Wrap Up for July 2016

Lately there's been lots of discussion about the political shift away from left/right ideology to "open" or "closed" mindsets about the world. Yet it seems to be more than this. Perhaps what's at stake is more a matter of becoming open to internal change and redefining work potential, so that nations do not close their doors to one another, and the globalization which still carries tremendous possibility.

Ross Douthat asks, Is cosmopolitanism a myth?

Timothy Taylor highlights vivid details what life was like in the year 1800, via Chapter I, Volume I from Henry Adam's History of the United States.
https://conversableeconomist.blogspot.com/2016/07/trying-to-envision-original-united.html

Thanks to James Pethokoukis for providing a clip of the opening ceremonies of the 2012 Summer Olympic Games in London, which featured a reenactment of British history and the Industrial Revolution.

This NYT article touches on the problems of Boulder, Colorado in their efforts to keep a local middle class.
http://www.nytimes.com/2016/07/04/business/how-anti-growth-sentiment-reflected-in-zoning-laws-thwarts-equality.html

National Affairs (Eli Lehrer) takes a look at "The Future of Work".

Ryan Nunn argues that the U.S. needs more flexible labor markets.

The growing divide between "mass populations" and "informed publics".

One reason I advocate coordinated group benefits of time value and asset formation to supplement a base wage for low income levels, is the fact that attempts to generate higher wages for these groups often have negative side effects. This Adam Smith Institute article explains how elderly care can be affected, by rising wages for healthcare workers in Britain. A similar problem in the U.S. involves a recent push to mandate more strict qualifications for pre-K, which would only make it more difficult for parents to gain access to childcare.

George Selgin's Monetary Policy Primer, part 6.
http://www.alt-m.org/2016/07/12/monetary-policy-primer-part-6-reserve-deposit-multiplier/

Healthcare needs to become part of a primary market, or a point of wealth origination in terms of time based product. Once this (largely) time based service becomes capable of generating growth on monetary terms, governments can finally breathe easier about their long term budget needs. From Timothy Taylor:

...healthcare spending is at the heart of the distressing forecasts for where federal borrowing is headed in the long term. It's not novel to say, but still worth pointing out, that higher healthcare spending is already crowding out other government at both the state and federal level.

As Angela Rachidi stresses, employment is about much more than just wages or income. Fortunately, there are substantial means to address the reasons why people choose not to work, in the present.

From the Washington Post, "Health care spending is projected to grow much faster than the economy."

Will Wilkinson at Vox: "Bernie Sanders is right the economy is rigged. He's dead wrong about why."

Thanks to Gavin Kennedy for pointing out this Evonomics article:
http://evonomics.com/failed-economics-tyranny-of-mathematics-enslaved-wrong-theory/

In a recent post, "Tech for Housing", Jeff Fong at Market Urbanism also highlighted a popular article from 2014 regarding San Francisco's housing crisis.

Scott Sumner offers a clear explanation of the rationale for NGDP futures markets, in this post.

A sad saga of building highways through cities, instead of around them.

"In placing greater weight on the global economy, Lael Brainard, a Fed governor, has argued that the Fed needs to consider the impact of its decisions on other countries."
http://www.nytimes.com/2016/07/26/business/lael-brainard-donning-a-global-lens-champions-low-rates-at-fed.html?_r=0

JP Koning questions the value of helicopter money in this post.

Unfortunately, YIMBYs have a long way to go, in terms of organizational capacity.

James Alexander highlights a WSJ interview with Governor Daniel Tarullo, and for good reason: https://thefaintofheart.wordpress.com/2016/07/27/daniel-tarullo-the-feds-market-monetarist/

The Economist talks about the new divide: http://www.economist.com/news/briefing/21702748-new-divide-rich-countries-not-between-left-and-right-between-open-and

"Most people do not want their values to be tolerated - they want their values to prevail." https://fee.org/articles/the-nationalist-socialist-moment/?mc_cid=dc2fd930f6&mc_eid=6aa86d7108

Bonnie Carr addresses a recent Bloomberg post from Noah Smith:
https://dajeeps.wordpress.com/2016/07/31/noah-smith-higher-inflation-target-not-ngdp/

Notes on Equilibrium Corporation Core Functions

After plenty of consideration, I realized "equilibrium corporation" could be a suitable name for a new form of corporate structure. After all, much of the organizational capacity this framework would involve, exists as alternatives to general equilibrium conditions.

These alternatives are free market in orientation, at a level that would be impractical in today's rigid economic environments. Indeed, the knowledge use systems which equilibrium corporations make possible, could be considered a form of libertarianism for time based services product. Production and consumption of services, land and building components would be locally held, so as to preserve a time value to resource value link for low income levels that is often not available in general equilibrium conditions. Decentralized offerings such as these would provide hope for libertarian "leanings" at the margins, given a present day reality where more citizens are now concerned that their set of values is not simply tolerated, but that it prevails.

Even though the equilibrium corporation would encourage unique (community) characteristics, it would include a broad set of economic patterns as a common "backbone", in each decentralized setting. Think differences in cultural outlook depending on community, versus a unified spectrum approach in terms of economic formation and knowledge use preservation. And while this corporate structure is a response to what has become political/macroeconomic gridlock, it would also simplify the ways in which individuals assist one another as they go through the course of their lives.

What might the common economic "backbone" consist of? Supply and demand for services and asset formation, would become internalized. Citizens would break free of their present (limited) consumer roles, by becoming time based service providers, for starters. Another important aspect is a combined public/private framework in a single setting. Time based functions are coordinated and prioritized as a starting point for organizational capacity, whether "public" or "private" in nature.

One reason this matters, is that fiscal transmission processes are overly complex in today's public and private enterprise, for they have not accounted for what are crucial differences in revenue origination. Since time value is a fixed component in relation to other forms of resource capacity, budget priorities can be readily skewed. A prime example are the legal requirements of pension and entitlement obligations, which have made too many claims on presently existing "prime" time value, in relation to its actual supply in the marketplace.

Consequently, equilibrium corporations would record and maintain the distinctions between resource use and availability which is time related, versus those which are not. By doing so, it is possible to determine what is occasionally available for infrastructure building and maintenance capacity, versus what is generally available on a regular basis. This allows a smoother transmission to take place between services based activity, and the physical constructs which serve as environments for time based coordination. Most important, it becomes possible to measure the time based content of services capacity. The fact this form of product is practically "dark matter" in general equilibrium conditions, makes it difficult to recognize the actual services shortfalls that exist in services - particularly in regions which already experience limited economic complexity.

Since today's time based services marketplace exists in a secondary capacity, no one really knows what is optimal, in terms of mutual assistance as opposed to what one would prefer to do for oneself. One reason knowledge use readily defaults to captured wealth settings, is that reversion to the mean does not naturally occur (via monetary representation) for asymmetrically compensated time based product.

As a result, too much applied time value potential is lost to a non economic status - if and when this form of potential is even recognized in a consumer based culture. While no equilibrium cannot create a reversion to the mean for time based product in relation to general equilibrium (constant time value, random resource value), alternative equilibrium can do so, when time value is utilized as a unit of measure in relation to itself.

Some core functions are also monetary in nature. While I've emphasized a connection between the equilibrium corporation and "time backed" money in a number of posts, there's actually a better way to describe this function, as a suitable point of reference: time linked money. How so? Time backed money is somewhat misleading, in that it implies additions to what are present monetary values for time aggregates in general equilibrium conditions. I don't propose more claims on existing capacity, because 1) already existing time value claims exist in a mature equilibrium construct, and 2) new growth would not make further claims on existing value, and 3) new growth is possible, via making time value equivalent to a raw (starting point) commodity good for further "processing". One could say the equilibrium corporation processes time value.

Granted, there are definite time links with monetary representation in general equilibrium, and regular readers know that I associate nominal income as the intersection between time value (as it is already accounted for) and other forms of resource capacity. This vital intersection is the most stable point in our economic realities. However, it has proven increasingly difficult to account for time value as the wealth contributor it actually is. Hence the equilibrium corporation would provide a stabilizing function for aggregate time value at the margins, through recording its relation to other existing resource capacity as a regular function.

Time linked money would provide means to standardize time value in relation to local resource capacity. Part of the process includes internal asset and service formation, as reliable supplements alongside a monetary base for local time value. Processes such as this are particularly needed for lower income levels, since monetary representation for these groups tends to distort general equilibrium conditions. For instance, a recent Adam Smith Institute post noted what occurs, when money (instead of other support means), becomes the primary component of support for lower income levels. Governments have attempted to provide benefits in lieu of income support for low income levels, via welfare states. However, the external augmentation of time based services, only further undermines their price mechanisms.

There's another important aspect of time linked money, which is also responsible for its potential to generate a higher growth trajectory: mutually backed employment generates new wealth which is not debt dependent in any way. Even though today's wealth has its origins in tradable sectors, economies have gradually became structured so that economic access often requires further debt creation, before more wealth generation is possible. However, the debt as wealth generation process has become too efficient, in that debt generation is mostly extended to high value skill sets and resource utilization. As a result, lower income levels have gradually lost their ability to either produce or consume, given how crucial elements of the marketplace are now defined.

By now some readers probably suspect that I don't find credit restoration to lower income levels to be an apt solution. Especially given their present lack of representation, for either time value or useful and encouraging environment definition for living and working needs. This is why time value needs a chance to serve as a new source of wealth generation. And credit institutions need not remain at the front of the line with their irrational and people defying dictates, for every form of wealth creation imaginable.

Equilibrium corporations would be more than willing to supply new means for wealth creation, in the form of human capital. Among the defining characteristics of this new growth capacity, would be its incremental nature, as groups begin to reimburse one another, simply for their mutual agreement to assist one another. Prototypical units of time and knowledge based service would no longer bear the burdens of harsh judgement, as now occurs when knowledge and time are asymmetrically compensated.

Incremental ownership also provides a nudge factor for individuals to hold fast to basic protections, even as they are encouraged to take greater risks in their own lives. Having basic asset structures as a fallback position, is one of the best means to protect one's health from spiraling downward, when in fact risks turn out to be too much for the circumstance at hand.

And last, but certainly not least, the equilibrium corporation would provide - finally - a free market for the time value which matters most to all of us. Only remember the worth of free markets, according to Milton Friedman:

What most people really object to when they object to a free market, is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really lack of belief in freedom itself.

The Decentralization Option

One of the problems with present day income inequality, is that some believe monetary policy should be addressed as though it were a great divide to be bridged by bringing spending "under control" for the average household. However, this is a wrongheaded approach, given the fact monetary policy needs to meet the actual monetary obligations that are held on the part of all concerned.

It's difficult to know for certain, whether some central bankers who overreact to today's imaginary inflation, are also being swayed by a subset of Austrian economics which actually reasons that the poor are "better off" when central bankers refuse to print more money. However, this is the same reasoning which - when carried too far - leads to bad deflation. Such deflation scarcely helps anyone living on a small income, it only makes everyone worse off. Even though the disinflation of recent years is not in the same category as depression level bad deflation, it nonetheless has cumulative effects which can't be lightly dismissed.

Fortunately, there are far more productive ways, to bring the marketplace within reach of those with smaller incomes. Instead of attempting to address inequality by destroying existing wealth - whether by war, further redistribution or excessive monetary tightening - why not allow the kinds of innovation that would also reduce the life struggles of those who are sometimes lacking in physical stamina and/or high skill levels. A new form of corporate structure could begin this process, via an alternate equilibrium which would not pose a threat to either the monetary or supply side conditions of general equilibrium.

These local and decentralized economies would benefit from a formalized version of imputed time value, which is particularly important since time value would gain monetary compensation as a starting point for economic activity. A time continuum for services generation and asset structure would be linked with coordinated group processes, in knowledge use systems. The same imputed time value efforts that would provide a cushion for those with disabilities who want to work - for instance - would be the same group supported time use which contributes to local research and development.

Via much needed innovation and new organizational capacity, non tradable sector activity would "move closer" to those who have struggled to meet these requirements on general equilibrium terms. Still, it's not about "dumbing down" or otherwise creating less "exceptional" environments, but providing innovation for desirable environments which encourage the capacity and stamina of the average individual. Of innovation, Alberto Mingardi recently wrote:

Innovation is not about technological progress per se, it is not even about "new stuff", per se: it is about what Deirdre McCloskey calls "market-tested progress", and the market-tested part is not trivial. Making new technology a means to better answer consumer's demands is not trivial, is not a mere "last mile" of innovation. It is its essence. Innovation is about "products", and "products" are about serving people's needs and wishes, not just doing something which was never done before.

The decentralization option would - in some instances - put a name to people's needs and wishes that they did not even realize existed. Often, this is exactly what new products in the marketplace have done, and people have wondered afterwards, how life must have been before those options became available. Indeed. It's time to allow innovation a chance to simplify our environments, so that more of us can gain the ability to move beyond what are all too often, unnecessary burdens and limits on our abilities.

Government and the Secondary Marketplace Factor

Lately, the term "secondary marketplace" seems to have become more prominent in my posts. And - once again - my usage refers to a supply side or "real economy" structure, which in this instance varies widely from the financial definition normally associated with secondary markets. However, a recognition of today's secondary market status is warranted for knowledge and time based product, because of the macroeconomic and microeconomic issues at stake.

Macroeconomic considerations are particularly important, because the government budget dependence which generates a wide range of knowledge use, negatively impacts long term growth capacity. Governments cannot move ahead of private interests in the provision of knowledge/time based product, in part because of the way this good is presently defined. When knowledge use is monetarily compensated by governments in a secondary market position, the redistribution required, means each unit of knowledge based product needs to be paid for twice.

In a sense, this organizational structure limits knowledge based economic participation by half, of what is already the case in a merit based framework of economic possibility. Whereas much of private industry compensation for knowledge/time use on merit based terms, exists via discretionary income (for personal high and low skill services), or by the degree to which asymmetric compensation contributes to the final marketplace product of tradable sectors. Even though today's private industry utilization of knowledge use is incomplete, this form of time value can be accessed more directly.

Unfortunately, in terms of arbitrage, governments nonetheless attempt to treat knowledge based product as though its resource capacity exists much as any other resource category across the spectrum. Too few have truly come to terms, with the fact that time based product exists in relation to other (comparable) time based product. As a result, far too many knowledge based coordination functions, do not have direct relation to the monetary representation that is aggregate resource capacity.

For example: one way to break down this time based product reality in the U.S., are those "neighbor" healthcare emergency clinic commercials, which encourage the random television viewer to believe their "neighbors" are always "there" for them. Yet this form of services product mostly holds in relative income terms, i.e. not those of the resource strapped individual who needs an emergency room which can accept most anyone at some odd hour of the night.

Since knowledge use - as a secondary market - is only partially compensated by discretionary income and government redistribution, increased merit is now mandatory, in order for most individuals to be able to take part in the economy. Decades earlier, merit as a requisite for knowledge use, was less problematic on a number of levels. Today however, efforts to initiate economic access without ("appropriate") merit are rapidly becoming a first mover problem in general equilibrium conditions, even as personal production options other than knowledge use, give way to technology and automation,

These limits on personal economic time value, increasingly pose risks for long term prosperity. Should governments eventually opt for providing basic income to citizens as a budgetary defense, associated efforts to scale back welfare states make the process far too complicated. Too many aspects of welfare states have subsidized the same knowledge use requirements, which now limit economic participation for citizens as a whole. As a result, no amount of basic income - at least in a normally understood supply and demand resource framework - would provide access to earlier knowledge use structures which were built and intended for higher income levels.

This is why knowledge use systems are needed, to provide means for lower income levels to engage in the production and consumption of time and knowledge based product, well into the foreseeable future. Best, this process would allow knowledge use and time value to exist as primary forms of wealth generation. As a primary marketplace, symmetric compensation would allow time value in aggregate to slowly - but surely - restore the growth trajectory which existed until the Great Recession.

Some Notes on Stock Management Potential

For as long as anyone can remember, many individuals with limited incomes held a stock management option in the form of agriculture, when other means for wealth generation were beyond their reach. Even though farming often didn't compare to more lucrative forms of employment, nonetheless, in most seasons it could be relied on as means for survival. Why aren't more stock management options now available, especially in places and at times when other employment options are scarce? And - if such options were available - what might they consist of?

Knowledge use is particularly important as a stock management option. All the more so, since much knowledge use exists as a secondary marketplace, where discretionary income and government redistribution limit the knowledge applications which can be compensated. By treating time value as a basic commodity, a primary market would gradually become possible for time and knowledge based product - one that would consequently be available to multiple skill levels. Even as a marketplace for time value would help restore economic freedom, it would also help to restore the civility which in some respects has been lost to automation.

When time value is assigned an internal economic relation for mutual coordination, group time value becomes capable of stock management. Since time arbitrage need not rely on outside revenue in order to take place, human capital becomes capable of directly generated wealth. By far one of the best benefits of a time based marketplace as well, would be renewed local economic activity, which would help to stem the present political backlash against the benefits of globalized tradable sectors.

Many forms of knowledge and skill can be likened to fertile "soil" that could generate a wide variety of time based services product. Unfortunately, too much knowledge use is now associated with controlled flows (via patents, etc.) of specific knowledge sets, which take little notice of the much larger pools of individually and mutually held knowledge stock. Controlled knowledge flows can also translate into limits for total economic output. For instance, Tim Worstall, in speaking of trade offs, writes:

We can, for example, promote primary innovation by giving strong intellectual property rights to it, but at the cost of, the stronger such right, the derivative innovation that we've just banned.

Indeed, Worstall was speaking of the potential for new knowledge applications from recently acquired knowledge sets. Today's arbitrary knowledge use limits contribute to a sustained loss of knowledge and time value in aggregate, particularly for tried and proven stock knowledge applications in the marketplace.

Loss of potential for innovation, is just one of the ways wealth capture endangers total output and inhibits long term growth. One reason why public and private interests alike appear to "double down" on forced flow strategies for knowledge value, is that other revenue sources don't always provide what is needed, for budgets that are just as demanding as ever.

Why did a preponderance of earlier stock management organizational patterns, give way to present day reliance on resource flow patterns? Some of this shift came about in the process of settling the New World. Often, settlers did not need to tend to a specific set of resources for long. This ability to steadily move forward to the next set of options, established resource use patterns which extended well beyond the land use most associated with this phenomenon. Institutions of all kinds became dependent on short term resource maximization, in part because of the ways system responsibilities were consequently established. For instance, preferences for extraction flow patterns in the photos of a recent Market Urbanism post, come through loud and clear.

Ironically, many incentives exist to continue knowledge suppression, since stock management of time value (and other resource capacity) generates less revenue flow in the short run. Hence stock management is yet another difficult first mover position for general equilibrium conditions - all the more reason to begin these formats via alternative equilibrium. For instance, consider a general equilibrium circumstance: Who can be expected to argue against any specific institutional extraction based flow approach, if that approach has become the primary redeeming component of one's 401K?

Healthcare is an apt example, how populations have gradually lost stock management approaches (which include personal time value and common knowledge pools) to flow structures which specifically emphasize new technique and specialty skill. All the more unsettling, when physicians are expected to bear responsibility for all potentially relevant health knowledge stock, even though they need to maintain lifetime learning, simply to stay relevant in their field.

Often patients would benefit from already existing knowledge stock, which does not necessarily have suitable replacements in today's marketplace. This escapes notice, since the issue at hand is not always economically rewarding in an environment of optimized knowledge revenue flow. Hence, 1) one's doctor may only be partially aware of suitable alternative approaches, and 2) the doctor's time is not optimized to apply what he does know, in terms of stock knowledge that is specific to the unique circumstance of the patient. While other healthcare providers can sometimes provide assistance in this regard, more often they need to follow through a physician's directives.

Even though healthcare is one of the more obvious contenders for additional wealth creation in the form of stock management, it is simply one of many examples. Time arbitrage would make it possible for populations to discover both pragmatic and experiential forms of product which are not widely utilized in the present. Equally important, are physical stock management options in the environment. One reason recycling benefits are somewhat mixed, is that they tend to be approached in a revenue flow construct, which makes it difficult for specific groups to adapt unique (local) recycling strategies.

3D printing is one of the best examples of stock management potential, given the fact it is especially well suited for local and decentralized group activity, in contrast to the scaling up processes associated with centralized organizational capacity. So long as local populations are able to maintain future balance between tradable and non tradable sector production (one can only hope), 3D printing would eventually be able to provide on site local augmentation, for mass produced building and physical infrastructure components.

Land as Symbolic Coordination Value

To what degree is the physical component of land, responsible for today's wealth?  After all, much has changed in this regard, in recent centuries.

When land value meant coordination of time value for agricultural capacity, land value was widely dispersed, and also intensively utilized. Once land use began to transition to manufacture and industrial patterns, social coordination and land use gradually became more concentrated as well. As production processes became more efficient, even smaller quantities of land were needed, in relation to total output. Changes in land use mean greater organizational clustering, and the value of  spontaneous societal coordination, gradually assumed greater monetary and economic value.

This intensification of land value for coordination processes continues apace, as manufacturing makes way for services based economies in developed and developing nations alike. Today, primary land use value exists in relatively tight clusters, particularly in regions where a high degree of coordination takes place for time value and knowledge based product. Imagine for a moment, clusters of spontaneous coordination as a highly desirable marketplace component (which they are) as "wild salmon". Since the serendipity of spontaneous coordination ("wild salmon") is in short supply, why not supplement it with the "farmed salmon" of organizational design for time and knowledge value?

In other words, generate more of the knowledge "value added" marketplace which populations now seek, via more closely designed organizational patterns. These knowledge use clusters would still be tightly arranged, but different from regional or major city formation since they would be small, broadly dispersed, and capable of utilizing digital potential. Even though some might argue that a "farmed salmon" version of knowledge use isn't economically "healthy", others would be more than happy to have a viable economic option, to today's limited services marketplace. And multiple benefits would accrue, beyond those that directly affect participants in knowledge use systems. After all, corporations have already been coordinating time value for centuries, and there's no reason why a new corporate structure couldn't do the same, within a combined supply/demand and production consumption construct.

Why hasn't a similar process already occurred? Asymmetric compensation has meant a secondary marketplace for knowledge use, and the resulting discrepancies in land use options, increasingly reflect the partial nature of knowledge use in aggregate. Some of the most important forms of knowledge based product have been subjected to extreme forms of location clustering, in spite of the digital promise of wide knowledge use dispersion. Knowledge use wealth capture is an inefficient and incomplete outcome, for the wealth potential of time based product. Indeed, the recent decline in nominal income is one of the major indicators as to what has occurred, even though the problem has not been openly discussed by either policy makers or central bankers.

Land values - over time - can be greatly affected by the degree of economic complexity that not only accrues but remains intact in a given location. However, even though organizational capacity can be nurtured and developed, other more specific aspects of location often lie beyond the ability of individuals to control. Because many aspects of the economy remain in flux, assigning specific attributes for land use beyond that of time value, presently involves more risk.

Consequently, capital intensive infrastructure for specific locations could prove a better follow up strategy for successful knowledge use system formation, than initial development along these lines. Even so, some building and infrastructure components would be flexible enough that they could readily be relocated, should an equilibrium corporation decide to move and start anew. Many environments would respond to group efforts that make them pleasing places to live and work, without requiring the major expenses associated with today's development patterns.

The equilibrium corporation would establish an ownership structure in which actual land use holds a symbolic coordination value, one that would eventually be reflected as rent options for non locals to live and work within these communities if they so desire. This symbolic value would also be a reflection of local incentive patterns, which derive ownership benefits to supplement a time value commodity wage. Even though specific locations would gradually accrue additional monetary value as they mature, initially these communities are built to nurture a time value continuum as the primary component of community formation. Fortunately, should specific locations turn out to be temporary, the time continuum for coordinated activity would readily transfer to new settings.

How to envision ownership in the equilibrium corporation? Time value allows participants to accrue ownership shares which exists in (at least) three dimensions. First, the initial processes of discovering time value in relation to others, provides access to coordinated services activity and the educational structure associated with it. Then, the physical components which include living and working accommodations, in the form of land availability and building use options. The third aspect of this process is more closely related to local business opportunities, especially in terms of investment pools.

Possibly the greatest productivity potential of the present, is taking advantage of spatial land characteristics so as to make greater efficiency possible for combined group action. In spite of the broad coordination gains of an automobile defined environment, these gains came at the expense of aggregate time loss in the form of extended commutes and the need for separately existing time choices. By bringing spatial components into a close framework, groups would not only regain time use options, but also greater flexibility in terms of time use decisions during the course of any given day.

What counts most, is effective coordination for the shared experiences both pragmatic and experiential, that do a better job of organizing scarce time availability. Ultimately, it is the experiences we share with others, that lend the most meaning to daily existence. With a little luck, our economic organizational patterns can do a better job of reflecting this reality. As Paul Romer noted in a recent post, "At the most basic level, an economy grows whenever people take resources and rearrange them in a way that makes them more valuable."

A Mid Range Level of Intelligence

Ultimately, that's all this blogger can really claim. In spite of a love of learning that has lasted a lifetime, my capacity for learning via the "proper means" has always been compromised to some extent. Indeed, there's little I've posted about that could even be considered "new". If my arguments appear different, not everyone has incentive to make similar arguments in the same context, i.e. can economics be a great tool even for those with limited resources?

And - such as what many others experience - age related health issues have seemingly arrived "too soon". Am I ever grateful now, for long hours spent outdoors hiking, exploring, gardening and the like, when it was easy to do so! Consequently, I feel for anyone who lives in a low services state and is letting health concerns accumulate while still in the workplace, before "giving in" to ask the assistance of physicians via Medicare. Sometimes I look back and wonder what the "alternate life" would have been, with the college degrees I so wanted in my twenties. Perhaps I'd still be writing Beethoven-inspired classical music...

All personal musings aside, there's a larger question. Does society have room to utilize a mid range level of intelligence in the marketplace? Right now the answer appears as though "no", especially since one of the more important indicators (mortgage credit) is now being denied to average and below average income levels. Today's asymmetrically compensated knowledge use is mostly that of the "best and the brightest", as institutions have slowly adjusted to making do with less in terms of labor force participation.

The problem is that too much knowledge potential, and time value beyond that of the best and the brightest, is now going to waste. The result could be thought of as "plantings" of high skill knowledge gardens, whereas the planting of less capable gardens are mostly denied, since they would not bear "produce" in the same abundance. And when those of average or below intelligence cannot plant their own gardens, they remain in limbo, as to whether they can plan for life as a willing and responsible participant.

Knowledge is today's most important property holding, yet much knowledge application takes place as though existing in a "new state", whereby institutions treat knowledge use as one of many other resource options locally available to the public for production potential. Knowledge use properties are comparable to what land properties once represented for primary production. However, consider two different aspects of the earlier reality, which still apply: land use and rent depend on whether properties are used for resource extraction (flow), or ongoing care and maintenance of resources (stock).

This particularly matters for knowledge use, which is often treated as a form of extended extraction via patents, as opposed to the general maintenance that is possible for long term knowledge use management. As to the difference, David Ricardo explained how he was primarily concerned with property in the "use of its original and indestructible powers". And land, just as knowledge properties and individual time value, varies in quality. Of the need to further develop land, Ricardo wrote:

If all land had the same properties, if it were unlimited in quantity, and uniform in quality, no charge could be made for its use, unless where it possessed peculiar advantages of situation. It is only, then, because land is not unlimited in quantity and uniform in quality, and because, in the progress of population, land of an inferior quality, or less advantageously situated, is called into cultivation, that rent is ever paid for the use of it. When, in the progress of society, land of the second degree of fertility is taken into cultivation, rent immediately commences on that of the first quality, and the amount of that rent will depend on the difference in the quality of these two portions of land.

When land of the third quality is taken into cultivation, rent immediately commences on the second, and is regulated as before by the difference in their productive powers. At the same time, the rent of the first quality will rise, for that must always be above the rent of the second by the difference between the produce which they yield with a given quantity of capital and labor. With every step in the progress of population, which shall oblige a country to have recourse to land of a worse quality, to enable it to raise its supply of food, rent, on all the more fertile land, will rise. 

Once, those with a mid range level of intelligence could seek out the lesser fields which were in fact those of land. So long as working the land was an option, time value existed in relation to the earth's resource potential. Today, however, time use exists primarily in relation to the time use potential of others. Given this important relationship, time use possibilities have been arbitrarily limited, yet no one's time value can be left completely unaccountable without undue loss of freedom. Even though asymmetric compensation can not consider time value as a complete set of aggregate potential, symmetric compensation could still capture the lesser fields of knowledge use. Again, Ricardo:

It is true, that on the best land, the same produce would still be obtained with the same labor as before, but its value would be enhanced in consequence of the diminished returns obtained by those who employed fresh labor and stock on the less fertile land. Notwithstanding, then, that the advantage of fertile over inferior lands are in no case lost, but only transferred from the cultivator, or consumer, to the landlord, yet, since more labor is required on the inferior lands, and since it is from such land only that we are enabled to furnish ourselves with the additional supply of raw produce, the comparable value of that produce will continue permanently from its former level, and make it exchange for more hats, cloth, shoes, etc., etc. in the production of which no such additional quantity of labor is required.

Today's knowledge potential is also today's property potential, which could restore the growth trajectory in a way that no one of sound mind would be able to argue with. Notice how tending the lesser fields would also increase the total output of tradable sector production, as indicated in the last sentence of the above quote.

P.S. And - in the "never say never" category, I would be remiss in this post if I did not also offer the potential of symmetrically compensated mid range level use of intelligence in towns, villages and small cities, as a protection factor.

A Plea For Economic Vitality

No economy or general equilibrium state can be considered vital or truly dynamic, if it is faltering at the margins. Why do policy makers and others turn a blind eye to local examples of economic abandonment, particularly in places which had extensive investment - in some instances - only decades earlier? Has everyone given up on long term growth?

It's one thing if existing structures clearly need to be torn down, for some reason. Is this what we are to expect when so much expense is poured into buildings and locations that are mostly intended to be usable for fifteen years, as has occurred in recent decades? Why not either build with the hope of greater permanence, or else design for greater flexibility at the outset via yearly spatial adjustments? In some instances, "permanent" new buildings are constructed with the promise of new business tenants, only to end up underutilized as extra storage space and the like, such as occurred recently on a nearby Main Street. What a waste!

The fact that neither public or private interests have addressed what can only be considered a wide array of economic abandonment, contributes to the kinds of social unrest which many of us who are older, never expected to see again in the course of our lifetimes. Faltering Main Streets were the first indication of trouble. Presently, abandoned businesses and homes in suburban areas are continuing the cycle.

Is it possible that shifts in middle class income patterns (less "middle", more "high" and "low") affect the dearth of local investment? After all, those with lower income levels have long taken advantage of existing real estate opportunities, when higher income levels shifted to new options elsewhere. A lack of investment along a full (diverse) income spectrum, contributes to an economic "deepening" of investment (instead of widening), as David Glasner noted in a recent post. His example highlighted capital deepening in relation to hiring decisions and efficiency in scale on the part of major companies, but these processes doubtless affect small business formation as well.

What is at stake in all this, is whether today's economic constructs remain vital to a point of being able to replicate themselves. Thus far it's been too easy to be fooled, when replication does takes place in developing nations (or more recent arrivals), but not in developed nations. What's the difference? A cellular organism has to divide (i.e. new wealth source) to generate new life. Not just stretch! In other words, economic vitality is not just a matter of expanding or bringing more entrants into already prosperous areas, but starting anew.

Meanwhile, cities and nations tell potential newcomers in no uncertain terms that they are basically full. Only so much augmentation is possible in the reigning circumstance of the present. And no one wants to hear it, because it is still too difficult to contemplate starting over. If today's economic conditions are to remain amenable to long term growth, this is no time to give up on places which have experienced less prosperity. Yet one reason it has been difficult to start the process - at least in the U.S. - is the lack of a national dialogue as to how citizens would like to live, work, and economically engage with one another in the 21st century. Instead, legislators and special interests are busily enacting laws to make many options in this regard off limits, across an entire realm of possibility.

Perhaps my outlook is even more "Malthusian" than usual (about economic vitality), due to a telling set of pictures and story line which provided a much needed warning. While prosperous regions and their residents mostly remain convinced all is well, economic stagnation continues apace at the periphery. From Johnny Sanphilippo at Market Urbanism, in "Your Town is a Financial Timebomb":

I keep up with the reports and journalists proclaiming that America's suburbs are thriving and will continue to do so forever. Yet I keep scratching my head since these depictions are  in conflict with what I keep seeing on the ground as I travel around the country.   

Many citizens don't have the current option of living where service formation and tradable sector production both exist in abundance. The above linked article also alludes to the fact that extensive government infrastructure is questionable, when much of it appears to encourage abandonment sooner, rather then later. Are we using the wrong kinds of infrastructure, if these forms of government investment end up being treated disrespectfully? How can governments contemplate further investment spending along the same lines, if too much ends up being squandered? It's time to recreate not just the environments that some of us live in, but also the ways in which we wish to interact with, and assist one another.

Is Time Based Product Amenable to Value in Exchange?

It's difficult to know for certain. All the more so, during periods of economic stagnation, when time based product - as a secondary component of market formation - distorts the tradable sectors which directly coordinate prices, supply and demand, and output. When a slow growth economy is services dominated, and merit based compensation is the only means to provide time based product, this can limit all output in aggregate, as services gradually become limited in their turn as well. As this process continues, populations become less able to support the tradable sectors which generate the initial revenue for non tradable sector formation.

Fortunately, the time arbitrage of knowledge use systems would make time based product more amenable to value in exchange capacity. Presently, the growth limitations of asymmetrically compensated time based product, remain hidden in ongoing struggles which often appear as though austerity, versus the roles of fiscal and monetary policy for long term growth. I was reminded of the validity of the post title question, after reading this from David Ricardo:

In speaking, then, of commodities, of their exchangeable value, and of the laws which regulate their relative prices we mean always such commodities only as can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint.

What is problematic about time based product in its present formation? Unlike the time value associated with tradable goods, when high quality investment is a central component of time based product, the investment does not increase the quantity of time based product available to the marketplace. Human exertion increases the value of time based product, but not the quantity of product as in tradable sectors which would otherwise generate further revenue to compensate additional resources utilized in relation to time value.

Lacking a sufficient quantity of time based product, multiple institutions end up paying for increased investment in skills capacity, as indeed as occurred for the array of institutions which now pay for healthcare, in addition to the consumer. Growing budgetary restraints in this regard, also account for the fact that automation will gradually begin to substitute even for skills at the highest levels, as it becomes more difficult for budgets to meet sufficient asymmetric compensation for vital skills sets.

Marketplace representation of time based product exists solely in relation to itself (i.e. the potential reciprocity of time aggregates), which is why time based services are not amenable to the same direct coordination that money provides for other forms of resources. While money can partially coordinate prices for time based product, it cannot do so as a first order process, given the secondary nature of time based services in the marketplace. Other resource relationships are more capable of providing clear price signals for large scale coordination processes. So long as finished product exists separately from time value, money captures the relationship between both resource availability (scarce or not) and also the ways in which time value affects a given product.

Healthcare - for example - would only reflect value in exchange in purely monetary terms if it were completely automated. However, time arbitrage could preserve sought after human activity, by providing a value in use function for healthcare time investment, which allows time based healthcare product to approximate a value in exchange framework. The "catch"?  Value in exchange in this instance, would be a result of coordinated product in terms of time, rather than price. Why would such a strategy even be worth pursuing? Is that really economic? Let's pick up Ricardo's discussion regarding value, from the above quote:

In the early stages of society, the exchangeable value of these commodities, or the rule which determines how much of one shall be given in exchange for another, depends almost exclusively on the comparative quantity of labor expended in each. 

"The real price of everything," says Adam Smith, "what everything really costs to the man who wants to acquire it,  is the toil and trouble of acquiring it"..."Labor was the first price - the original purchase-money that was paid for all things." Again, "in that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labor necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them with one another."

Today, healthcare is still paid for according to the original price of labor - i.e. the amount of labor that is actually required in total for an individual to present a product. It's fair to suggest that healthcare remained in the "primitive state", in terms of labor compensation, as contrast with the labor associated with tradable sectors.

Granted, it makes sense to compensate a physician for the extensive investments taken in order just to practice. However, if the value of the physician's time based product were equivalent to that of a tradable good, it would be as though - instead of paying the price of a toaster in today's terms which means good deflation benefits from divisions of labor and organizational capacity  - the product is instead compensated in consideration of the fact one person undertook this vast investment process, alone. It would be like paying someone to build a toaster who had to seek out each piece and assemble the whole toaster, again, alone.

Presently, a physician's time investments cannot be tapped as sustainable revenue to compensate him or her during the course of early learning processes. Which makes it necessary for the physician to demand "more" when the time finally comes, in terms of monetary compensation. This effect is also an increase in one's time value in relation to the time value of others. The relative differences in time investment, force down the aggregate time value of those who did not need the same extensive dedication to time investment in order to accomplish various tasks and endeavor. In many instances it is possible for individuals make up differences according to access to other forms of resource capacity, but even this strategy has proven inadequate for healthcare as a marketplace.

When institutions have to share the expenses of deferred compensation for a physician's time investment, they have more incentive over time, to prefer automation which would make it less necessary for them to pay for that level of expense. Hence a physician's time becomes as vulnerable to automation (in aggregate), as the asymmetric compensation of a low skill maintenance worker.

Lifelong education for knowledge use is important. The problem for all of us, is that we make one another wait till an arbitrary point in learning processes, before many of us can ever offer sets of services skills to one another. This process imposes unnecessary expenses on all concerned, and detracts from other resource use potential as well.

No one wants their doctor to know "less" in any relative sense, especially when it's a matter of life and death. That's why multiple institutions have been willing till now, to pay what has been deemed absolutely necessary. But what happens when supply and budgets alike simply become too constrained for this process? It is possible to continuously reinforce (compensate) important skills sets along the entire continuum, through peer to peer sharing of knowledge use and application.

Instead of presenting a barrier for long term government budgets, the time investments of time arbitrage would become a stepping stone process of incremental growth for all concerned. Knowledge acquisition would serve as both investment and compensation, simultaneously. Time arbitrage could eventually put the knowledge use of non tradable sectors on a more sustainable wealth creation path. One that is more amenable to time use as a value in exchange process.

Monopolies Versus the Value in Use Option

In "The Costs of Monopoly: A New View", James Schmitz Jr. of the Federal Reserve Bank of Minneapolis writes:

Imagine what types of substitutes a monopoly might try to weaken or eliminate. It would not go after those with broad political support. Rather, it would target those with little support, those purchased by politically disadvantaged low-income segments of the population.

Consequently, some of the damage from monopoly is actually hidden from the middle class, even though it often affects them just the same, since lower income levels end up competing with them for (purposely) limited services and housing. The article is worth reading in its entirety, and Schmitz does a good job of explaining how monopolies are productivity killers. However, it is no easy task to challenge monopolies, entrenched as they are at multiple levels.

At issue is not really a matter of "breaking up" monopolies, but reexamining the marketplace conditions they impose on all involved. How do monopolies impact the trajectory of long term government obligations and future growth potential? Much of the economic damage imposed by monopolies, is due to the ways they define the scope and character of today's environments. Citizens are not only limited in their choices of housing and building components (no price saving mass production of yet) but also in terms of the services that individuals are able to offer one another.

Indeed, central banking has become a part of this restrictive scenario as well. Given today's volatile political climate, I have to swat away my skepticism when I hear "All lives matter". If monetary representation is no longer adequate for the full range of nominal income, how can that possibly be true? Central bankers are becoming less inclined to provide full economic representation, as the alternative marketplace conditions needed for lower income levels to participate, are still being regulated out of existence. 

By far the most common monopolist restriction is a citizen's right to produce - a right which was once taken for granted in the U.S. Indeed, our country's founders worried about potential losses in this regard, as they were hashing out the messy details of constitution making. Yet many of today losses added up slowly. They can be difficult to notice when the loss occurs, because citizens have had plenty of means for economic engagement, during most periods. And more is at stake than diminished output or economic stagnation. How so? Frugality and resourcefulness are no longer enough to make the difference, between success and failure.

Resourcefulness and frugality were still celebrated qualities, as recently as the Great Depression. It's a sign of my age, but I am still shocked when I observe the ways in which people "prove" to their peers how they don't have to be careful in this regard. Apparently this is a social signal, one that associates success with an income which makes such attributes an unnecessary throwback to an earlier era.

Throwback or no, an equilibrium corporate structure could still create economic environments in which personal resourcefulness and frugality would count for something. In the past, formal environments for value in use options certainly would not have been necessary. However, too many possibilities in this regard have been gradually undermined, in general equilibrium conditions - possibilities which once included shared productivity as a part of marriage. Hence an alternative equilibrium scenario, would also include resource use elements which go beyond the standard pricing of normal economic exchange.

Consider what is at stake, when of value in use options are lost. As David Ricardo noted in "Principles of Political Economy":

Utility is not the measure of exchangeable value, although it is absolutely essential to it.

For lower income levels, value in use options for time value and asset formation would serve as stepping stones for incremental progress, and as safe harbor during life's inevitable setbacks. These additional means would make it possible for those with small wages and income, to not only reciprocate with others on economic terms, but take part in the mutual security that every society seeks to build.

It can be difficult to discern value in use production and consumption options, in part because there is no clear line between economic wants and needs. Just the same, the difference between the two is invariably felt at a personal level, in times of uncertainty. All that is needed during most periods of life, is a simple fallback position, by which one can bounce back and once again thrive. The value in use option during such times in life, would be valuable indeed.

Credit: Wealth Claim, or Wealth Representation?

Credit is not a representation of wealth, but a claim on wealth, at least from the viewpoint of this observer. The difference greatly matters, and also has bearing on the alpha versus beta designations for central banks and smaller banks as Nick Rowe has explained in previous posts. Today's post is more a series of musings, in part a "diversion" from recent events such as Brexit and the recent violence in the U.S. which I'm still trying to absorb. All of which has made me more appreciative of summer reading, and having recently completed "Wealth of Nations", I found a recent post from Josh Hendrickson interesting. He begins:

One way to interpret Adam Smith's Wealth of Nations is as a critique of and rebuttal to what he called the "mercantile system" or today what we would call mercantilism. One critique that Smith made in the book is that mercantilists had an incorrect notion of wealth. In Smith's view, mercantilists confused money and wealth. According to Smith, this misconception led many mercantilists to see trade surpluses as desirable because it was a way to accumulate gold (money) and therefore make the country richer. As it turns out, this is likely a straw man of Smith's own construction.

Could this be the case? Also, Adam Smith may not have been aware of a group known as the Hartlib Circle - at any rate he did not acknowledge them in his work. Hendrickson continues:

Members of this group thought that the expansion of scientific knowledge would lead to permanent expansion in economic activity. This therefore required an expanding money supply to prevent deflation and other problems with insufficient liquidity. At least two writers within the Hartlib Circle denied that the value of money came from the commodity itself.

Hendrickson explains further, how some members of the Hartlib Circle viewed money primarily as a form of security for transaction, as payment for other commodities. As it turns out, banks ultimately monopolized the capacity of credit claims in relation to (already) existing time value - a fact which meant tradesmen would not get the chance to originate credit claims as some among the Hartlib Circle had hoped. Then as now, credit serves as claims on (preexisting) wealth or time value not just for national transactions, but international transactions as well. Where I disagree with their arguments however, is in the idea of credit as capable of representing wealth beyond the specific endogenous claims which it makes.

Oddly, mercantilists of the time had one point which may have made their trade argument more compelling. Tradable product as opposed to services was the primary (alpha) point of origination, for the monetary representation of the real economy. As far as I can tell, the role of central bankers was to provide monetary representation for what was currently being produced, as opposed to honoring existing claims on production. Nevertheless, credit claims on international wealth holdings, gradually became somewhat of an indeterminate factor, particularly after the rise of fiat monetary representation in the twentieth century. Even a country's nominal income could not be considered as strictly limited to the resource capacity of any single nation.

While I applaud the impulse of the Hartlib Circle to make vital knowledge use an ongoing component of economic wealth, I do not believe that credit should be redefined as central to monetary policy, as means for even more indefinite claims on already existing wealth. Clearly, this urge to demote the integral structure of supply and demand in the misplaced hope of preserving meritocratic pay, is a battle that has been going on for a long time.

Defining credit as representative of wealth, would ultimately distort the very structure of fiat monetary policy. Again, whenever knowledge was asymmetrically compensated for replicated product which existed separately from time value, it was possible to complete the wealth creation cycle (referenced through Adam Smith's remarks in a recent post) instead of leaving it open ended in a dissipation of capital.

Merit compensation of knowledge, while certainly understandable, nonetheless makes an indeterminate demand on other existing resource capacity which can distort normal liquidity during times of economic stagnation. This desire to be able to compensate knowledge use indefinitely by means of a professional salary, is closely connected to the impulse to rely on a credit definition of money as representative of wealth. Unfortunately, credit defined wealth is capable of breaking down supply and demand structure, alongside the forms of resource backing that maintain links between time value and resource use.

Those indefinite claims on monetarily represented tangible product for knowledge use, are unnecessarily dragging down the very product formation which has been utilized to back vital forms of knowledge in recent centuries. Now that central bankers are intent on destroying imaginary inflation, less vitality in tradable sectors ultimately means a smaller horizon for knowledge use if the problem is not addressed, despite wishful thinking to the contrary. Does anyone wonder why the growing risks of a college education are now being stressed to potential students?

There is a simple means to keep monetary policy real: make certain that money continues to be backed by tangible product, so that supply and demand are always discernible in economic activity. Fortunately, this process is also possible through personal time value, much as any other forms of resource capacity. Vital forms of knowledge can still gain meritocratic support through asymmetric compensation, but only up to a point. And it is not just the preservation of knowledge use that is at stake, but the multitude of daily real life interactions which individuals find so comforting in the marketplace as a whole.

This is why I continue to suggest time backed money in local non tradable activity, as means to preserve knowledge and the integrity of monetary structure. Time backed money would allow symmetric compensation to also exist as a real economy component, capable of contributing to wealth as a point of origination, much as any other tradable good. Even though this approach to knowledge use is incremental in nature, it would allow monetary policy to adopt growth policies which no longer exclude a sizable portion of the population, whose positive frugal nature excludes the use of credit.

New Communities: Some Spatial Considerations

More people will want to move to thriving economic regions in the near future, but not everyone will be able to enter the places where prosperity is already a given. This also holds true to some degree, for those who live in the under served areas of developed nations. As a result, individuals and groups alike need to actively reconsider, what economic access and participation actually mean. How might new communities start from scratch, in an era when knowledge use has become an important time based service product? How can new community starts contribute to aggregate supply and output, instead of having to knock at the closed door that is economic stagnation?

Communities have had little opportunity to evolve in meaningful ways, and recent additions to existing infrastructure appear as though extensions of the old. Or occasionally, someone constructs a sentimental throwback to the Main Streets that baby boomers such as myself remember from childhood days. But how useful are these design elements in the present, especially given the forms of service product which remain in short supply in the marketplace? Especially since the environments which do exist for important time based services, are primarily structured for higher income levels.

One thing to consider is the fact that in general equilibrium conditions, those with higher income levels have been willing to pay more for both housing and related amenities - both for the additional security they provide and the greater ease of getting things done. Lower income levels will want varying degrees of (lifestyle) self selection, but they will need to utilize infrastructure and related resources quite differently. For decades, however, security has been a problem at low income levels. Hence some families and individuals will understandably prefer to maintain their living quarters along the outer edges of newly generated communities, so as to have a buffer from the mixed use neighborhoods which lie closer to the center, where living space would often be adjacent to retail and service formation.

A different approach for security would be tapped for those who live near the community center, in that these groups would benefit from a constant variety of ongoing activity in the public and private areas of downtown. These are the most logical places for many among the young, old, and the disabled to work and congregate, particularly to break the cycles of isolation such groups have too often experienced in schools, assisted living facilities and rural areas.

Central locations for these individuals would also ease the commuting burdens that can be especially stressful for low income families. Families with young children or aging parents would gain access to living quarters near downtown, alongside older individuals who face the additional stresses of living alone with few family or friends nearby. These flexible ownership patterns would alleviate what can be considerable institutional costs, in general equilibrium conditions. A services oriented Main Street might resemble campus settings. These flexible "campus" arrangements could be interspersed with public spaces, alongside the privately owned enclosures that would serve as space for time arbitrage settings.

Walkable communities are a high priority, since they represent a logical starting point on an income continuum which has yet to be taken into account in general equilibrium conditions. For those with small wages and income, walkable communities would present a full range of opportunities that make it easier for everyone to generate ongoing employment - even those who face health and age related issues which occasionally limit participation.

The hub and spoke option is advantageous for walkable communities, where the center or downtown exists as a hub. From this center, a series of transportation pathways and roads (spokes) would radiate out to more traditional forms of transportation (i.e. highways, railroads, rivers and the like) along the town boundaries. Each spoke could specialize in a different form of transportation, and individuals could seek out living options along the spokes which are their personal preference at any given point in time.

These communities would in many instances not be designed for substantial expansion. Rather, they would provide a full range of living and working options, which would in turn could begin a replication process in other locations, once a certain population density is reached.

Design particularly matters for anyone with a limited amount of mobility for whatever reason, and the heart of these communities would provide ample room for these groups at its center. Ultimately, the result would be fewer individuals who remain dependent on government assistance as in the present. Areas closer to the hub or downtown, could provide living arrangements for families currently providing for either young children or elderly parents. Also, older citizens who live alone with no family nearby, would gain living quarters near the community center.

Fortunately, design for low income community structure is one of the more obvious economic patterns that would provide immediate benefit for those who are presently impacted by the spatial requirements of automobile defined towns and cities across the country. New community formation needs to address the most pressing aspects of this reality first, before moving up the spectrum to provide broader options for the middle classes which are also experiencing their own pressures in general equilibrium conditions. Indeed, much of their "beef" with higher income levels, revolves around the framework for lifestyle patterns which appear as though necessary in every instance. It always helps to ask: is this really true?

Notes On the Output Potential of Time Arbitrage

Could the time arbitrage method which would be used by knowledge use systems, generate output gains? Time based product would exist as newly created wealth, in that the time value of others would be directly purchased from one's own.

Unlike the time value associated with meritocratic "value in exchange" compensation, time value as a "raw" commodity good with common exchange value, means that everyone is eligible to take part, in what is essentially a socially and monetarily compensated value in use structure. While monetary accrual, asset formation and time based services are part of this process, the primary value exists in the social and knowledge coordination which accrues over time, as held in relatively small group formation.

In recent history, most forms of beneficial economic coordination have been limited to the activity of cities and/or the large profit and non profit institutions which tend to locate in these regions. Much of this activity has been the result of fortuitous circumstance over decades and in some instances, centuries. However: in the 21st century, it has become vitally important for individuals and groups to generate further economic complexity, in areas and regions where it does not already exist.

Time arbitrage is one way to begin this process. Most important, the time arbitrage of an equilibrium corporate structure would be new wealth, which leaves no residual, fiscal or budgetary obligation to be met by others besides the actual participants involved in the process. The symmetric structure of matched time value, makes human capital viable as an economic starting point - one not dependent on the capital or resources required for asymmetric compensation.

However, this process is a completely different form of productivity gain. The compensated value of time arbitrage is not a residual of other (previously) existing economic activity, but a point of origination for broader resource use patterns which ultimately follow. Even though these coordination patterns would often resemble those of cities and towns, they would not be as location specific in nature. In other words, they would be less reliant on specific physical environments and their related real estate factors, to generate value.

Knowledge gains would not be quantitatively valued as specifically related or assigned to any one individual, but instead categorized as part of a communications process between individuals and groups. This also makes it possible to quantify the nature of the services process, as a way of recording what compels individuals and groups to seek assistance from one another, rather than a specific component of the process that may otherwise generate profit.

Asymmetric compensation often means that time value is reduced to its lowest common denominator, in order to meet costs and stay within budget. While this is generally not problematic when resulting product doesn't include current time value, other factors come into play when time value needs to be a part of the final product. This is all the more true, when knowledge apples to product which includes an experiential or non specific outcome.

Even though asymmetric compensation greatly benefits from merit and personal time investment, asymmetric compensation cannot meet vital knowledge based needs without detracting from other forms of wealth. So long as an economy continues to grow this problem can be overcome. Today, economies have ceased to grow and asymmetric compensation of knowledge is increasingly endangered.

The problem of compensating time value and knowledge use which is not associated with tangible or tradable product, has a long history. Indeed, part of today's ambivalence regarding time based product, is a result of the fact both public and private enterprise have little choice but to meet budget requirements through the same means - reductions of time based product wherever possible. For instance, of the revenue that government sets aside for purposes of employment, Adam Smith wrote:

Had they not advanced this capital to government, there would have been in the country two capitals, two portions of the annual produce, instead of one, employed in maintaining productive labor. 

Of course, these dead weight losses are offset to some degree, since wage and income are taxed in a continuum regardless of productive or "unproductive" origination. For instance, Smith stressed that "unproductive labor" as paid for by government, is also compensated by diverted revenue from the same:

The public expense, however, when defrayed in this manner, no doubt hinders, more or less, the further accumulation of new capital; but it does not necessarily occasion the destruction of any actually-existing capital. 

Symmetric compensation could make it possible to generate further employment and the preservation of applied knowledge use, which need not destroy other forms of existing capital. In the process, human capital gradually becomes a part of the "annual produce" which Smith spoke of. Even though the formation of knowledge use systems would start slowly, it would represent a much needed turning point, so as to reverse today's no growth environment.

Productivity - until now - meant the ability to apply asymmetric compensation wherever human merit appeared as most warranted. Just the same, greater productivity can coexist as directly applied human capital, so that the preservation of knowledge and full employment need not represent a problem for the depletion of other existing capital and resources.

Freedom to Choose, Means More Freedom to Trust

Betsey Stevenson recently challenged her readers in this Bloomberg article, "Want to Help The Economy? Learn to Trust". Yes, more trust would certainly help. But just the same, the article reminded me of a "feel good" Sunday morning sermon, in which the pastor exhorts everyone to be "better" people. Who remembers that impulse by Monday morning?

Unfortunately, there are good reasons for a growing lack of trust in the present. Stevenson is right that people are losing faith in one another, and she noted that when we find it difficult to trust others, others find it difficult to trust us as well. Economically speaking of course, less trust equates to less economic output in aggregate. However, something was missing from her reasoning: the same economic forces which leave us more vulnerable or less able to choose for ourselves and others, make us less trustworthy, by default. As someone who remained (formally) unemployed for too long, I get that such a perception on the part of others is understandable.

It's not enough to persuade, cajole or reason one's way to a stronger economy, especially in a time frame when representatives of more prosperous regions are becoming more intent on closing the door to new entrants. In particular, people need new means for discovering economic interaction with one another, which are also capable of contributing to long term growth. More reliable economic patterns would make mutual trust a rational choice - one less likely to end up as excessive risk taking in terms of either one's health or personal belongings.

Just the same, whatever the label that society places on the marginalized, and there are plenty of relatively arbitrary labels: those who try to assist the ones who have fallen, have too few economic means at their disposal to help them in the ways that count most. Sometimes, when social workers are new to their work, and the light of day dawns on them as to what is really going on, it can be a cruel dawning. I remember a few years earlier, a young woman who was working with the homeless ended up screaming at a crowd: Jobs! They need jobs!

Freedom to choose on economic terms, also includes the freedom to construct one's own unique business environment, by which to interact with others. I cannot stress enough, how important this function can sometimes be, for those who may otherwise lack the social graces to thrive in the large corporate environments of the present - whether they be public or private.

Consider what freedom to choose could potentially mean, given a meritocracy which rewards people so as to encourage excessive repetition in terms of chosen skill sets. Those who are deemed less skillful, are too often expected to perform repetitious patterns continuously which others have already opted out of. Yet time value - in terms of workplace options - should also exist as a form of marketplace choice. Physiologically, our bodies constantly ask us for variety in both movement and thought processes. Our bodies naturally use the "down time" of low skill processes to prepare for the next step we want to utilize in high skill processes. When work is performed according to externally determined time frames, it is not always possible to optimize this natural process.

Also, work environments can be thought of as a form of experiential product which is paid for through time investment. While the reality of job as desirable product is now recognized in terms of happiness and self esteem, the reverse effect has not been adequately considered for remaining low skill positions. When individuals have sufficient options to coordinate high and low skill work patterns among one another, self respect - hence mutual trust - can be much easier to come by.

A marketplace for time value, would provide more freedom to choose, which in turn could lead to more respect for a wider array of work functions than presently exists. Even though broader sharing of repetitious low skill work may seem as though a small matter, it's not for the ones who are expected to fulfill these societal roles to a degree they have little remaining time for more challenging work. Trust is not a matter of wishful thinking. But I would also suggest for Betsey Stevenson that trust issues are not something that governments can work out for their citizens. These are the kinds of issues which need to be faced openly and honestly, on the Main Streets which have increasingly been left behind.

On the Vital Role of the Knowledge Donor

Put simply, a newly constructed equilibrium corporation wouldn't be possible without the assistance of knowledge donors, so this post also serves as an informal appeal to those who may eventually consider the offer. However, some readers might reasonably wonder: why am I discussing such an important subject in a blog post (i.e. digitally) instead of via the normal social circles?

There are several reasons. Health and related issues contribute to a present inability to travel on my part, and I can't be certain whether these circumstance will change. Also: without a college degree, I lack some of the qualifications to approach this matter with others at the level of, say, international summit settings where such issues are ideally addressed. I need to be clear as possible in the years ahead as to what this ongoing project would benefit from, so that others could fulfill similar functions in my stead, should they desire to do so.

On the other hand, I do hope to be able to take part in the organization of domestic summits, eventually. In these summits, other citizens such as myself would be involved who don't necessarily hold advanced degrees. Once my work is finally organized in a viable and understandable form, I'll begin efforts in earnest to reach out (digitally) and share it with others.

Either way, summits would bring individuals together from all walks of life, to explore the possibilities of a directly generated services and time based marketplace for the 21st century. For the participants of domestic summits, college degrees would not be necessary to participate, just as this form of institutional recognition would not be necessary for active participation in knowledge use communities, afterward.

However: in terms of setting up organizational capacity, knowledge use systems and the corporate structure they rely on, would greatly benefit from the personal attention of professional donors. My fondest hope is that this new structure can eventually provide a stronger link between a professional world which is increasingly burdened with society's hopes, and populations everywhere which seek to be a part of progress and prosperity.

While an equilibrium corporate structure would reach out to institutions of higher learning in multiple capacities, professionals are particularly needed to assist with some basic elements in three areas: economic, medical and legal. Many problems in these areas have become difficult to address through general equilibrium means - a factor which helps to explain the name of equilibrium corporation as an alternative equilibrium construct for broader economic access.

Today's healthcare professionals are overwhelmed as governments pressure them to expand their services, even though these professionals often don't have the resources (or backing) at the ready which would allow them to do so. Knowledge use systems could eventually relieve some of this pressure, by making it possible for medical professionals to preserve some of the most important facets of healthcare for broader use.

I mention healthcare first, because of its direct links to issues which so many nations now face. Among the reasons nations are compelled to turn back immigrants at the border, is the fact immigrants require healthcare which local citizens fear is already in short supply. And governments are facing new struggles in their efforts to support present healthcare obligations, as well. For instance, John Taylor reminded his readers that the CBO no longer reports U.S. debt levels higher than 250% of GDP, even though the upcoming fiscal projections are not substantially changed. Knowledge use systems would provide an option, for future generations who remain uncertain about the role of government entitlements for services generation.

Just as basic elements of healthcare would be built into the educational structure of knowledge use systems, so too an understanding of economics, as a basic educational component. Regular readers know that I'm particularly concerned about economic education which includes not only the vital role of money, but also the role of the individual as an integral part of supply and demand. It is the ongoing intersection of time value with resource value, which matters most for populations of all sizes in terms of economic outcome.

Tight money conditions since the Great Recession have led to a relative loss of tradable sector activity, in relation to that of non tradable sector activity. Even though this circumstance is difficult to address in general equilibrium conditions at national levels (especially without a nominal level target), an equilibrium corporation would approach non tradable sector activity through innovative means which gradually diminish its costs, as contrast with those of tradable sector activity.

Several aspects of the equilibrium corporate structure are unique in nature, hence would benefit from legal assistance. Local participants would contribute to a direct marketplace for time value, through a process of mutual employment for ongoing activities in services formation. Incremental forms of ownership make it possible to own building components and land components separately, and time value serves as means to accrue asset formation through mutual educational assistance from a young age. By creating the most flexible forms of ownership possible, the equilibrium corporation can quickly respond to changes, whether those shifts in conditions are environmentally induced such as global warming, or even of a political nature such as secession.

As more individuals find themselves on the short end of economic access, the burdens on those expected to remain responsible, only continue to grow. Today's economic and social issues exist at a level which no longer readily responds to reason or persuasion. Further, asymmetric compensation (through discretionary income and revenue) alone is insufficient for full employment in an automated age, and fiscal measures such as basic income are completely off the mark. As technology substitutes for many of the old work roles, it will take time to restore faith in a future with new marketplace challenges.

Even though symmetric compensation is hardly an ideal substitute for merit based compensation and ability in the workplace, it could nonetheless provide a way for many among the marginalized to regain their hope for a better future. Knowledge donors would provide a most valuable service, through helping to define the original framework where knowledge use systems can begin. At stake is the preservation of knowledge for the foreseeable future, and also, the preservation of time value for all citizens.

Disentangling the Components of Growth Potential

What "kills" growth potential? What encourages it? In some of my earliest blog posts, I emphasized the importance of getting monetary policy right as an initial step, before other courses of action can provide reliable long term gains. Once again, economic stagnation is tempting policy makers to downplay the central role of monetary policy. In much of the twentieth century, central bankers provided nominal stability by closely adhering to aggregate spending capacity. Since the Great Recession, however, they are gradually pulling back on the nominal spending which could maintain present marketplace conditions for the near future - let alone generate new growth. Recently Scott Sumner concluded a post by saying, "The world has forgotten how to grow".

When policy makers become disenchanted with long term growth potential, monetary policy is sometimes allowed to suffer the consequences. Central bankers are reluctant to commit to a level target, and indeed doing so would effectively create a regime change. Hence monetary policy advocates may be relegated to "fair weather friend" status, when policy discretion substitutes for the stable anchor of a nominal target. Worse, the growing focus on financial factors - alongside an inexplicable desire to downplay supply and demand in economic discourse - continue to weaken growth potential. When central bankers take a non monetary approach, people and the economies they attempt to uphold, suffer the consequence.

Does it matter that policy makers are beginning to experience populist resistance? Unfortunately, resistance as it exists now, is quite ill defined. Too much confusion exists all around, as to how faulty fiscal and monetary policy contribute to existing problems. Few citizens can scarcely discern the importance of accurate monetary representation. It doesn't help that some publicly argue that money is not even "real", even as money is required for the most central aspects of our lives. Where to begin? I decided to do a quick review of some common reference points, and compare them. The FT Lexicon describes the real economy as:

The part of the economy that is concerned with actually producing goods and services, as opposed to the part of the economy that is concerned with buying and selling on the financial markets.

First, note that even though the above description of a real economy includes both public and private enterprise, it is incomplete in the sense of measured real GDP (RGDP), which includes the ongoing activity of financial markets. That's quite a difference in interpretation, regarding what is real. When I next googled RGDP, Investopedia redirected me to GDP, as " a broad measurement of a nation's overall economic activity."

In all of this, it's not hard to see how the uninitiated could get a headache, trying to decipher a story line as to existing wealth and activity which could be considered the domain of governments, Main Street, or Wall Street. Even if the underlying stories existed in picture form, finance would act as a thick layer of paint which coats each canvas.

Among these already confusing components, one finds the supply side economics which previously held such promise for long term growth. While the term is used by advocates of private sector activity such as myself, plenty of government engagement is involved, nonetheless. From Wikipedia:

Supply side economics is a macroeconomic theory which argues that economic growth can be most effectively created by investing in capital and by lowering the barriers on the production of goods and services.

This opening sentence sounds quite promising. However, how long has it been since society elected to invest in human capital so as to lower barriers for services production? I'm reminded of a recent comment from Arnold Kling:

One of my fantasies is of a classroom in which a tenured professor at an accredited institution of higher learning says "We must have free trade", and a few students leap out of their chairs and shout "You first!"

Too many supply side policies support pro business (both public and private) intentions, instead of assisting pro market growth. Consequently, citizens are now less trusting of an approach which could have created positive results for all concerned. Even though I identify as a supply sider, I find myself frustrated by supply side policies which mostly rearrange already existing wealth, instead of creating a more accessible marketplace.

Last but certainly not least for this post, are structural concerns, which were addressed by Wikipedia with structural change.

In economics, structural change is a shift or change in the basic ways a market or economy functions or operates...Historically, structural change has not always been strictly for the better.

Regular readers are quite familiar with my attention to structural factors, which pose substantial challenges in terms of long term growth potential. Still, it would be easier to develop a simple story line about the present inadequacies of asymmetric compensation, were it not for the fact that central bankers are still compounding the economic pressures which nations already face. It's time for a regime change.