legal construct, since the term is more descriptive of the underlying rationale, than the "dual" designation I'd recently considered. Equilibrium corporation also provides a recognizable notation for economics as part of an educational framework. Too many political problems of the present, stem from a lack of economic understanding. One of the best things about compensated peer to peer learning is that today's K-12 public education is but a starting point, since some education basics can also be mastered on personal time via digital methods.

Not every community would be "newly created" in the sense of infrastructure and flexible building components for life/work options. An (alternative) equilibrium construct could assist older communities which are considering new beginnings as well. In some instances, partially abandoned neighborhoods might still be viable, provided local infrastructure can be salvaged or possibly reconfigured without excessive expense. I've not lived close to areas of extensive decline during my 60+ years, so admittedly don't know the extent of existing burdens that would be involved.

In other instances, "bedroom communities" could be created for system participants who wish to live near prosperous regions - particularly areas with limited ability to add greater population density for lower income levels. Indeed, it is becoming difficult to generate greater density for middle income levels in today's more prosperous regions.While these new towns would still have a multi purpose center or core, it would likely not be as extensive as "free standing" new communities with a broader array of ongoing activity.

Practicality for low income bedroom communities, also means creating simpler transport patterns to nearby cities. Affordable transportation infrastructure would not only make auto use unnecessary, but take advantage of resource sets within the realm of shared responsibility. In particular, citizens need transportation choices which go well beyond the present debate of self drive vehicles for major cities. As for the transportation difficulties of the here and now: one only wonders how many millions opt out of the workplace, because of the difficulties involved in maintaining older automobiles for long commutes.

Among the more inspiring visual components of these new communities, would be their walkable core. Beauty can become a part of local environment by means of shared time commitment, just as readily as disposable income. These could be among the first walkable communities created in nearly a century, for the average citizen (i.e. not high income retired) who wants to participate in a full range of economic activity without need of an automobile in central areas.

Depending on terrain of course, a series of "spokes" from the center (or downtown) would provide dedicated transportation options, so that different travel accommodations need not maneuver the same pathways and thoroughfares. The nature of these transportation options would help to determine as well, where individuals and families might prefer to locate, should they choose to locate inside of the areas where normal transportation spans the exterior of community boundaries.

Knowledge use systems would provide settings where a wide array of innovations and methods have a chance to be explored and discussed within common frameworks. When new communities are formed via the process of domestic summits, participants will have a chance to review innovation for building and infrastructure which often receives little notice otherwise in developed nations. Developed nations dismiss many such options out of hand. Too much housing has been built in recent decades which looks essentially like all other housing, and these developments use the same resource patterns which are mostly targeted for higher income levels.

Just as each alternate equilibrium construct would be unique, so too would be the environments they would generate. It has been said that variety is the spice of life, and even though these communities would be small by comparison with most towns and cities, in some respects they would actually have more variety and choice than can be found in their larger counterparts.

Update: Thanks to Miles Kimball for this Quartz article by Alex Balashov, about the unfortunate design of today's low density realm which was built especially for cars -  http://qz.com/698928/why-suburbia-sucks/

One Day Perhaps, Common Sense at the Margins

Why not common sense in the center, where it seemingly belongs? There's too many preexisting obligations all around - some of which have been a long time in the making. Governments and special interests alike, sacrificed political centers in ways that don't readily allow populist reactions such as Brexit to get at the root of the problem. Some noted in the Brexit aftermath that citizens wanted greater national autonomy, but for "the wrong reasons". What might that mean, for would be leaders who are anxious to make their countries "great again"?

Consider how governments became more involved in the economy, while constructing fiscal transmission processes via fiat money in the twentieth century. Where once the issues of fiscal revenue and redistribution were simple, they grew in complexity, as locally generated wealth transitioned to more specific and often, disparately held sources. When agriculture was still a primary wealth source for many populations, wealth creation meant understandable loops of production and consumption which - despite their simplicity - were also internally complete. In a sense, this local wealth "trickled up" to additional wealth generation. Even though these earlier patterns scarcely resemble today's non tradable sectors, they nonetheless served as a base from which tradable sector formation was able to grow and evolve.

In Adam Smith's time, governments expected to rely on the wealth generating capacity of their own citizens, regardless of world events. Might similar reasoning have factored in to Brexit votes? After all, a nation's economy supposedly represents its own citizens. Or does it? Again, Adam Smith:

But though a particular merchant, with abundance of goods in his warehouse, may sometimes be ruined by not being able to sell them in time, a nation or country is not liable to the same accident. The whole capital of a merchant frequently consists in perishable goods destined for purchasing money. But it is a very small part of the annual produce of the land and labor of a country, which can ever be destined for purchasing gold and silver from their neighbors. The far greater part is circulated and consumed among themselves; and even of the surplus which is sent abroad, the greatest part is generally destined for the purchase of other foreign goods. 

Doubtless, Brexit is a strongly held desire to rely on internal sovereignty. Look more closely for locally generated wealth in the present, however, and in some respects, a redundant phrase may apply: "There's no there, there." Indeed, the meritocratic and asymmetric compensation which nations have come to rely on, is based not on the circulation of locally held wealth, but that which more closely resembles the general equilibrium conditions of tradable sectors the world over. Meanwhile, central bankers mistakenly attempt to control the economic value of their nation's non tradable sectors, instead of supporting domestic aggregate spending capacity and the monetary representation of their own citizens.

Despite the benefits of applied skills preferences, total reliance on meritocratic structure, means too many citizens inadvertently become economic liabilities, in aggregate. When governments lose access to internally and symmetrically generated wealth, they rely excessively on externally defined sources of wealth generation. In other words, the very wealth of globalization, which governments and nations are increasingly inclined to react against. Still, the problem for nations is not that globalization was somehow "wrong". The problem was that nations allowed their non tradable sectors to completely rely on the gains of globalization, instead of finding means to generate new sources of economic access and wealth at local levels.

As more nations (and occasionally, states) consider secession, they need to take a much look closer at the structural circumstance which created their primary problems in the first place. The ability to generate reliable economic value (safe assets) closer to home is in doubt, since knowledge use is not only closely held, but dependent on the fruits of globalization even now. At the very least, it would be possible to rebuild and preserve applied knowledge for broader use, at the margins via alternate equilibrium.

The problem is not meritocratic constructs per se, but that they are the only pathways nations presently have, which are fully capable of providing much needed economic value. One can only hope that the winds of political uncertainty will not threaten to unwind the fiat monetary systems which for now are still capable of rewarding meritocratic structure. In the meantime, national revenues remain mostly dependent on the same global constructs, which governments sometimes wish to disavow.

The Strongest Link

Some might be surprised, of the degree to which Adam Smith held agriculture in high regard:

The capital, however, that is acquired to any country by commerce and manufactures, is always a very precarious and uncertain possession, till some part of it has been secured and realized in the cultivation and improvement of its lands. A merchant, it has been said very properly, is not necessarily the citizen of any particular country.

Few today, would consider the role of agriculture as quite so basic. What might account for the fact that Adam Smith emphasized agriculture over industry in this passage? For one, he recognized the merchant as part of what would become the international nature of tradable sectors. Even though all goods have some form of local origin, this expansive form of economic wealth belongs to all nations.

But by the same token, industry - with its relative lack of definable roots - was more subject to the vicissitudes of war. Patterns of commerce and industry could readily be broken down at any time, and - as had so often played out historically - not always reemerge with the same strength they held before exposure to the conflicts of nations. Whereas, local agriculture - while hardly impervious to the threats of war - still had higher chances of escaping such strife relatively unscathed.

Hence the above quote appears to highlight a belief on Smith's part, in agriculture as society's strongest link. Or more precisely, agriculture as rooted in the economic capacity of what was once every nation's citizen majority, via their contribution to a nation's most basic needs. When Smith lived - and indeed for a long time afterward - agriculture provided ready means for spontaneous coordination and cooperation, for people from all walks of life.

All too often, people forget how to cooperate and coordinate for their wants and needs, when they do not have adequate institutional means by which to do so. For centuries, agriculture provided economic cohesion alongside a strong incentive for family production, before giving way to the prominence of manufacture and commerce. What was perhaps less discussed, was the fact citizens were losing the most reliable production autonomy they had ever known. To some degree, governments must have understood what had actually taken place. After all, agriculture had also served as work opportunity for young and old, who would thereafter become underrepresented in the modern workplace. How much bearing might this loss have had, on the rationale of the welfare state?

Part of the problem for many citizens, was the loss of autonomy and self direction in terms of economic outcome. The knowledge based wealth which ultimately became so important to the economic foundations of nations, largely bypassed the work based patterns of citizens in many areas. As a result, a growing number of communities and regions gradually grew dependent on the places where knowledge use was allowed to flourish. Where once local citizens provided points of stability from which other forms of commerce had been able to expand and multiply, now local communities were forced to rely on resources that existed well beyond their ability to reciprocate.

Nations and governments alike, have forgotten the integral role of citizens as a foundation for economic stability. Instead of addressing the earlier losses of production rights, governments responded by establishing a welfare state. Now, as many of those government promises have become difficult to fulfill, policy makers grow anxious to scale back welfare states. There's just one problem: many have forgotten the particulars as to how these welfare states were established in the first place. Citizens will once again need clearer rights for production in the marketplace, should policy makers proceed down this path.

However, some factions are ready to double down on the earlier bets of the twentieth century, in a belief that governments will still be able to take care of their citizens on previously defined terms. Even though it makes little sense to reemphasize government power at this juncture, there are important reasons why it is happening. Too many supply side factions bear their own responsibility for a resurgence of Keynesianism, given the fact they have chosen economic stagnation over marketplace strength and full participation.

While Democrats and Republicans alike have created harsh limits on the supply of knowledge product, Republicans are paying the highest price in terms of party disarray. Even worse, is the fact all concerned gave progressives and financial interests the rationale that supply and demand is not central to economic activity. After all, special interests have seen to it that broad supply and demand for knowledge product in the marketplace, is mostly wishful thinking for dreamers and fools.

Just as agriculture was once the strongest link - because of its connection to citizens as a whole - knowledge use has the potential today, to fill that role as well. But if nations disregard this possibility, widespread knowledge use could just as easily lose its chance, to become a solid economic foundation in times of uncertainty. Indeed, the connection between time value and knowledge use was never as important, as it is in the present.

Experiential Product as a Structural Component

A marketplace for time value, would make it possible to generate experiential product which need not rely on (asymmetric) prior revenue or disposable income, in order to take place. Eventually, as more groups participate in symmetric compensation to generate time based service product, more economic output - hence a higher growth trajectory than is presently the case - could also result.

More economic output is important, if present day economic stagnation is to be overcome. However, people are confusing wage increases (on the part of some) with increased output overall, which unfortunately is not the case. Wage gains in aggregate, result from an increased degree of economic activity and circulation of marketplace product. By the same token, any increase in the growth trajectory of nominal income and spending also reflect increased output. Yet the ability to generate additional marketplace capacity has proven difficult of late, since doing so requires defining product along broader lines than governments and private interests alike, have been able to do.

At least for purposes of this post (as a glossary term), think of experiential product as non routine focused attention, intended for assistance in the circumstance and environments of others. Non routine focused attention is vitally important for the economic lives of all individuals, and not to be taken for granted from anyone in one's personal life, otherwise. Each individual's attempt to improve resource utilization and decision making, varies to some extent from the general knowledge sets that society expects to assist those processes. In spite of online assistance in multiple areas of life, confirmation or additional reference points on the part of others, can make a crucial difference in one's ultimate approach.

While I emphasize individual to individual activity as an appropriate starting point for economic gain, some forms of individual and group created experiential product don't need to be expressed on economic terms. Why so? Many spontaneously formed social activities would not benefit (economically) from compensated time value, especially if they are sought primarily as entertainment.

Indeed, the experiential product of entertainment which contains economic value, is that which is prepared for sale by individuals or groups for others as separately existing packages from individual time value. However, experiential time value as spent in entertainment with others (or in personal challenge) is not necessarily linked to group based mutual assistance, because many forms of human activity represent what individuals choose to do in any instance. In particular, activity which is family or otherwise tribal oriented, also tends to be less economically oriented. Think of informal local sporting events for instance, and personal preferences for home based activity which come closer to personal hobbies, than clearly existing family needs.

Such preferences are important to delineate, because compensating already existing time based preferences would remove the impetus for more productive forms of economic activity which encourage individuals to seek out strangers (i.e. more participants) to meet real service based needs. The more willing participants are involved, the less coercion is involved on anyone's part, for any single time based activity.

The whole purpose of envisioning experiential product as a structural economic component, is to bring people together who otherwise don't have sufficient social constructs in place, to be able to imagine doing so. Higher income levels understandably don't recognize what's missing in this regard for lower income levels, because time based services are such a part of daily life for the prior group. Even though lower income levels have a minimal degree of time based health and educational services at their disposal, it is not possible for society to apportion these effectively through asymmetric means. Hence education and healthcare provide an essential starting point, for experiential product in knowledge use systems.

Knowledge use systems would insure that people who otherwise remain socially and economically isolated, have a precise coordination platform which is not open ended (such as LinkedIn) for work potential, but generated to structure work within a defined group on a regular basis, in an ongoing time continuum. Put simply: through a reasonable structure which allows people to call on one another to sort life's confusions and aggravations, personal freedom and autonomy once again become possible.

How to think about experiential product in relation to the ways it has previously been discussed? Some readers may notice some dissimilarity to Wikipedia entries, so I'll look at a few contrasts. For experience good, I found:

...an experience good is a product or service where product characteristics such as quality or price are difficult to observe in advance, but these qualities can be ascertained upon consumption.

Experience good as defined by Wikipedia, appeared to be the closest description to defined real time product that was available. This article also stressed the difficulties posed for consumption choices, which in turn leads to lower price elasticity. Another subjective product is referred to as the "experience economy", which may also be thought of as business creating (memorable) customer events. Many knowledge use systems would gain opportunities to pursue this form of product, once they are well established. The prime experiential product I noted was a reference to movies, videos and other mass produced product as generated through time value, prior to sale.

What appears missing from the immediately available online interpretations, is subjective product with a focus on individual assistance. Also - as noted early in this post - contrast non routine personal attention, with the attention required for routine activity or objective service outcomes.

Of course, many time based activities that include specific or standard outcome, are those that are subject to automation - particularly in prosperous regions which include complex economic settings. Presently, individuals are being encouraged to seek work opportunities of a non routine nature, for long term job safety. Even though non routine work is somewhat of a safer bet, asymmetric compensation will continue to face limits due to budget revenue and lack of discretionary income. Hence a symmetric approach could prevent needless unemployment, and allow human capital a more central role as a time based consumption good.

Another way that time based experiential product differs from separately existing product, is the "passive" role of the consumer, in the latter. One of the prime benefits of time based experiential product, is the opportunity it provides for the consumer to take an active role, which translates into a flow of mutual interaction. The blogging format - much as other online formats - can provide an interesting partial time shift, in that some interaction between provider and participant is still possible. Indeed, asymmetric compensation tends to only allow a partial degree of mutual interaction in aggregate, between professionals and consumers.

Even though some knowledge use systems would eventually seek to engage in group based research and development, peer to peer assistance needs to be fully utilized and understood, first. Otherwise, differences in aptitude make it too tempting to divide work patterns in ways which eventually devolve into layers of administration, such as what now exist. By fully integrating peer to peer assistance, automation choices and unemployment would no longer be perceived as threats. Further, the maintenance of a non hierarchical group format, makes symmetric compensation and organization a feasible long term goal.

Economies Would Benefit From an Equilibrium Approach

Economic access is not simply a matter of "too much" or "too little" income or taxation. "Too much" or "too little" in relation to what, exactly? The interconnected nature of general equilibrium conditions, means any attempts to remedy specific parts will affect the whole to some degree. Hence general equilibrium problems would benefit from public dialogue which transcends the ongoing battles of relative wages, income and taxation.

When policy makers approach problems from partial equilibrium framing, often the result is greater equilibrium imbalance. An apt example for equilibrium perspective, is the recurring battles over gun control. Instead of imposing yet more rules and laws yet again, why not work together to redress equilibrium imbalance? Doing so, would ultimately mean that people have fewer incentives for using guns on one another in the first place.

General equilibrium settings can be envisioned as shared marketplace capacity, between tradable and non tradable sectors. The complex effects these sectors have on one another in terms of growth capacity, are not yet well understood. This is all the more problematic, given high level government involvement in non tradable sector activity. Even though government "crowds out" private sector activity, too much of this process occurs with the implicit "blessing" of the private sector - in spite of protestations that circumstance are otherwise.

Sometimes, government crowding out almost seems beside the point, as time based product is called into question because it is not generated through viable and sustainable means. Here, knowledge applications are questioned, because of the fact they take place on terms that are simply too open ended, in terms of shared resource capacity. In other instances, the wrong parties are continuously blamed for supply side deficiencies, in what have been deemed crucial areas for applied time based activity. It does not seem plausible, that the marginalized get the blame for seeking access to the forms of time based production which they have not been deemed capable of providing on their own.

How does a lack of equilibrium balance contribute to so many problems? Tradable sectors developed their share of wages and income in relation to actual resource capacity, i.e. that of currently existing revenue and capital. This setting also actively contributed to ongoing product formation and marketplace expansion. A balanced equilibrium would imply that non tradable sectors take a similar approach, but alas this was not the case. Rather, today's non tradable sector activity is a completely open ended structure, which also has not proven capable of gauging aggregate resource capacity in real market terms.

Non tradable sectors estimated the aggregates of wage and income, based largely on whether or not political factions were in their favor. As a result, this open ended structure - which did not lead to direct (i.e. time or resource backed) wealth creation - meant permanent dependence on tradable sector wealth, in aggregate. Had existing resource capacity for national tradable sector activity been taken into account (also in relation to similar international tradable sector activity), non tradable sectors would not face the current wage/income impasse which now contributes to worldwide productivity losses. As a result, hiring is either partially curtailed or continued at lower levels of compensation.

Just the same, non tradable sector formation is likely somewhere beyond the early stages of crowding out tradable sector marketplace capacity. Should this crowding out process be left unchecked with no marketplace alternative, central bankers may incrementally decrease the level of aggregate spending capacity which represents both sectors.

A recent post from Marcus Nunes, shows how this process has already been occurring for some time. There's a way to think about the gradual shift downwards, which puts additional pressure on both nominal and real growth levels. How so? In some time periods, non tradable sectors will claim a relative greater share of total resource capacity than tradable sectors. Their relative inflation, as contrast with the good deflation of tradable sectors, also decreases the tradable sector representation for that period, when a hard inflation cap is in place. Since this adjustment draws down total existing resource capacity from which non tradable sectors derive their revenue, inflation caps gradually draw aggregate spending capacity downward.

Is it possible to set non tradable sectors on more sustainable paths, which do not continue to draw down resource capacity for both tradable sector activity and combined activity overall? One reason for today's political gridlock, is the fact it's difficult to fight the multiple battles of equilibrium imbalance within the structure itself. UBI can be thought of as such an attempt to fight a problem at general equilibrium level, from within. In a recent post, Scott Sumner noted the lack of political feasibility for UBI, because of the political issues involved. How does one willingly "step away" from government promises such as Social Security and Medicare for instance, if there are not viable long term options to reduce risk?

Much as inflation targeting represents an arbitrary cut off point on the part of central bankers, governments also become inclined to throw up their hands and institute arbitrary cut off points such as UBI when general equilibrium issues have gone unaddressed for too long. Rather than everyone having to face arbitrarily cuts for entitlements in the near future, why not provide the choice of an alternative equilibrium approach in the present?

Today's government promises are risky, but the only thing more risky is relying on private enterprise which does not yet have a built in continuum option for previously applied time value. The best way to deal with risk in a manner that approaches a government promise, is to build an internal time continuum which links time based wages to asset and service formation. It's an approach which still leaves the participant free to gamble their resource/income equivalency if they wish, but in which one's time/wage equivalency can maintain the protection of both individuals and the participating group.

Alternative equilibrium is an equilibrium response which need not jeopardize existing equilibrium structure. No one set of economic rules should have to suffice for multiple differences in lifestyle preference and wage/income potential. Democracies only fall into disrepute when opposing tribes attempt to impose their beliefs on one another, as if there were no other choice but to do so.

Services Product in Global and Local Context

When it comes to services product, context matters. This is true not just in terms of how skills, time value and knowledge interact, but also in terms of macroeconomic and employment outcomes. Hence those who attempt to quantify or classify services product in the future, could consider skills product in various contexts, since these categories differ in important ways.

As governments seek relief for long term budget obligations (with universal basic income as the latest "opt-out of the welfare state" wish), it becomes more important to understand the nature of services product that citizens expect - particularly in connection with present day entitlements. Presently, most citizens attempt to access the same forms of high skill services product which organized in response to global discretionary income. This, despite the fact some wage levels were too low, to support the resource capacity required for general equilibrium service formation.

To supplement the revenue that nations dedicate for skills arbitrage, some professionals are adapting with knowledge product which is aimed at a global marketplace. Unless actual travel is involved to access time based (high skill) product, global services product can shift away from present (perishable) time value to prioritize specific forms of knowledge and skills capacity.

Whereas local services product will hopefully continue to have the option of prioritizing time value in knowledge use settings. Not only is it important to maintain time value in an era of increased automation, local services product does not require the highest skill and knowledge levels in all instances of product access. This relative skill to time use context is hardly a negative, since many consumers value the personal time component of service product, just as highly as any knowledge or skill that may be on offer in the package. In particular, time value for services product is all the more important when education is sought as personal challenge; or for healthcare, where knowledge and skill come up short in providing answers for health outcomes.

The global search for specific knowledge and skill, contrasts starkly with knowledge and skill as it is frequently applied at local levels. In many instances, local consumers have little ability to negotiate for the service product they might prefer - whether it be simple or complex. This is especially true, when government provision of services means budget oriented "default" settings, in which limited sets of knowledge and skill options are applied with a broad brush.

These default settings are an unacknowledged problems in today's welfare systems. They also result from a lack of interest on the part of private parties, to broaden overall marketplace representation. There is too little cooperation and competition, for the kinds of services product which consumers find increasingly important.

Oddly, time based services are still viewed as economically unproductive, since their present formation means a need to siphon resources from other existing forms of wealth. Yet who could have imagined a world which would ultimately move towards automation for tradable goods, only to lose understanding, how best to approach non tradable sector activity in the 21st century?

What's more, money has become such an important part of daily life, that personal assistance on voluntary (non monetary) terms has continued to decline. Even the time banks of more prosperous regions, suffer from the fact many members seek asymmetrically compensated services product, which is too limited by design, to substitute for symmetrically coordinated time value. Today's marketplace has yet to structure for time value as local group priority. As a result, many individuals perform countless service tasks for themselves, much as they once had to build their own crude products centuries earlier with little societal coordination. And yet this self-imposed frugality - desirable though it may appear - scarcely translates into societal gain.

In recent centuries, asymmetric compensation (originating from disposable income and existing revenue) for time based services became more extensive, as tradable sectors continued to expand. Unfortunately, the recent worldwide slowdown in growth, puts asymmetric compensation for high level knowledge and skill in jeopardy, to some degree. When William Baumol indicated the relative lack of services productivity (in contrast with tradable sectors), he echoed Adam Smith in "The Wealth of Nations". Adam Smith referred to the revenue required for public servant and menial servant alike as "unproductive", since individuals being paid solely for the value of their time, weren't perceived as capable of contributing directly to wealth formation.

Nonetheless: since Smith wrote, there's been a growing number of instances when purveyors of time based services have found means to "pay their own way", or create services associated product. It was only with the broad expansion of published print, that more individuals associated with "unproductive" labor, gained the option of generating product value which existed separately of their time. Further - in recent decades - this services transformation has been amplified by the digital realm. Timothy Taylor writes of the services product that has now become international in scope and - somewhat unnoticed - even contributes to a trade surplus:

The US has been running a trade surplus in services for the last few decades and its getting larger...I wonder how many of those who think that trade deficits are a result of unfair trade practices by other countries are willing to stick to the logic of their position when it comes to US trade surpluses in services.

Many of the digital services Taylor highlights, are also of an ongoing nature. Before the use of computers became ubiquitous, an international sharing of knowledge and skill sets was already beginning to take place. However, it was more closely oriented toward start up efforts in developing nations, for expanding tradable goods production. In other words, those additional expenses for personal transport and the actual element of time value, were deemed worthwhile since they were necessary for the start up process. In the present, the lower costs made possible through digital transaction, make services product a part of ongoing international communication as well.

However, there can be downsides to "paying one's way" as a knowledge and skill provider in this capacity. When knowledge as product is sold separately from time value, there is danger that the knowledge in question is forced into competition with other knowledge which may also have useful applications. Once economies begin to stagnate, populations become more inclined to insist that some knowledge is useful, while other forms of knowledge are consequently deemed useless or unnecessary. Sometimes, knowledge can be withheld and even lost from the marketplace. This unfortunate circumstance contributes to my rationale, to create a marketplace for time value. Time arbitrage - for everything from the mundane to research and development - could eventually make knowledge use less dependent on gaining support from disposable income or revenue.

This is already an overlong post, hence I did not have the chance to delve into the post which inspired me to write it, before coming across Timothy Taylor's discussion regarding international service formation. Recently, Dietrich Vollrath asked, "Is productivity the victim of its own success?" His post is definitely worth perusing, for those readers who have time. I was particularly happy that Vollrath noted the importance of time value in services product, and how that component might potentially affect a given growth trajectory.

Economics "Rescue"? More Pragmatism Needed

In a recent post at Bloomberg, Noah Smith expressed hope that academia, i.e. the "ivory tower", would gain a more relevant economic role in the near future. For Noah, the DSGE model is part of the problem. He summarizes the article with these thoughts:

When we understand the pieces of the economy better, we'll have a much better chance of grasping the whole. If this continues, maybe the ivory tower will have more relevance for the Fed, the financial industry and maybe even for our coffee house discussion.

Brad Delong enthusiastically backed Noah on the irrelevance of the DSGE model, while in response to the overall exchange, David Andolfatto explains for his students why he continues to find the model useful. Meanwhile, Narayana Kocherlakota took the discussion a step further:

Academic macroeconomics is specifically designed to be of limited use to policymakers like the FOMC.

Should Kocherlakota's statement be considered accurate: given the importance of the FOMC, since the Fed largely consists of academia, there seems to be quite a communication problem! Regular readers already know how I feel about the matter, which is summed up by this post title. Much of the problem stems from ideas about resource patterns that developed when human capital (in aggregate) seemed less important than other forms of capital. As a result, twentieth century economics was predicated on the assumption that individual economic actors weren't really all that important - either in a monetary or fiscal framework. Likewise, the importance of money's role was also downplayed in the twentieth century economic model.

One could say that the first rule of economic pragmatism should be to faithfully represent the aggregate spending capacity, of a nation's level growth trajectory. Commitment to a level nominal target, can also be thought of as the commitments which economic participants have already assumed for one another in the marketplace. When central bankers refuse to provide this basic level of monetary representation, productive capacity is all too easily lost. The only difference between today's ongoing loss of productive capacity - versus that of the Great Recession - is the fact supply side capacity continues to dwindle at a less obvious pace.

Also, one of the most concerning issues since the Great Recession, is that policy makers have yet to realize the importance of sustained labor force participation, as important for long term economic viability. Even so, the particulars of labor force participation are important for central bankers insofar as the latter provides accurate monetary representation, instead of being distracted by the needs of government and credit driven institutions.

The hard work of production reform, is not the responsibility of central bankers. Unfortunately, too many business interests have refused to acknowledge their role in ensuring broad marketplace participation and economic access for all concerned. When both public and private interests gradually hire fewer workers over time, the lack of economic participation means problems for the shared responsibilities of infrastructure, as well.

No new economic models would provide useful application, if they don't acknowledge the reality of the conditions which have gradually led to economic, hence social and political gridlock. All political parties now have limited options, due to the way that state and national budgets have been affected by countless earlier decisions - particularly those of "kicking the can down the road". Should political factions be unwilling to squarely face what has actually occurred, economic conditions will gradually decline, regardless of who is in power. For a long time, academic discourse happily remained beyond the political fray. Now, in order to remain relevant, academic discourse will need to dig deeper, to provide assistance in what has become a political, social and economic impasse.

Economic potential for the 21st century, resides in human capital. But governments cannot fulfill the roles of human capital which need to take place at local levels in the context of time based product. Meanwhile, governments have little choice but to short the human capital investment which has already occurred, in order to meet their budget requirements. How will policy makers respond to the growing gaps in marketplace representation that are already taking place? For instance: neither the public or private interests which negotiated Obamacare, were willing to acknowledge the need for human capital and time based product in terms of a truly free marketplace.

These knowledge and service based roles are precisely the ones which governments and special interests seek to control. However, it is this lack of willingness to allow true freedom for services provision and time based product, that makes long term austerity such a threat for many nations. The realities of supply side factors are important for any economic model, since growth and continued prosperity is not possible if they are ignored. The coffee house discussion which Noah Smith spoke of, also contributes to public understanding to some degree. But it is the other private and public interests he discussed which need a better understanding among themselves, if future economic models are to really matter.

New Corporate Structure: Some Wage and Income Concerns

Wages are more closely associated with local capacity for hourly compensation, while income takes into account resource capacity beyond personal input. Wages and income for tradable goods are today's primary role, for the wealth formation most capable of expansion. Tradable sector income represents easy to quantify product formation and long term growth potential. Whereas, the secondary income role (i.e. non tradable sector income in general equilibrium), more closely reflects a nation's relative role or international positioning, in terms of time value formation.

Knowledge use systems would provide more room, for non tradable sector formation that need not be dependent on the resource capture of political roles. These systems would transform local coordination for services into a new source of wealth, via time value as commodity. Through the assignation of time value as commodity, individuals would be able to assume a direct and primary role in wealth creation, for the first time. This process could allow time value to overcome many of its limitations as a non tradable factor in economic activity. As a quantifiable commodity, time value becomes capable of assuming growth potential in the same sense as tradable sector wealth.

The new corporate structure this process would entail, delineates wage and income differential through a distinct process of separation. Such distinctions - embedded in local education - could allow participants to gain a better understanding of their own relationship with resource potential.

An ability to ascertain differences between wages and income is important - not just in terms of personal responsibility, but also as means to determine connectivity between local economic conditions and those of surrounding economies. Ultimately, local separation of wage and income in terms of economic activity, could also make it easier for citizens to understand factors which contribute to representation for nominal income.

How would knowledge use systems delineate the crucial differences between wages and income that matter most? By protecting time value - via wage to asset formation - from some of the liquidation risks that can destroy the impact of small wage potential. Wage compensation would gain protection that is not otherwise possible in general equilibrium. Such protection could do far more good, than what are often ongoing attempts at finance reform, in general equilibrium conditions.

Of course, even in this form of corporate structure, some "dangers" for low income levels would continue to exist. However, these dangers would mostly be associated with the additional income that citizens are able to accrue - much as local discretionary income would also remain exposed to the normal taxation of one's state and nation. Protection of wages is made possible, by the fact that wages are tied to internally coordinated time value, which accrues to internal asset formation from a young age.

Wages as a basic commodity foundation, would receive protection for all local citizens by building time value as the central component of local asset structure. The service based wage to asset link is what makes the standard form of loan processes unnecessary, since housing, local ownership and other building formation accrue through time value.

This service wage to asset link, also makes unnecessary the fiscal transmission processes that are necessary for government in general equilibrium conditions. However - if so desired - participants would still have the option of generating local finance through discretionary income which is not connected to the local form of monetary transmission that takes place. In other words, discretionary income as savings for local loan formation potential, would be connected to surrounding economic circumstances through non local resource and asset related means.

Doing so would give these citizens the option to create the kinds of small loans for local business formation and related personal need, which today's large banks no longer have incentive to provide. Even though such loan structures might require equity in order to take place, such equity would be income based on the part of participants, rather than the wage equity which accrues within the system through one's personal time value.

Some Thoughts on Equality of Opportunity

Do people argue for equality of opportunity, as opposed to equality of outcome, in "bad faith"? Why would anyone do so? There's no need for me to single out the specific arguments against equality of opportunity as a legitimate concept, which I recently spotted. And after a strong response from a commenter on a post regarding neoliberalism, I'm concerned about coming across as antagonistic, which is not my intent. Suffice to say, I was taken aback, once I realized there are bloggers - and others - who have a strong aversion to "equality of opportunity" as a legitimate argument.

Much as the reality of rich and poor, equality of opportunity is a relative state which still deserves acknowledgement and action. The right to produce goods and services for the public - for example - is a dramatic example of equality of opportunity. Why not strive to make certain that opportunities aren't lost, instead of losing further ground by reasoning they don't exist in the first place? Better odds of success are possible for all concerned, when inequality is approached with the intent of improving economic access.

In other words, plan for opportunity in terms of resource use and access, instead of seeking greater equality through increased redistribution of outcome. This initial or prior approach increases outcome potential and long term growth, whereas an outcome based approach only encourages further divisions over already existing resources. In particular, specific supply side methodology for increased non tradable sector production and consumption, would contribute to long term growth. When most marketplace capacity is defined so as to exclude low income levels from production and consumption, it's understandable that equality of opportunity may not ring true.

Another important consideration for equality of opportunity, is to consider how time and skill contribute to efforts and economic outcomes. Even though it is not widely recognized yet, new horizons are opening for personal time value in terms of production and consumption, which didn't exist before the technological gains of the present. Equality of opportunity is inherent in the process, due to the use of equal time value as a starting point for service product coordination.

Time value has an important role in its own right, as a function of mutual coordination capacity, while skills capacity responds best to resource application. When individuals are responsible for their own time management and resource decision making processes, time value and skills capacity are not limited to a single role, in terms of the wealth that accrues to both individuals and groups. Both organizational capacity, and the alignment of skills potential with resource capacity contribute to economic outcome.

The separate functions of time value and skills capacity in the workplace, are sometimes missed. This is understandable, given the fact that 20th century employment by others often meant applying time and skill along a single path of resource application. In some respects, the employment model which combines personal skill and time value in a single output trajectory, is outdated. Yet it has proven difficult to move past a mindset in which personal time and skill - in relation to specific resource sets - is mostly determined by one's employer.

Generally, when individuals are self employed in some capacity, time and skill options can also be applied along different paths to achieve greater outcome potential. Time arbitrage would assist this time management process, given the fact individuals in groups would hold both entrepreneurial and mutual employment roles. Sometimes the paths of time and skill use would merge, whereas in other instances they would become quite distinct, in terms of output potential and quantification.

Personal skill in relation to resource capacity, particularly defines the output potential of tradable sector activity. Indeed: much of what is now considered "uneven" in terms of economic opportunity, originated when compensation increasingly took into account the degree which one's unique skills capacity was able to contribute to the marketplace output of tradable goods. Skills arbitrage employment roles gradually developed in relation to total resource capacity - not just that of nations, but to some degree of international wealth.

Unfortunately, asymmetric compensation for time based product does not contribute to increased marketplace output in the same way. Even though greater skills capacity resulted in better time based product, it did not increase marketplace output. As a result, even as the marketplace expanded for tradable goods, time based product did not have the chance to achieve the marketplace outcome that populations sought.  This is why asymmetric compensation is not as effective (in terms of macroeconomic outcome) for the time based product of non tradable goods, as for tradable goods.

Time arbitrage could eventually create greater marketplace representation for time based product. There's another opportunity aspect to time based product, as symmetrically matched and compensated. Many forms of knowledge and skill which end up "pushed aside" in a society which devotes many resources to critical knowledge, would once again gain room for fuller expression in society. By assigning equal time value to knowledge use, groups can coordinate for time and skill value in ways that provide more equal opportunity for knowledge diversity as a whole.

Further Rationale for Domestic Summits

Several recent posts from Arnold Kling, reminded me of issues that are pertinent to the kinds of organizational capacity which domestic summits would also address. Regular readers may remember earlier posts on my part, which discussed domestic summits as a way to begin the process of creating new communities. A commenter asked Arnold Kling:

If we are over-educating our workforce, then why don't entrepreneurs find and train non-college workers at lower lifetime salaries?

Kling replies:

Very good question. Equivalently, why don't non-college workers try to convince entrepreneurs that they can do the same work for lower pay? 

Of course one needs understandable settings among a wide variety of groups, in which it is possible to do so! My first thought upon reading his response, is that lower pay as a logical move, would involve a restructuring of organizational marketplace costs as well, for both living and working. Otherwise, those with lower pay would continue to struggle with the oft ill defined consumption expectations of general equilibrium. Hence taking this into account is what I have referred to as an alternative equilibrium response, to the normal costs associated with general equilibrium conditions.

While reductions in business overhead are important, simpler forms of business structure would allow all summit participants - even those who may not consider themselves particularly entrepreneurial - to create new community and participate in marketplace outcome. Most important is the fact many such beginnings would result in positive and long lasting effects.

Among the many retail possibilities, are updated variations on pushcart vending such as market monetarist Benjamin Cole has proposed, and he explains their benefits to a commenter in a recent post at Historinhas. Even though higher income levels have often sorted for business patterns that negate pushcart vendor related options, other income levels would welcome flexible retail in new marketplace design. Retail production choices are especially becoming more important, as big box retail finds little incentive for either building or remaining in communities without high income levels.

A framework which makes greater use of lower wage and income potential, would allow infrastructure and environmental factors to move closer to the resource capacity of each group. As participants determine what is possible in this regard, follow up summit gatherings would allow those who ultimately commit, to select among the marketplace constructs which new groups wish to pursue. These resultant settings could be thought of as free market innovation zones. In these zones, what would otherwise be labeled "disruptive" (i.e. undesirable) innovation, can take place without posing direct threat to the general equilibrium conditions of prosperous regions. Domestic summits would serve as a starting point, for the selection process of more unique settings than today's standard zoning and regulatory environments allow.

There's another aspect of the resulting selection processes among potential groupings which deserves consideration. Sometimes, what appears as though discrimination, is simply the desire of individuals to work and live in groups that are similar. Years earlier, working with others who had experienced a lot of discrimination in their lives, I remember being astonished when they nonetheless expressed a preference for much of their time to be spent with others who could relate to life experiences held in common. Often, this was a matter of race preference as well.

However, these natural grouping tendencies are often confused with discriminatory activity in the marketplace. Part of the problem is that too many groups end up competing in an economic arena which lacks sufficient production and consumption space for all involved. The domestic summit response is for self selecting groups to create more marketplace and economic access for everyone, instead of encouraging anti-discrimination processes which are mostly a battle over the already existing pie of general equilibrium. Some aspects of direct democracy would be within reach (for time value in particular) in small group settings, because the results are not those which millions of individuals are expected to comply with.

All who take part in domestic summit proceedings would need to approach them with an open mind, to create a positive experience capable of long term potential applicability. It would be difficult for anyone with a negative attitude regarding "opposing" lifestyle options in general, to add value for a particular marketplace option among many possibilities. Domestic summits would strive to multiply social capital, instead of continuing with today's political efforts to closely restrict anything possible in this regard. Again, from Arnold Kling:

...one possibility I want to throw out there is that people want affluent neighbors...high prices is going to make me want to live there.

Few individuals with a substantial income would feel otherwise, given the unfortunate lack of trust that has become a feature of the U.S. landscape. In the thoughtful comments that followed, some noted that the only remaining forms of discrimination that are still possible, are those of price and meritocracy. Prices have been unnecessarily bid up because too few other possibilities exist for the natural forms of association that people seek. Even though discrimination certainly has negative implications, one's desire to sort for lifestyle preference is not the same thing.

Anti-discrimination policies sought to provide economic access in an arbitrarily limited marketplace. However, a better approach would have been to create sufficient marketplace space which provided production and consumption potential for all concerned. This is also an important reason greater flexibility in property ownership is needed, so that mutually held real estate can also be coordinated for changing preferences in working and living arrangements. Today, most neighbors live next door to one another not because of any personal preference, but because of the limited pathways which today's property ownership makes possible.

Over the decades, I've observed alternative production/consumption options that were lost because they posed too great a threat to the existing order. The seventies in particular, were a time of great hope for both infrastructural and healthcare options which for the most part did not see the light of day. Now, today's struggle with food trucks and digital platform transportation feels reminiscent, as these options also pose a direct threat to existing general equilibrium conditions.

What's more, the political arena doesn't acknowledge that special interests and government alike continue to put sand in the gears, of what otherwise would be greater choice and innovation in the marketplace. Instead, political parties react to the existing order in ways that could undermine both economic and political stability. Domestic summits would provide means for individuals to present alternatives that don't pose a direct threat to the status quo. There is no reason, why any society should have to live by the same set of economic rules, regardless of income. Still, creating new patterns for life and work is best approached with a live and let live perspective, for the best possible outcome.

Why is Innovation "Not Enough"?

Dani Rodrik has a Project Syndicate post, "Innovation is Not Enough", which in some respects is spot on:

...who can seriously doubt that innovation is progressing rapidly? The debate is whether these innovations will remain bottled up in a few tech-intensive sectors that employ the highest-skilled professionals and account for a relatively small share of GDP, or spread to the bulk of the economy. The consequences of any innovation for productivity, employment and equity ultimately depend on how quickly it diffuses through labor and product markets. 

Technological diffusion can be constrained on both the demand and supply sides of the economy. Take the demand side. In rich economies, consumers spend the bulk of their income on services such as health, education, transportation, housing and retail goods. Technological innovation has had comparatively little impact in many of these sectors.  

...The two sectors in the United States that have experienced the most rapid productivity growth since 2005 are the ICT (information and communications technology) and media industries, with a combined GDP share of less than 10%. By contrast, government services and health care, which together produce more than a quarter of GDP, have had virtually no productivity growth.

...On the supply side, the key question is whether the innovating sector has access to the capital and skills it needs to expand rapidly and continuously. 

Consider also, how the primary investment of recent decades has occurred. Where once the most important forms of saving were designated for capital other than time value, knowledge use - especially the value of which accrues to non tradable sectors - has gradually become the more dominant form of wealth. Where land value was once closely aligned with the value of basic food commodities, real estate now more closely responds to the nominal income representative of time value, and the spontaneous coordination of prosperous regions.

Human capital representation on economic terms is only partial, despite the fact investment priorities for time value begin early in life. Even public education attempts to determine what might augment human capital investment, before other forms of capital savings come into play. Thus far, however, only a fraction of time investment expenditure shows up as wealth gains - given today's partial representation of time value at an economic level. Consequently, additional savings for capital contribution (in the classic sense), are mostly limited to those who benefited from initial time value investment, as represented in general equilibrium.

Even though human capital is key to potential productivity, there's good reason why (what appears as) non productive sectors have yet to experience the broader gains of innovation. One reason these sectors seem non productive, is that technological gains have mostly generated wealth capture for greater administrative capacity.

Worse, the value of human capital (in aggregate) as a economic component, is at odds with a natural inclination for societal exclusion, which governments and private interests alike are able to tap for wealth capture. It is the struggle for economic access, and the many forms of signalling required to gain access, which pushes up the price of markets in ways that make costs of living higher for everyone. The time and knowledge based services of healthcare and education, are especially prone to these forces. Indeed, the natural tendency to judge can prevent the organizational capacity, which would otherwise result in product that generates good deflation and a freer, more open marketplace.

Oddly enough, perhaps the innovation most needed, is for the human mind to be willing to tap the potential of human capital - much as other resources have also been utilized in their turn. Granted, this is not something that either can or should be expected of every environment, given what have become vast differences in human capacity and lifestyle choice. Rather, human capital potential could be tapped in settings which acknowledge the importance of developing useful marketplace patterns along a continuum of income potential. This, as a viable alternative to today's default settings of relative rich or poor as the sole options.

Conceptualizing a (Shifting) General Equilibrium

There's plenty of uncertainty about general equilibrium conditions. Is the economy stable? Will the marketplace even function recognizably in the decades to come? Ahh, just dish it up straight: are people coming unhinged? If so, it's not so hard to figure out why. A Vox article prints yet another variation, on a loosely thought through argument:

Lessons from the IT Revolution are that firms with relatively low-skilled employees are likely to be affected negatively by the new industrial revolution, and those with highly skilled employees tend to reap benefits.

My concern is the takeaway this reasoning implies. Does that mean everyone still needs to prepare for high skill work, all the while making certain that they don't end up with the unfortunate signal of lower skill work, instead? Good luck with that. Oh, the horror and social stigma, that it's become necessary to distinguish today's work "lottery" as such! Hence Andre Spicer of The Guardian:

The idea of the knowledge economy is appealing. The only problem is it is largely a myth. Developed Western economies such as the UK and the US are not brimming with jobs that require degree level qualification. For every job as a skilled computer programmer, there are three jobs flipping burgers. The fastest growing jobs are in the service sector. One-third of the US labor force market is made up of three types of work: office and administrative support, sales and food preparation.

The majority of jobs being created today do not require degree-level qualifications. In the US in 2010, 20% of jobs required a bachelor's degree, 43% required a high school education, and 26% did not require even that. Meanwhile, 40% of young people today study for degrees. This means over half the people gaining degrees today will find themselves in jobs that don't require one.

Of course this doesn't stop employers from expecting their employees to have college degrees, whether or not they are truly warranted. Perhaps these facts are also on the minds of those who are coming out in support of UBI. Granted, the rational solution of government subsidies for low skill workers is only a partial one as well. Why? Government low wage subsidies would be limited to existing jobs, i.e. those of today's prosperous regions, given today's high bar of economic engagement. However, one person's idea of what a UBI "should" be, is possibly another person's nightmare. From Charles Murray at the WSJ:

...the UBI is an idea whose time has finally come, but it has to be done right...A UBI will do the good things I claim only if it replaces all other transfer payments and the bureaucracies that oversee them.

Murray's vision of a UBI might be thought of as a "gotcha!" moment, for long term budget issues which most people have been sane enough (unlike myself) not to address, directly. Murray's "let's not think too hard about this" approach would also threaten some of the aforementioned administrative service jobs, which often make college degrees so lucrative in the first place. Equally important, is that a no holds barred UBI would be the next logical step from block grants to the states. Just add one part political gridlock to one part economic stagnation, mix well, and watch budget minded policy makers gradually unwind government obligations beyond that of police and the military, it would seem.

So the question remains: Are policy makers and the private sector committed to supporting broad prosperity, should national government gradually reduce itself to a bare minimum? Are there sufficient means to include widespread knowledge use, as part of a vital marketplace? If a radically minimal government seems preposterous, one can't help but notice how the private sector is too quiet about aspects of austerity which aren't being replicated for free markets, even as their subsidies are threatened. Imagine a devolution to "government services: there's an app for that", or people completely opting out of education or healthcare because of marketplace deterioration.

While digital platforms have the capacity to transform economic outcomes, personal time and consideration must remain integral to the process, for those platforms to matter. However, knowledge use as a central component of the economy, is in no position to be taken for granted right now. Indeed, limits on knowledge use continue to raise the bar for economic entry. A consequent reasoning of college degrees as poor investments, is unfortunately not too far off the mark.

Even though I identify as a libertarian, I'm not averse to all aspects of centralized government. Just the same, nation states don't realize the extreme harm they continue to cause their own citizens, who resort to taking out their frustrations on one another. The concept of freedom should mean being able to freely choose one's activities with others in the marketplace, on economic terms. Governments and private interests took a hierarchical approach to services in the twentieth century. Not only is this approach outdated, neither governments or special interests can expect the time/knowledge based marketplace of the future to be supported through fiscal means.

Hence governments don't have the capacity to build upon and protect knowledge use for the long run. This prerogative belongs to the private sector, for better or for worse. Which is why it is so unnerving, that the fact knowledge use potential actually belongs to the private sector, has been completely missed in the dialogue about automation and the workplace of the future. Will the private sector accept the challenge? One can only hope.

Knowledge Use Systems in Time Aggregate Value Context

Knowledge use systems would create time value for closely coordinated sets - in contrast to the random nature of time based coordination in today's prosperous regions - for knowledge based services activity. Only consider that an important attribute for (city oriented) higher income levels, is the time based service capacity they take for granted. Fortunately, time value can also be tapped to generate positive economic complexity, even without the monetary flows of more prosperous regions.

Even though time arbitrage might be considered a "lesser" form of knowledge use in contrast with normal economic patterns, an option such as this is paramount, if aggregate time value is to maintain economic stability over the long term. After all, the long term means ever expanding resource wealth, which gradually "pulls away" from aggregate time value in general equilibrium conditions. Historically, societies have not always compensated well for growing discrepancies between time value and other forms of resource value, to say the least. Bad deflation in these circumstance can perhaps be thought of, as a lot of unhinged bad attitudes.

Fortunately, the alternate equilibrium of knowledge use systems could create additional time value wealth without debt, to address this problem. True, "the poor with always be with us" as noted by Scott Sumner. "Rich" versus "poor" is as relative as relative comes. But the reason such discrepancies matter, has little to do with minor wage inequality among peers, or disappointments in middle class consumer expectations. Rather, inequality is vitally important because of the degree to which GDP has decoupled from median wages, particularly in the last forty years. Sumner emphasized for instance that "Government quality regulations are set based on average living conditions." And yet the fastest growing jobs continue to be those which are often below average in pay.

The wage to GDP decoupling serves as a distinct reminder that while total resource capacity the world over continues apace, aggregate time value is being left behind. Even more important, is the fact median income is only representative of those who presently have economic access. Others who are also expected to "get in (the same general equilibrium) line" for time based services, are scarcely even accounted for, on economic terms! Does anyone really wonder why immigrants - in aggregate time value terms - have become a net loss to any skills subsidized welfare state?

Hence among the reasons time arbitrage could be of benefit, is that knowledge use systems would create broader value for time aggregates as a whole. For instance, greater access for production and consumption of knowledge use, would address the largely hidden wait time in today's knowledge based service sectors. Yesterday's long lines for product in tradable sector markets that weren't free, are today's lines in non tradable sector markets that also aren't free. When populations have little chance to compete for the production of time based services, more queuing is the result, for basic knowledge use functions.

An alternative equilibrium would ultimately shorten the line for time based services product. Participation in a knowledge use system, is equivalent to the entire group purposely "buying a ticket" (via the right to produce) for mutually desired destinations. Time based group coordination is also a form of social insurance, particularly for multiple aspects of healthcare services. Tim Harford explains the process of waiting in line, in a way which aptly expresses the potential of time value when each individual "buys a ticket":

Queue engineers understand that queues can have strange properties...Queues are a terrible, inefficient waste of time. If the resource in question is genuinely limited, then the existence of a queue shows that it is being underpriced.

Consider the line for healthcare. Time based product is not underpriced in the same sense one associates with tradable goods. Rather, the physician is undersupplied to a degree that it is next to impossible to calculate the existing price as an accurate signal - in relation to time based resource capacity given potential aggregate demand. For instance, the U.S. has 2.6 doctors per 1,000 people.

In this instance, queues develop because the time based service provider purchased a ticket (i.e. time investment) that is calculated in relation to price potential on the part of complete or worldwide resource representation. Local coordination for time based services is difficult in general equilibrium, because the time aggregates of medium to high income levels are calculated alongside resource use patterns which exist beyond national boundaries. As a result, specific values in terms of long term time investment, are not calculated among the immediate groups of which they supposedly represent. As Harford noted, queues have strange properties, indeed. Again, Tim Harford:

If everyone had to pay to join a queue, the queue itself would be shorter, because some people would decide not to bother. Those who did queue would earn back their entry fee in time saved, while the person selling tickets for the queue would make some cash. 

Using time value in relation to itself - via production rights - would allow each individual to buy a ticket or an entry fee to the desired destination. In knowledge use systems, individuals would make the decision whether to "stand in line" to wait for currently offered services. Missed opportunities would be noted, in ways that also send time based production/consumption pricing signals within the group.

Not unlike what would occur in a direct democracy, one's time value can become a multi faceted and meaningful vote for the desired product. Note that when time value exists solely in relation to the world resource capacity of general equilibrium, everyone doesn't get the chance to buy a ticket because aggregate time value is not fully represented in general equilibrium conditions. The alternate equilibrium conditions of knowledge use systems - at the very least - would seek to address this at the margin.

Economic Time Value as a Steady State

What are the advantages of using economic time value as a steady state? Are there viable alternatives to the twentieth century practice of employing individuals during the height of their abilities, while leaving them dependent on fortunate circumstance in youth, sickness and old age? Economic time value as a steady state in one's life, could provide a much needed alternative to the vagaries of maintaining steady and sufficient employment during prime working years.

Yet all too often, unemployment concerns are confused with whether people actually want to work, or whether they should even need to work. Where to begin? As Isabel Sawhill notes:

The debate centers around why we think people are jobless. Unless we can agree on the diagnosis, we will not be able to fashion an appropriate policy response.

Economic historians and others have pointed out over the centuries, that people often end up jobless due to social design. This practice persists today, yet is scarcely clarified in present day arguments. Fortunately, Adam Smith offers plenty of explanation in "The Wealth of Nations", despite the fact it is mostly the monopoly aspect of this reality which is stressed by progressives and conservatives alike.

As a result, supply side factors which purposely limit employment, are chalked up to excessive regulation. Worse, regulations are so diverse and complex, that the public can scarcely determine cause and effect for the circumstance of low labor force participation. The fact that U.S. unemployment is so well concealed - under statistics that seemingly insist otherwise - contributes to the vague and ill conceived nature of today's growing populism.

Looking back on what has already occurred, of course it's possible to put a positive spin on meritocratic workplace exclusion. By limiting workplace design to those society perceives as most skilled (judgmental or not), more resources were freed up, so those with high incomes could put the resulting capital to good use. Admittedly, this approach led to the solid and often beautiful housing of medieval cities for instance - some of which still stands. Just the same, the majority of housing today is not built with the kind of craftsmanship, that warrants taking away the choice of mass produced building components.

Hence one might insist that beautiful environments result from the purposeful limiting of labor stock. Intentional limits for employment are a form of equilibrium shifting, which sometimes works reasonably well, so long as economies maintain a strong growth trajectory. However - should stagnation set in - those cultural patterns can start to break down. Many end up waiting too long to gain economic assimilation, such as the apprentices in Adam Smith's time. Consumption smoothing would mean economic access, for individuals and society as a whole. The option of economic time value as a steady state, could ensure that an ever growing percentage of the population is not left behind.

Indeed, more than consumption smoothing is at stake. The human inclination to take part in productive activity is strong from a young age, yet is is frequently lost. Young students have been expected to concentrate on their own learning, instead of discovering how to purposely interact with others while they are still inclined to do so. Adam Smith explains how apprentices were not paid for the years they were expected to learn their trades - a practice which is unfortunately echoed by long years of education today. Here's Smith:

The property in which every man has in his own labor, as it is the foundation of all other property, so it is the most sacred and inviolable. The patrimony of a poor man lies in the strength and dexterity of his hands; and to hinder him from employing this strength and dexterity in what manner he thinks proper, without injury to his neighbor, is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty, both of the workman and those who might be disposed to employ him. As it hinders him from working at what he thinks proper, so it hinders others from employing who they think proper. To judge whether he is fit to be employed, may surely be trusted to the discretion of the employers, whose interest it so much concerns. The affected anxiety of the lawgiver, lest they should employ an improper person, is evidently as impertinent as it is oppressive...

The institution of long apprenticeships has no tendency to form young people to industry. A journeyman who works by the piece is likely to be industrious, because he derives a benefit from every exertion of his industry. An apprentice is likely to be idle, and almost always is so, because he has no immediate interest to be otherwise...A young man naturally conceives an aversion to labor, when for a long time he receives no benefit from it.

Lest anyone complain that the life of a student is not labor, this may appear so in comparison to the hard labor of the past. The societal commitment of schooling is not the privilege to the student that many imagine! Hard labor versus classroom is not the point of reference for many students, who mostly see a long road ahead with a very uncertain payoff for one's efforts in the classroom - especially during periods of low economic growth.

Those familiar with my work, know that in knowledge use systems, individuals of all ages who take part in the system would provide mutual employment for one another, determined by individual preferences at various points in a given year. The resulting work patterns would also reflect today's time based services patterns, albeit with internal coordination at local levels. Each young student would become a knowledge entrepreneur, alongside more routine responsibilities. The elderly would gain the ability to return to knowledge based endeavor, when it becomes more difficult to perform other forms of work. The elderly would also be able to bring young people together, who they feel would benefit from mutual learning efforts with one another.

Smith spoke of the "affected anxiety of the lawgiver", as a way to expose the fallacy of government "protection" of the public in particular. Once, home construction may have required the largest income possible, hence teaching may have needed to be limited to the "best and the brightest". But there is no excuse now to exclude those who seek to work, given the capacity of technology to generate today's environments with a mere fraction of the time and resources that were once required. Fortunately, today's technology gives people the chance to create wealth along more horizontal dimensions than in the past.