Thursday, July 28, 2016

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.

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