Wrap Up for October 2016

Both James Pethokoukis and David Beckworth interviewed Ryan Avent recently, re his new book, "The Wealth of Humans".

In response to Nick Rowe's patient efforts - Brad Delong asks, "How seriously should we take the New Keynesian model?"

The real problem is that healthcare costs are still rising as a share of income (Timothy Taylor): http://conversableeconomist.blogspot.com/2016/10/rising-out-of-pocket-health-care-costs.html

Scott Sumner responds to a recent report from Carola Binder and Alex Rodrigue, re monetary rules and targets.

"To end the affordable housing crisis, Washington needs to legalize Main Street."

David Sloan Wilson has a particularly good opinion of Elinor Ostrom: "The Woman Who Saved Economics From Disaster"
also, http://evonomics.com/tragedy-of-the-commons-elinor-ostrom/

The blog "A Fine Theorem" provides informative background on the 2016 economics Nobel winners, in two posts.
https://afinetheorem.wordpress.com/2016/10/10/nobel-prize-2016-part-i-bengt-holmstrom/
https://afinetheorem.wordpress.com/2016/10/11/nobel-prize-2016-part-ii-oliver-hart/

Mark Thoma (for Moneywatch) also explains why this year's Nobel was so well deserved.

A global restoration of nature could be underway in America:
http://phe.rockefeller.edu/docs/Nature_Rebounds.pdf

Cass Sunstein comes up with a nice list: https://www.bloomberg.com/view/articles/2016-10-11/five-books-to-change-liberals-minds

Some classics from R.H. Coase, "The Nature of the Firm" http://www3.nccu.edu.tw/~jsfeng/CPEC11.pdf
also, "The Problem of Social Cost", http://econ.ucsb.edu/~tedb/Courses/UCSBpf/readings/coase.pdf

If only we knew, how many people would choose a walkable community over one with auto transportation, if they had the option to do so. "Put people, not cars, first in transport systems."

Howard Husock reviews "Eyes on the Street: The Life of Jane Jacobs" by Robert Kanigel
http://www.city-journal.org/html/uncredentialed-woman-14809.html

Five wars, at one time. http://theweek.com/articles/655826/why-wont-anyone-admit-that-america-fighting-5-wars

Some Econlog posts from Scott Sumner: on macroeconomics, with an apt quote from Einstein: "If you can't explain it simply, you don't understand it well enough."
The case for easy money today, is not as strong as before.
"Is the Fed a firefighter or an arsonist?"
Japan as a refutation of old Keynesian ideas.

No one does furniture quite like Ikea: http://fivethirtyeight.com/features/the-weird-economics-of-ikea/

What happened to adolescence? https://aeon.co/essays/adolescence-is-no-longer-a-bridge-between-childhood-and-adult-life

From David Beckworth and Joshua Hendrickson: https://www.mercatus.org/system/files/mercatus-beckworth-ngdp-taylor-rule-v1.pdf

"Do recessions accelerate routine-biased technological change?" Of this study, Brookings write "The Great Recession has hastened the polarization of the labor market."
http://faculty.chicagobooth.edu/workshops/appliedecon/pdf/AEW%20Spring%20Lisa%20Kahn.pdf

Jonathan Haidt, "The Ethics of globalism, nationalism and patriotism"

James Pethokoukis considers the services factor:
http://www.aei.org/publication/another-explanation-for-americas-worrisome-productivity-slowdown/

From Apollo magazine: "Post-fire London was a magnificent, beautiful compromise."

Does Fiscal Stimulus Contribute to Long Term Growth?

It depends. Historically, governments have occasionally strengthened a nation's growth trajectory through the contribution of new infrastructure. However, context matters. For one, the less complex a government's already existing obligations to its citizens, the more benefit such investment might provide. Most important: does new infrastructure make it possible for citizens to build more substantial economic templates, than what already exist? In other words, are citizens able to utilize new infrastructure on economic terms, specifically, greater opportunities to pay existing bills? Or are there structural ("special interest") factors which prevent citizens from putting to good economic use, the infrastructure already in place?

Answers to these questions particularly matter, given the all too perennial arguments for fiscal policy rather than monetary policy, in times of economic stagnation. Today's fiscal policy infrastructure dialogue emerged somewhat slowly, and for good reason. For instance: how many were all too cognizant of new infrastructure and investment in waiting, with scarcely any measurable yield, due to lack of local economic patterns for productive activity? Even as earlier investments dwindle and are quickly forgotten, fiscal arguments to "jumpstart" growth gradually reemerge, since there is little else to fill the conspicuous economic void. Meanwhile, private interests actively and passively stall economic activity behind the scenes, as others contribute to this unfortunate reality, by actively stalling monetary policy as well.

Once again discounted in the latest monetary/fiscal round, is that monetary policy has the capacity to maintain existing societal obligations in recessions and downturns, particularly for the massive group responsibilities in complex economies. Done properly, monetary policy can at least maintain present and ongoing economic stability, whereas fiscal policy is far less immediate, and exists within a broader realm of issues that extend beyond present concerns.

An additional problem in the present, is that many government fiscal obligations have become closely bound with ongoing redistributive maintenance. While some maintenance capacity provides real value, these governments consequently have fewer means to work within a first mover context when growth is most needed - particularly the growth capable of generating broad, equilibrium wide opportunities to populations, such as occurred at mid 20th century in the U.S.

Consequently, private interests now bear the responsibility of ensuring continued momentum in growth and economic progress. Why has monetary policy proven so reluctant to assist them in this task, since the Great Recession? One problem in this regard, is that too many non tradable sector private interests contributed to economic stagnation, which in turn is wreaking havoc on the U.S. Republican party - given how it has long stood for economic progress.

Hence "feet dragging" on the part of both private interests and monetary policy, contributes to the latest wishful thinking regarding government options. Which in turn leads to "forgetting" of monetary history, as noted by Scott Sumner in a recent post. How many universities even provide this history for their students? While reading the old "new" Keynesian views he noted, I was struck by the policy maker confidence in being able to positively affect the expansion of supply side factors, as though this ability were a relative constant. Even though fiscal reasoning as such could be readily countered, in terms of public/private contribution to output potential, why would economists want to jeopardize their employment by doing so? Understandably, it's not quite rational to directly challenge the private interests, which benefit from the artificial scarcities of non tradable sector activity.

One reason governments were successful in the first mover endeavor in the twentieth century, was the fact they contributed to the capacity of still expanding tradable sector formation. New roads and bridges, meant the expansion of capacity for every commodity and physical product imaginable. But even more important, was the citizen contribution to this new capacity, as they expanded retail into areas which previously held little more than the wealth of commodity formation.

Nonetheless, arguments for fiscal instead of monetary policy, begin with the assumption that government has a continuous and ongoing advantage in generating a stronger growth trajectory. If only it were so! Alas, the 20th century government role for progress was substantial enough, that the earlier dynamic appears easier to replicate than is actually the case.

At a surface level, one might mistakenly assume that government holds the prime responsibility for much of a nation's growth trajectory. However, this appearance can be misleading. For instance: only recently, Washington "warned" citizens of impending slow growth in the foreseeable future. If it were in government power to generate and maintain a strong growth trajectory, 1) why was that dire warning issued in the first place, and 2) why have they waited until now, to stir up hope yet again regarding growth potential?

One could reasonably argue that Washington didn't do so, because their first mover options have been greatly diluted, especially in recent decades as existing entitlements have multiplied. Unfortunately, the fact that Washington is doubling down on infrastructure reasoning now, points to the lack of a supply side desire to even offer reasonable options which aren't based on wishful thinking. One could say that government infrastructure/spending arguments would make a better "feast" (more employee skill preparedness) for the private interest patrons which are already "full" and backing away from the table.

The infrastructure that matters in terms of economic stagnation, is that which makes new economic templates possible - templates which citizens can actively use in new forms of economic engagement. Before everyone gets excited about building new infrastructure and research opportunities, let's set up shop along the countless nodes and end points on the digital highways we already have, first. At the very least, don't rewrite economic and monetary history in a way that pretends people want economic growth, if this is not actually the case.

If "Labour Abundance" is Lemons...

Then perhaps it's time to learn to make lemonade. Of course, easier said than done! In a book chapter ("The Wealth of Humans") titled "The Virtues of Scarcity", Ryan Avent writes:

Historically, the labour market's fortunes - as captured in how labour is used within the economy, how it is compensated, and how politically strong it can claim to be - have hinged critically on the extent to which labour is a scarce factor or a plentiful one.

He adds:

But the dividend to scarcity has never been any great historical secret, and groups of people have often fought to obtain scarce status for themselves within an economy, at the expense of other groups of workers. Workers seek to make themselves scarce by reducing the capacity of others to compete with them...Yet the most powerful and durable form of discrimination-induced artificial scarcity is that created by borders. 

Much of today's labour abundance has its beginnings after the start of the new century. Avent notes three major causes: globalization, automation, and the boost in productivity which technology can often provide for high skill workers. Meanwhile, a growing labour abundance also means further polarization in the labour market, even if skills polarization didn't become obvious until the Great Recession. Like the authors of this study, I've noted the prevalence of high skill offerings in classifieds for employment, especially in areas where a wider variety of job offerings have been in short supply for some time.

Yet it's also a growing concern for city employment, as middle skill jobs are gradually replaced by employment requiring professional levels of skill. Previously, the risks of moving to new areas weren't so high, for anyone seeking work in a low to middle skill range. Now, middle skill workers end up compromising with positions requiring less skill. Further, much in these work categories may not be easy to procure, beforehand. Which means low skill work is more likely to be found, after one has already taken a chance on relocating to a new area - all the more risky if there are no family or friends nearby.

I can understand the reluctance of many to take their chances in this regard, because of the many moves I've made over the years. Plus: the older one gets, the more that low skill work becomes a gamble for one's health, and the resulting doctor's bills might end up more substantial than one's paycheck. In a Bloomberg article about universal basic income, Tyler Cowen muses about the prime age males who have dropped out of the labor force:

Many are capable of working, yet these individuals typically are not taking the jobs that immigrants might end up filling. Either they shy away from hard work, don't want to move to where jobs are, or don't like the low social status of these jobs, among other possibilities. 

I no longer see getting money to those males as the central social problem. Instead, the core issue is how to make the work that's available to them sufficiently rewarding, in cultural as well as economic terms. 

If the kinds of jobs created by the modern service economy can be made more attractive, I think much (not all) of the work problem will take care of itself. Most people do wish to work in jobs they enjoy, as a source of pride, money, and social connection.

Is it possible to bring back middle skill work, given the fact that many people could still benefit from middle skill time based services? Indeed, much of the services based work which people would find meaning in providing for one another, actually consists of these possibilities. Equally important, is the need to structure middle skill work potential in ways that people will eventually be able to take the chance of moving, secure in the knowing they can participate in a group structure which offers more opportunities to generate middle skill work.

That said, the time arbitrage of knowledge use systems would compensate time value as a basic commodity, instead of the middle income levels which became standard in the 20th century. Which is why these living and working environments would need considerable exposure to infrastructure and building innovation at the outset, for this form of wage structure to be a reasonable option.

Labour abundance does not have to be a negative. Only consider the primary source of today's wealth, and one can take heart: human capital. Granted, much of this capacity presently exists in the artificial scarcity and agglomeration effects of prosperous cities. Even though it would take time to realign knowledge use to the participation of lower population densities, it can be done. Indeed, the artificial scarcity of knowledge use contributes to the underlying scarcity of property in the most highly desired regions, as expressed by their high property values.

Also, the wealth creating effect of group agglomeration, need not be limited to the concentrated high skill variety, for time value can be horizontally coordinated and patterned for full participation. Ultimately, productive organizational capacity has become too scarce, in relation to the economic environments it is expected to somehow support and maintain. In all of this, labour abundance can be put to good use in ways which were not always possible, or in some instances even imaginable, in the all too recent past.

Shifting Relationships in Economic Time Value

Today, economic time value could benefit from organizational capacity which exists in relation "to itself". Time arbitrage would allow new forms of economic complexity to exist within a closed, recognizable loop of wealth creation, which nonetheless remains open and supportive of both new participants and tradable sector activity. This form of (internal) non tradable sector formation would make it possible to work more directly with technological factors, thereby reducing employment uncertainty for the long term. Not only would it become easier to determine production and consumption preferences for time based product, but the resulting time valuations wouldn't impede overall pricing structures, to the degree that tends to occur in general equilibrium conditions.

How have economic relationships changed? In tradable sector activity, economic time value exists in relation to other resources that are utilized (coordinated) within a recognizable, single institutional context. Hence when workers within these groups organized to protect time value (via unionization), the results could readily be noted on the pricing constructs on the affected corporate institution.

Whereas the pricing effects of unionization for non tradable sector activity cannot be directly observed, and this form of unionization is far more prevalent than that of manufacture, in the present. These wage and pricing effects exist in relation to general equilibrium (and region "desirability" or economic value), as opposed to the internally coordinated resource capacity and pricing structures of tradable sector institutional management.

For instance, Ryan Avent noted the problem of time based services product as Baumol's disease in "The Wealth of Humans". Today's time based services pricing, exists in relation to the pricing of wealth which is derived on more direct resource based terms. However, pricing time based product to correlate with the pricing of tradable product structure, is like pricing apples as though they were oranges, even though real estate markets have long encouraged this form of local income smoothing via property zoning. Even more distorting, is a form of time aggregate "inclusion" as attempted in recent decades for healthcare in the U.S. (via employer responsibility). These misplaced efforts have further "muddied the waters", for both tradable sector and non tradable sector pricing structures.

Consider for a moment, how organizational patterns for primary market activity have evolved in recent centuries. Early on, first mover activity for output included gains in the form of individual contribution, such as the market for beaver pelts as noted by early classical economists. Personalized relationships to local resource potential were supplemented by local group coordination for time value, albeit still in relation to local resource capacity. Granted, some local group (and familial) coordination took place on non economic or cultural terms. These forms of resource adaptation were generally not needed (in developed nations), once extensive innovations in agriculture and manufacture encouraged the beginnings of a consumer based culture.

An important shift took place with the advent of broad agricultural gains, in terms of the economic relationships of individuals, and what had been local group formation for mutually desired ends. For those of us in the southern U.S., this pattern change is still part of living memory. As governments assumed greater responsibility in trade flows, the relationships of individuals and (previously local) groups with primary market and tradable sector activity, became linked to organizations that were less local in character. These organizations - in turn - connected to institutions which shared resource capacity across a now recognizable general equilibrium setting.

In recent decades, this institutional relationship has once again shifted. As primary markets thinned in relation to the secondary markets of developed nations, the Wicksellian interest rate followed the downward trend of more investment in what was unfortunately becoming less primary market activity and/or capacity. Today, one's economic relationship to resource capacity in general, is altogether likely to exist in a dependent market position. This secondary relationship not only makes the time valuation of non tradable sector activity difficult to decipher, but its broad continuance, less certain. After all, this form of economic time value exists in relation to a complete equilibrium construct, instead of the recognizable sets of resource management which can readily be tapped in primary markets, and their single price structure in general equilibrium.

However, tradable sector formation has experienced its own internal resource management issues in the U.S., given the employer responsibility for healthcare which is now an additional burden for all resource management structure. Consequently, both the pricing of time value and product is not as straightforward, as if resource coordination were of a complete internal design. It is impossible to decipher how this relatively new responsibility, affects either tradable sector output or primary market formation and capacity as a whole.

Even though politics has shifted towards the desire to preserve tradable sector activity of late, the real uncertainty exists in terms of the non tradable sector employment which can reasonably be expected to be preserved in the decades to come. Fortunately, internal organization of economic time value (in relation "to itself"), would be possible to return time value in aggregate to wealth production potential. Particularly important, is the fact time arbitrage would function the same as any other expansion of primary market activity, which could eventually restore a positive Wicksellian interest rate to the marketplace.

Freedom and the Debt Connection

To what extent is a credit driven economy, responsible for loss of freedom? Granted, debt need not be problematic for small incomes, should credit be willingly pursued, and borrowers are not constrained in their ability to reimburse lenders. Rather, debt turns into an excessive burden, when it becomes expected as a matter of course, for life's most basic forms of production and consumption. Too much of what were formerly consumer options - for instance - have morphed into requirements. Personal choice is lacking in terms of services and infrastructure, and the default positions aren't well suited, for those who wish to be more resourceful with their money and time.

Today's merit based workplace - not to mention home building requirements - would not have been possible, were it not for the credit driven economy that developed in the 20th century. For decades, debt even provided the illusion it was possible for citizens who were minimally compensated, to reimburse the skill sets of those who were highly compensated - via mutual time coordination. Credit availability bolstered the rationale for meritocratic limits (wealth capture) in time based product - much of which now contributes to a vast and still growing skills divide. And unfortunately, wealth capture does not contribute to prosperity for nations or citizens, as does true wealth creation.

More than anything, the burden of low income debt makes it difficult for individuals to function freely or effectively in the marketplace, given societal expectations for essential life needs. Miles Kimball writes of freedom and consent in a recent post, and highlights a John Locke quote of which I'll provide the beginning (Kimball's post deserves reading in its entirety):

To understand political power right, and derive from its original, we must consider, what state all men are naturally in, and that is, a state of perfect freedom to order their actions, and dispose of their possessions, and persons, as they think fit...

Kimball wraps up his post with these thoughts:

John Locke's perspective of people beginning free and equal is very refreshing in a world still filled with domineering states. The world still has a long way to go on the way to freedom. 

How can anyone dream of equal beginnings, if basic forms of knowledge use product are no longer within the reach of the lower half of the income spectrum? How can people dream of freedom, when governments and special interests alike find it too tempting to claim income which otherwise might have been applied to discretionary choice? Is it still possible for lower income levels to structure their mutual desires and responsibilities, without need of either credit or the meritocratic structure which eventually leads to extreme skills divisions and dehumanization?

In tradable sector activity, merit based (and asymmetric) time compensation exists to the degree it contributes to production processes and final product. Full use is made of special skill sets where they are most needed, so as to generate full output potential.

However, different incentives are in place for asymmetric compensation in non tradable sector activity. Here, meritocratic rationale for high value skill is not intended as a forerunner of new product formation or marketplace output, but as a permanent state so long as people can afford to pay for it. Non tradable sector time based services do not contribute to optimal output; they contribute to quality output, as rationally intended for those who are able to pay and operate from a similar positioning of economic time value. Hence these groups are only able to organize up to a minimal point, to include time based product for those who are not well suited for mutual economic reciprocity.

There's no need to continue the illusion of either credit availability or all encompassing health insurance, for those who are not in the appropriate income strata for general equilibrium coordination and definition. It could be better for many citizens, to begin an educational process which makes it possible for those with small incomes, to take a more direct role in their destinies. This would include education which draws from the wisdom and pragmatism of the ages, a workplace which requires no debt to organize, and the ability to gradually discover how best to coordinate time so that economic forms of knowledge use need not be limited to a subset of citizens, in the 21st century.

Notes on First and Second Mover Activity in Equilibrium

Primary markets can be thought of as "first movers" in the marketplace. Nevertheless, the follow through activity of secondary markets has been substantial in developed nations, due to the dynamic activity of primary market potential in recent centuries.

When secondary markets can contribute to existing growth patterns, much of their core structural framework exists as societal permission (time based services) and financial services. While government involvement in the economy is often said to detract from private options for growth potential, secondary market activity is associated with both public and private interests. Importantly, private interests in secondary markets could be crowding out the first mover potential of primary markets, for some among their representatives impose substantial and unnecessary limits on both output potential and monetary policy.

Real economy conditions have complete representation in the tradable sector activity of primary markets, whereas real economy circumstance are partially represented in secondary markets which comprise both real and nominal value factors. Primary markets contribute new product which does not need "permission" (on the part of redistribution or existing discretionary income) to take place. While some of today's time based services appear to move the market forward (think state of the art teaching hospitals for instance), their present organizational structure requires a shift of monetary and other resource value, from already existing primary and secondary markets.

How does asymmetric compensation fit into this framework? The asymmetric compensation which occurs for labour in primary markets, also holds a first mover position in terms of newly created wealth. In other words, asymmetric compensation for labour in tradable sector (or primary market) activity, moves marketplace capacity forward - even though asymmetrically compensated labour is a residual function. Whereas the asymmetric labour compensation of secondary markets, could be thought of as a holding pattern for existing marketplace activity. First mover activity generates more output in real market terms, while second mover activity consolidates the resource capacity gains of primary mover activity, and assigns them further value in pricing mechanisms and nominal value.

Even though secondary marketplace activity has the ability to move primary markets forward in the short term, it loses the capacity to do so, once in an overly dominant position. Secondary markets have great capacity to supplement primary market activity in vitally important ways. However, economies can falter if primary market formation becomes too thin in relation to secondary market formation, as has become the case in the present.

It is not always easy to distinguish the wealth of primary versus that of secondary markets, and the imbalance which has resulted between the two, helps to explain why global debt has hit an all time high. Even though one associates government activity with excessive debt, rigid private sector dictates for production and consumption, have also contributed to this unfortunate reality.

Two things need to occur, in order to address the problem of rising global debt. First, less rigid consumption definitions are needed on the part of non tradable sectors, to help ease the burdens of publicly and privately held debt. Further, the purposeful creation of new primary market activity would help to restore economic balance, so that the expectations and responsibilities of today's secondary market activity would no longer be stretched so thin. Regular readers know that I suggest a new marketplace for time value as a basic commodity, for this role. While this would be a long term approach, it could still help to ease the present uncertainty of economic conditions.

Some Thoughts Regarding Economic Uncertainty

Much of general equilibrium is a result of the numerous benefits which accrued from earlier economies of scale. Hence today's expected "standard of living" also includes a high bar for economic access, given the wide array of special interests which have contributed to rigid definitions of equilibrium. Of course this approach has had its costs in terms of public and private economic engagement, along with a substantial backlog of debt structure to make it possible.

Remember when the majority of this structure was built? Only consider those 20th century decades, when inflation was actually a problem for all concerned. The Fed's earlier "party with the punch bowl" (attributed to everyone else? How exactly does that work?) serves as a reminder how opportunistic a credit driven central banking system can be. Some of the central banker overreaction to today's imaginary inflation, comes across a bit self righteous, given the reality of the situation.

Worse, are the excessive complaints about demographics, which are little more than the residual credit driven excuse for economic gridlock. One might call it a "pity party", since there are insufficient high incomes left for credit institutions to "plunder", oh and never mind the plentiful loose change still lying on the sidewalk which seemingly is not worth anyone's time. To put it politely, those excuses for economic stagnation are entirely inappropriate "hand wringing", due to the earlier excessive capture of income by debt creation in the years when it was possible to do so. Today's resulting economic uncertainty, helps to explain why aggregate spending capacity should always be honored with a level target. Instead, citizens are paying the price of imaginary inflation, to a large degree because central bankers and others were unable to resist the bounty of income capture, in the decades of high inflation when Baby Boomers were still young.

It is quite hypocritical to pretend high inflation is even an issue, when younger generations are still struggling for economic access. The fact that today's central bankers are reluctant to acknowledge the importance of nominal income representation, is just one reason why I'd like to see wealth creation which exists independently of the credit function now responsible for economic prosperity, or the lack thereof. I must admit that I dislike wealth creation which is entirely credit driven and discretionary, because it still allows central bankers to throw entire generations under the bus - only to (finally) throw a big party with all the attendant inflation (that of excessive lending capacity) when the "right" generation comes along. When that finally happens, what about today's posturing as to inflation being "just around the corner"? Ah who cares, it will all be forgotten by then.

Particularly problematic, is that political constituents are becoming less willing to honor mutual understandings for both economic and political obligations, as they presently exist. One could say there is an increasingly open challenge to present day equilibrium monetary needs, which also belies a lack of understanding, how important it is to maintain the wealth structures of the present, before societies find new systematic means for the wealth creation of the future.

When political leaders challenge monetary policy, they also do not understand the degree to which central bankers are already holding back, in the representation of already existing mutual economic agreements. No question, central bankers have already been reacting, to what some believe to be an excessive amount of liquidity. How else to explain recent Fed communications about running the economy "hot" for a time, when this would not take place under any circumstance? Hence some confuse the pricing levels of artificially constrained assets, with the monetary flows which are required to maintain business as usual.

Today, it seems many people reserve their anger for the "wrong" candidate or the "wrong" political response. As it turns out, most of my anger is still directed at the structural circumstance that were allowed to continue for far too long.

Secondary Markets: Some Growth Considerations

Why have today's purveyors of credit, so greatly reduced their presence in the marketplace? Banks in the U.S. had long since cut back on providing support for local business formation - a pattern which now extends to housing as well. The "parked" mechanism of interest on reserves is not just a problem for reduced credit access in the U.S., but also for other nations. Of course, central bankers are hardly the only the only institution "sitting" on money, instead of putting it to better use. Could some of the lack of interest in lending, be due to secondary market constraints? This post is in part further thoughts from a recent discussion, as to the coordination difficulties of services capacity.

Consider the widespread arguments about a lack of investment opportunities. Besides the standard explanations of economic gridlock, how might one think about this problem? After all - as long as anyone could remember - the ample investment opportunities of primary markets for tradable sector activity, meant plenty of investment opportunities for secondary market formation and its associated non tradable sector activity. The 20th century in particular, experienced vast opportunities for growth and development in the latter: markets which included financial product, valuable formats for knowledge application, and of course the asset formation which followed nominal income potential.

Even though (at least until the Great Recession) services appeared to have a bright future, it is becoming apparent, how dependent their present structure remains on the fortunes of primary market formation. Indeed, the fact that knowledge use and service formation are not (yet) organized to generate first mover roles as primary markets, greatly contributes to the present global backlash. So long as populations do not have a true marketplace for time value, future policy makers could become more likely to treat the existing trade of manufacture, as a zero sum reality for economic policy. Hence the challenge, to create organizational capacity for human capital on primary market terms, so that the existing global structure of tradable sector wealth is not lost.

However, changes in organizational capacity, also means knowledge based divisions of labour which are not dependent on meritocratic structure. In order for primary market formation to be possible, knowledge use needs to be as interchangeable as any factory component, in local organizational capacity. The good news is that this process can take place without need of additional debt formation, which is all the more important given the reticence of today's central bankers and their lack of support for continued growth. Instead, wealth can be built incrementally, as formal education is gradually integrated into monetarily compensated mutual assistance.

In many ways, it was the widespread availability of credit which lent further credence to the meritocratic structure which prevailed for knowledge use, in the 20th century. One reason it was so difficult for emerging economies to evolve towards services in times of premature industrialization, was the fact that so much human capital investment was required for every individual in a secondary market time based services formation. An incremental growth pattern for knowledge use, could make it possible for emerging economies to continue their path towards prosperity, even though premature industrialization has already begun.

Notes on Services Capacity and Coordination Difficulties

As more individuals gradually became employed by today's institutions, time based services also became associated with meritocratic reasoning for monetary compensation. Even though merit based compensation seems imminently reasonable, it is nonetheless a coordination dilemma, for time based services as a whole.

So long as the majority of economic activity consisted of tradable sector formation, mutual coordination for group activities - whether economic or not - was more clear cut, for all concerned. In these settings, individuals with higher incomes were most likely to account for time based services on economic terms, and this group - at least in the U.S. - was the first to pay taxes for what were once minimal government contributions to knowledge based endeavor. Today, most income levels bear responsibility for taxation, at least in terms of government assisted coordination of time based services. Even though (non economic) family coordination provides partial remedies, by no means is this the cultural option it once was, in the U.S.

Earlier patterns of cultural, or non economic coordination, were gradually disrupted, as secondary markets for time based services supplanted primary market activity in developed nations. In many instances today, if either high and low skill activities can't take place on economic terms, often they don't happen. However, this dramatic shift in group forms of time use, places undue strain on monetary flows that were designed in environments where money had only gradually came to represent the majority of coordinated activity. Many important monetary valuations for time based services were already designated in terms of general equilibrium demand, long before secondary market activity began to take precedence over primary market activity.

Even though meritocratic arguments (for limits on supply of knowledge based skill) seemed reasonable at the outset, it has become difficult to expand time based activity of any skill level to the extent of societal expectation, on general equilibrium terms. When time based services are organized as secondary market activity, they can't contribute to output gains in the same capacity as has been possible for tradable sector activity.

Consequently, when secondary markets make further demands within a partial equilibrium construct, the earlier monetary values they were able to command (particularly on high income level terms), no longer correspond well with low incomes and in some circumstance, middle class incomes. Still, economies continue to be structured, as though time based services can be apportioned for the consumption patterns of all income levels.

Consider the dilemma of day care workers, whose incomes are particularly difficult to coordinate with other time based service sets. Meritocratic arguments for more pay (in the form of higher skilled workers for "better" child outcomes) can also be contrast with a historical reality in which a majority of the population tended to young children on non economic terms. Service coordination for young children is all the more difficult, when both parents need to work, for more calendar time is required for this service than just about any other, except for K-12 education. And should daycare workers gain the higher wages that help to pay their bills, life becomes easier for them, even as overall possibilities for time based coordination on economic terms become further diminished.

Meritocracy arguments can distort general equilibrium in unexpected ways. A prime example of course is physician necessity for the practice of medicine in the 20th century. Much as societies tended to childcare on non economic terms, so too lower income levels had a long history of what is now referred to as alternative healthcare. Once professional medicine ruled out many alternative options, it also reduced an entire supply side structure of healthcare possibilities. Yet governments and citizens alike assumed that physicians would be able to tend to the needs of all income levels. This was never possible, given the fact professional medicine already had a built in investment structure, that was made possible by the high income levels which contributed to this form of healthcare from its earliest beginnings.

Time based services examples such as this, help to explain why lower income levels need options such as time arbitrage, for important time based services. Even though hard choices would occasionally have to be made, when individuals coordinate time on an equal basis, at least it immediately becomes easier to understand the supply and demand issues at stake, given existing time scarcities. By looking closer at time scarcities in group context, groups are better able to construct environments in which individuals become better able to take conflicting sets of preferences into consideration. There would be a lot of stumbling about in the dark to find more opportune means for services coordination. But understanding the true scarcity of time use potential, is a good start.

Growth Potential: A General Equilibrium "Constraint" Example

Does increased educational capacity still contribute to long term growth? It depends, and as Ryan Avent emphasized in "The Wealth of Humans", there's still room for emerging markets to benefit from education investments in terms of added long term growth. In particular, the knowledge intensive nature of high skill work provides the "social-capital infrastructure" which emerging markets need. Given fortuitous circumstance, social-capital infrastructure can move emerging markets toward greater economic complexity and higher income levels.

However, Avent also notes how increased educational attainment for developed nations, now faces somewhat diminished returns. Interestingly, some of his explanations in this regard, illustrate the relationship between primary and secondary market capacity, in terms of long term growth potential. Here's Avent:

Where increased education alleviates fundamental growth bottlenecks - by increasing the numbers of knowledge-frontier-expanding engineers and scientists, for instance - it can increase growth and the size of the economic pie to be distributed. If other economic factors are the bottleneck, however, then education mostly boosts the fortunes of some groups by reducing the relative scarcity of others: nurses who train to become doctors earn more, but they also reduce the bargaining power of the existing pool of doctors by increasing their numbers. And if increased education raises effective available labour by enough - if it mostly adds to the abundance of effective labour available in the world economy - then it might simply reduce the bargaining power of labour as a whole relative to other factors in the economy, such as land or social capital.

Regular readers may realize that I would attribute the bargaining power of labour per Avent's "other factors", to existing growth capacity in the form of first mover or primary market formation. While the knowledge and time based product of secondary market means can be most essential, the problem is that - as secondary markets - they are not positioned to move the marketplace forward on real growth terms.

Consequently, the resources that time based services require just as a steady state, can keep the dimensions of the existing (general equilibrium) pie mostly in place. One reason the physician's pay is also subject to these constraints - much as any teacher or day care worker - is the fact it depends either on existing redistribution or discretionary income through the same economic mechanism that other secondary markets face, in relation to the existing scope of primary market formation.

Knowledge use systems could increase the trajectory for long term growth, because the matched time for knowledge use would serve as a new point of wealth formation. In other words, since this organizational capacity would move growth ahead (or outward) with no additional debt structure, it also expands the pie, via newly generated and accounted for product at the outset. Time based healthcare services as primary market capacity, wouldn't face the same constraints which impact today's existing healthcare supply - given its dependence on the growth level of already existing equilibrium.

Ryan Avent further elaborates regarding healthcare's dependent status on other growth factors:

Doubling the number of doctors working in America - either by increasing the educational attainment of native workers or by accepting immigrant workers - would not generate an appreciable increase in American economic growth. It would make doctors more abundant relative to the labour force as a whole: doctor bargaining power would fall, and doctor incomes would rise more slowly - or perhaps would fall a bit. The doctor doubling would therefore be good for the new doctors (whose salaries would rise), for American consumers (who would enjoy a one-off rise in real incomes thanks to the drop in the cost of medical services) and for the managers and owners of healthcare firms (who would be able to reduce their labour bill and boost profits). Those benefits would derive, for the most part, from the reduction in bargaining power and pay of the original doctors.

When I think about Avent's framing, it actually becomes a bit easier to understand today's supply side restrictions in healthcare, even though I have often railed against them. Whereas many forms of product contribute to overall growth, time based healthcare product - as currently structured - instead acts as a drag on growth via further debt formation. Any increased supply on secondary market terms would further exacerbate this process, by diluting the available amount of redistribution and discretionary income from today's existing equilibrium. Perhaps physicians could have more incentive to prepare future students for healthcare as a primary market structure, than I'd previously realized.

Of Food Banks and Equilibrium Patterns

Some of my readers may have noted a "feel good" story about food bank efficiency gains, after some organizational adjustments which led to greater free market choice. These adjustments - in turn - made better use of available resources at a national level. But when is coordination such as this more difficult to carry out, in a general equilibrium setting? From a recent NYT Upshot article:

In a free housing market, for example, big houses generally do not go to those who need them most but to those willing and able to pay the most...but it turns out that when you analyze objections to free markets on those terms, they contain two basic issues. First, goods go to the highest bidder; second, bidders possess different amounts of wealth. Disentangling these two factors is important. When markets produce outcomes that seem unfair, it is usually the second factor - the wealth disparity - that is to blame.

Place bidders on an equal footing and the superior efficiency of the market becomes evident. When two similarly well-off families vie for a large house, for example, the family that places the greater value on the property will outbid the other one.

In all of this, housing valuations face thornier general equilibrium issues, than the much simpler tradable commodity coordination which proved amenable to all concerned. The non profit group Feeding America was able to enact a bidding process, which in turn put food banks on equal footing. This allowed food banks to bid in ways that reflected regional variations in supply and demand. The pricing features that were noted, led to surprising discoveries about variance in value assigned to goods - indeed, it turned out that some donations were not actually wanted.

Unfortunately, some general equilibrium components - particularly for national level non tradable sectors - aren't really amenable to coordination on a broad scale. Non tradable sector activity reflects both local labour market factors and local/international wealth holdings, which are quite different from one region to the next. This wide variance would distort many general equilibrium bidding processes that attempt to place participants in an equal framework. In particular, the costs of housing and time based services often correspond to the degree of access for local employment. Housing can be expensive if it reflects real property scarcities, even though employment scarcities may be artificially imposed. In these environments, most attempts to place participants on more equal footing for economic access, run headlong into local efforts to keep economic conditions as they already exist.

Even though general equilibrium conditions include wide income variance for time value, not all labour markets have to exist on these terms. New employment templates would be possible, via alternate equilibrium conditions in which local price coordinates aren't so dependent on externally driven employment factors. In these settings, time value could serve as an equal starting or bidding point, by which equilibrium corporations would create their own internal economic access. Labour market scarcity can be alleviated through knowledge use systems which generate a mutual employment market structure. Eventually, the high rents which now accrue to areas with the most economic complexity, would be offset by growing markets for time value and knowledge based services in new regions.

Part of today's general equilibrium coordination problem, is due to the need for money to bear the entire burden of representation for all resource capacity. In times when money is in high demand, other resources can appear as though too abundant. And yet some of these resources would be capable of assisting the circumstance of individuals and groups which may otherwise lack economic access, were the coordination in place to make this happen. It is possible to link resource capacity and time value to monetary representation, so as to strengthen local economies.  Ultimately, this approach could extend economic access to those who need it most.

Wealth Makes More Sense When It's Quantifiable

Initially, this post began with thoughts I wanted to explore, re the quantification for time value via a complete and measurable loop of activity. However I was pleasantly surprised when Scott Sumner wrote an Econlog post, "Non Materialistic Millennials and the Great Stagnation", which highlighted the truly quantifiable wealth of (seemingly) "missing stuff". All that stuff made quite a difference in the lives of Baby Boomers! And his post PS was intriguing:

This might be a stretch, but is the Trump phenomenon at some deep level a longing for the old stuff-oriented economy? And is Hillary the "services" candidate?

Why do services register so differently in our minds, as a form of product? Even though we occasionally value experiential components as a part of the package, those qualities don't necessarily hold substantial monetary value or "worldly" worth. Nonetheless, both services production and consumption are closely related to supposed levels of intelligence or skill - not to mention the level of economic access which skills can also impart.

While economic access is more necessary than ever, all those earlier associations with physical stuff not only felt more natural, they were a lot more fun. While I scoffed along with other Baby Boomers when Madonna sang "Material Girl" years earlier, many of us lived some version of that materialistic reality just the same. Even now, a few vestiges of that earlier materialism are part of my environment. There's thousands of books stashed alongside the shelves filled with thrift store collectibles, which my mother happily discovered in the "thrill of the hunt".

Also noted in Scott Sumner's post, was the fact that eating out at a young age was somewhat of a rarity for some Baby Boomers. Apparently Houston must have been an outlier for restaurants and eating out, compared to other parts of the country. Indeed, the biggest part of my restaurant consumption took place when I was young, and Houston had no shortage of great food options - even in the sixties and seventies.

Consider how restaurants have proven an interesting way to bridge the gap between "stuff" and services, in a number of ways. Even though many restaurants include a strong time based service component, these services tend to be quantifiable as simple measures, in part because of a reliance on internal coordination for well defined product sets. For the most part, it's also easy to tell whether this form of organization serves practical or experiential roles, and time considerations are planned accordingly.

If only more time based services capacity could be organized internally on self replicating (hence primary market) terms, instead of having to rely on other forms of redistribution, to take place. Knowing what to expect in terms of competition and market formation, would make it a lot easier to appreciate time based services as a valuable form of product.

 Ryan Avent also noted the shift from "stuff", to what is increasingly a services based economy:

Indeed, it is true of our consumption in general; we once devoted most of our household budgets to physical things: food and drink, clothing and furniture. Now we spend vast amounts on things like education and healthcare, or on housing, the value of which is mostly dependent on the access it provides to social capital rather than the wood in the walls and the plastic in the pipes.

In short, services could benefit from more time based quantification, and less judgement all around as to the levels of skill that are necessary or desirable in every instance. Part of what made free markets so easy to defend in earlier decades is the fact they tended to be a lot more fun, when there was less insistence as to how they were "supposed" to take place.

Notes on Secondary Market Roles in Wealth Creation

Chances are, present day wealth would not have been quite so substantial, were it not for the considerable (public and private) secondary market contributions of the 20th century. Even though I've emphasized the need to generate new primary markets, there's a caveat: If only. In other words, if only wealth creation could continue, on the course which it gained through the secondary market activity which contributed to primary market activity for so long.

Indeed, the twentieth century was a time when social capital as emphasized by Ryan Avent, was greatly augmented by secondary markets. Today, however, social capital - in and of itself - can't create a stronger long term growth trajectory, without the additional impetus of primary market formation. Even now, the general equilibrium conditions of the present continue to be tightened, and too few understand how central bankers are further exacerbating the process. For instance, labor markets are supposedly in recovery, according to this Reuter's headline, "U.S. jobless claims fall, point to labor market strength":

The number of Americans filing for unemployment benefits unexpectedly fell last week to near a 43-year low, an indication of firmness in the labor market which may support an interest rate increase by the U.S. Federal Reserve this year.

Still: the labor firmness that does exist, is of a specific general equilibrium form - one which continues to exclude economic participation and access along its margins. Worse, some forms of knowledge use participation have already peaked in general equilibrium conditions, which only points to the growing need for an alternative equilibrium approach.

What has changed? Both public and private market activity once contributed to broad income gains, especially in developed nations. Even though the fiscal transmission mechanisms of governments have lost much of their earlier capacity for efficient coordination, they nonetheless broadened the base of income capacity, in previous decades. The unique nature of fiat monetary systems was defined by both public and private financial integration, which in turn supported the productive complexity of knowledge based services. Developed nations in particular, gained equilibrium characteristics by which complex economies accumulated successive income "layers" of additional GDP growth.

In some respects, it's a shame that income taxation has became too open ended to serve a truly useful purpose, since initially this form of redistribution contributed to structural underpinnings in a way that may otherwise have proven difficult to replicate. In particular, knowledge based service sector activity became more complex and dynamic, than might have occurred via discretionary income alone.

Just the same, today's governments are increasingly at an impasse. Often, they cannot expect economic conditions to remain strong, should they remain reluctant to support a more structural economic approach to long term growth potential. Further taxation would be hard pressed, to provide the kinds of effective economic measures once promised. However, in order to productively supplant further redistribution, populations need to take a more direct role in the economic activities they believe to be most important. Otherwise, the productive knowledge based services of the twentieth century could eventually become hollowed out, with little to replace their value.

Social Capital as Value in Exchange vs. Value in Use

Human capital - as a sought after value in exchange component - has evolved in ways which go well beyond what were once normal routines for economic participation. Indeed, the most important social capital which comprises today's institutions, has the potential to substitute for a broader range of employment positions. Often, the more important the personal engagement that remains, the more expensive the real estate in which that engagement occurs, as well. But what happens when a growing number of people can no longer take part in economic activity with others?

Unfortunately, a political climate with little remaining logic or common sense, is one answer. Somehow, more of us need to become actively involved in negotiation processes and knowledge sharing, once again. While value in exchange "social capital" (skills arbitrage) roles are important, they need to be supplemented by value in use roles which are economically authenticated. In recent years, I have suggested time arbitrage, as a way to provide this additional capacity.

Ryan Avent has also been concerned about a growing lack of economic engagement. In "The Wealth of Humans" (p. 120), he discusses social capital, via its evolution as the most sought after skills capacity of the present:

Across societies, in fact, it is the depth of social capital - the social capital per worker, if we could quantify it - that matters most in determining the level, growth and distribution of income. Social capital is unlike industrial capital in many ways. It cannot be seen or traded. It cannot easily be measured, except perhaps as a residual - that which is left after accounting for the measurable stuff. Yet in the way it has transformed relative bargaining power, and in so doing concentrated the benefits of growth in the hands of the few, social capital is very much like its physical counterpart; it is playing an economic role that is analogous to the role of industrial capital two centuries ago. Just as worker's ability to reap significant benefits from the deployment of industrial capital was in doubt for decades, so we should worry that social capital will not, without significant alternations to the current economic system, generate better economic circumstances for most people.

He also notes, "Social capital is individual knowledge that only has value in particular social contexts." While this is could be said of any form of employment, it is all the more so, for the skills arbitrage which is necessary in many workplaces. What's increasingly at issue, however, are the natural limitations for skill sets being sought on present day institutional terms. It's a template which leaves too little room for populations as a whole to exercise their economic "muscles", so to speak. And without the utilization of skills capacity in a broader range of settings, society's ability to function well in social contexts, would atrophy as well.

Like others, I believe more overall time value should remain within an economic framework. While skills arbitrage as value in exchange is highly specific, time arbitrage as a value in use function, need not be so specific for knowledge use. Essentially, people would be granting permission to one another, to create economic environments which make better use of one's time value on more general terms.

Even though it's not easy at this historical moment to imagine economies as holding potential for internal generation, this is precisely how individuals coordinated mutual responsibilities for millennia. The 20th century brought about more wealth creation by upping the ante on economic participation - especially through formal education. In the 21st century, wealth can be generated and maintained, by a concerted effort to bring more people back into the economic fold.

Land "Scarcity" and the Secondary Market Effect

Land scarcity in David Ricardo's time was quite real, due to existing constraints in food production. Prior to the technological gains which greatly reduced the land needed for cultivation, more rent would continually accrue to landlords who didn't need to do anything, to improve their original land holdings. While a similar process continues to play out today, land scarcity in terms of food production is no longer a problem in the same sense. Meanwhile, the "scarcities" of desirable real estate, are merely a portion of the captured rents of the present.

Earlier land scarcities - in terms of feeding growing populations - have been replaced by land scarcities which reflect problems in the replication of local economic complexity, for important facets of knowledge use. Unlike the primary markets that are capable of creating decentralized locations for new wealth, secondary markets are especially reliant on national and state redistribution of already existing wealth.

This secondary market factor is aggravated, by the degree of core knowledge use in society which remains dependent on primary market wealth. Consequently, excessive secondary market dependence means arbitrary caps on overall growth, and caps on new formation of organizational capacity. Hence the scarcity of affordable land or housing by which to live close to one's work - particularly in the most dynamic areas where secondary markets exist alongside primary markets. Another way to think about this scarcity, is in terms of serendipitous agglomeration effects which are so important for wealth creation.

Unlike the primary market (tradable sector) of food production, knowledge use as a secondary market has not been particularly amenable to innovation. This inability for knowledge based services to provide growth through internal or decentralized means, is all the more problematic in times of economic stagnation. It's a form of organizational capacity which also encourages low populations densities, in the cities most reliant on captured knowledge rents. One could say that the artificial scarcity of property availability in the most desirable cities, parallels the artificial scarcity of knowledge based property, given the secondary market origins of so much present day knowledge use.

Interestingly enough, different incentives exist for the density of cities, according to the degree to which their economic activity is more closely linked to primary or secondary market formation. While plenty of services may also be found in more dense cities with a greater degree of primary market formation, the high density cities of some nations generate secondary market formation on more informal terms (less monetary compensation), than cities where knowledge based service providers have the political power to sway local leaders to maintain lower population densities.

The same population limits that apply between local citizens, are in turn reflected in attitudes regarding immigrants. Developed nations often welcomed both immigrants and high city population densities in the past, when city growth was comprised of a large degree of expansive primary market formation. But present day limits in secondary market growth, make it appear as though immigrants are competing for both production and consumption of budget driven services.

The Vital Structure of General Equilibrium

Tradable sectors provide a sizable contribution to general equilibrium stability, in part because they often include a representative single commodity price - one which extends across regions and nations. Nonetheless, while a normally reliable price construct exists - in contrast to somewhat indecipherable non tradable sector pricing - tradable sectors remain subject to swings in supply side conditions, which affect costs and resource availability.

In spite of this changeable supply side factor, the primary market position of tradable sectors is more closely anchored to overall economic conditions, than secondary markets and/or their related non tradable sectors. The latter does not affect general equilibrium value in the same way via price swings, because secondary markets aren't coordinated across a full (international) range of resource potential - especially in terms of economic time representation.

Consequently, when tradable sectors experience supply side shocks, the maintenance of a level nominal target may provide sufficient means to smooth the shock across a full spectrum of primary market value. Yet aggregate spending capacity has not been well maintained by central bankers in recent years, and too many economic activities have been diminished, by what should have been the limited consequences of individual supply shocks. By coddling the secondary market of credit formation, central bankers are missing both the (international) wealth templates of tradable sectors, and the nominal income which bridges all sectors.

Another general equilibrium consideration is price stickiness - especially in the knowledge based wages (and asset structures) of local, unique equilibrium settings for secondary markets. While these settings might appear decentralized due to their price variance, they are a direct monetary response to internationally and nationally (centrally) managed wealth generation. In a recent post, "Price stickiness is a symptom not a cause", David Glasner wrote:

All the theory of general equilibrium tells us is that if all trading takes place at the equilibrium set of prices, the economy will be in equilibrium as long as the underlying fundamentals of the economy do not change. But in a decentralized economy, no one knows what the equilibrium prices are, and the equilibrium price in each market depends in principle on what the equilibrium prices are in every other market. So unless the price in every market is an equilibrium price, none of the markets is necessarily in equilibrium.

Glasner is right, in the sense it can be difficult indeed to decipher equilibrium conditions in secondary markets. My concern of late is that we presently expect too much of our secondary markets in terms of marketplace capacity. Until more secondary markets exist in a primary market position, they will present problems for primary international markets, which are consequently experiencing deflation from inflation targeting.

Is it necessary to "know" equilibrium prices for every market? Secondary markets and non tradable sector activity provide price coordination in a different capacity than tradable sectors, which partly accounts for the unique qualities of these markets. While their value is also a reflection of primary market wealth, secondary markets have the additional responsibility of coordinating time based product which is not (yet, at least) sufficiently represented in primary markets.

Even though sticky wages are a general equilibrium problem, individuals will eventually need a more direct approach, in which existing resource capacity better adjusts to the changing wage realities of the present. In fact, this process should have already begun, decades earlier. Of median wage growth, Ryan Avent writes ("The Wealth of Humans", page 60):

Median wage growth, or growth in wages for the American worker in the middle of the distribution, did far worse. Indeed, since 2000 the real wage for the typical American has not risen at all. Looking further back does not much improve the picture either; since 1980 the median real wage is up by only 4 per cent. Not per year, but over the whole of the period. And if you then focus in just on the real wage of the median male worker, the duration of the stagnation extends back into the 1960s.

Too many aspects of secondary market structure contribute to this dilemma, and the response thus far has been inadvertent attempts to adjust wages to consumer expectations, instead of the other way around. Hopefully, Ryan Avent's latest book will make more of this discussion a commonplace. I am particularly grateful he recognizes the fact that - in the years ahead - marketplace realities will need to do a better job of adjusting to wage realities.

While I hardly expect general equilibrium circumstance to bear this responsibility at the outset (given extensive investments and commitments to marketplace definition), other portions of the population need not have to take this one size fits all approach, for equilibrium structure. Rather, experiments at the margins would make it possible to determine new forms of marketplace structure which more closely approximate existing wage capacity. All too often, sticky wages have been quite important in the general equilibrium conditions which have attempted to impose the same consumption definitions for all citizens.