Wrap Up for February 2018

Subsidies for the rich have made it impossible to tap universal catastrophic coverage as an option.

"Estimating Unequal Gains Across U.S. Consumers With Supplier Trade Data"

Zombie firms create problems for productivity.

James Pethokoukis for The Week, in "Death of the Debt Hawks":

Trump won the Republican primary and then the general election by disavowing GOP positions on spending and debt. That is a powerful real-world lesson for current politicians and future candidates.

David Wessel welcomes Janet Yellen to Brookings.

Will we survive elitism?

"The Economic Implications of Housing Supply"

Intangible capital is changing the nature of traditional banking.

Adam Ozimek muses on the stages of Trump acceptance:

"...about two-thirds of global investments is financed by firms themselves."

Even though some may not give much thought to the loss of international students, this is lost revenue for higher education - in particular smaller and less prestigious universities.

While I'm no longer an advocate of the use of wood for many building purposes (old homes in need of maintenance can be quite a headache in one's later years), an improved method for compressing wood may contribute to its strength and stability.

From the abstract:

The within-industry dispersion of TFP and output per worker has risen, while the marginal responsiveness of employment to business-level productivity has weakened.

David Andolfatto debates fiscal theories of the price level.

Matthew Kahn describes his new "limits to growth" class for non-economists as "a fair fight between Paul Ehrlich and Julian Simon".

The timing of this "piggy bank" raid was also noteworthy...

"...if we are all going to return to a happiness set-point after a period, why bother with policies trying to increase happiness?"

Their preferred explanation is that the economy has "returned to normal", however I do not feel the present structural circumstance are a normal that can be maintained. What's more, the Fed played a role in the downward shift of growth capacity that they did not openly acknowledge: http://ngdp-advisers.com/2018/02/15/just-one-things/

Gallup notes a significant decline in well being.

"...the question of how networks work in reality isn't a simple one."

"The US rate of homeownership was about average by international standards 20-25 years ago, but now is below the average."

Angela Rachidi discusses "the state of the safety net".
Ed Dolan also addresses potential safety net reforms.

What determines value capture and value creation?

Some economist opinions on the "mismeasure of output".

Geography affects basic needs.

Intangible capital as the "most important firm-level determinant of corporate cash holdings".

Given the backlash against mental health considerations re school shootings, it's good to see a public poll that backs those concerns.

Scott Alexander reviews pieces of the unemployment puzzle.

Inequality is not a simple matter of technological progress.

Government safety nets are no longer intended for recessionary shocks.

"71 percent of young Americans between 17 and 24 are ineligible to serve in the United States military."

The Fed needs to commit to stabilizing the long-run growth rate of spending.
"The truth is that poor Fed policy has contributed to the weakness of the expansion. But the Fed has erred by keeping money too tight, not too loose."

A review of factors re the decline in the employment to population ratio

The current healthcare system is a source of social tension between the working middle class and the poor.

A comparison of Japan's Lost Decade with the Great Recession in the U.S.

One's ability to recite facts - for instance - isn't well suited to competition with AI.

This supposed "consensus" that "Financial Plumbing most to blame for 2008 crisis" not only makes it difficult to remember the unfortunate monetary withdrawal on the part of the Fed (that was never completely remedied), but also the structural real economy factors that play a large role in macroeconomic effects.

One of my bigger concerns re an "excessive U.S. focus", is that a wide range of infrastructure options discussed in other countries, don't gain the full audience they deserve.

How does income inequality affect aggregate output?

Even though this rationale may sound odd to the ear: "building capital needs a shorter life", temporary building components that can be assembled and reassembled, would allow much needed societal flexibility and reduction of capital risk. And as Matthew Kahn stressed in his blog post, it would also allow building and infrastructure design to remain up to date.

The divisions between rural and urban life can literally separate families (China)

Does Jerome Powell believe the economy is "overheating"?

A graph which highlights the costs of economic access (housing and transportation)

Sometimes a crisis can happen in good times as well.

A former med student voices his concerns to Bryan Caplan re medical education.

"Starting with the 1980s, each decade has had a lower average than the previous decade."

Time as a Repository for Intangible Value

Why is it confusing to determine how human capital contributes to wealth creation? Not only is today's intangible wealth difficult to measure, so far it's notoriously difficult to translate into a wide range of economic settings as well. Unlike the tangible product of tradable sector wealth - which potentially originates from all corners of the world - intangible value is more closely related to specific human capital outcomes in favored regions. This has put an undue focus on "special" cities and areas to utilize highly concentrated skill sets, with the rest of the world's population seemingly on the back burner, indefinitely.

Intangible value as a partial representation of skill aggregates, has temporarily devalued human potential. Asymmetric skills arbitrage leaves too much human capital out of what could be self regenerating processes for wealth creation. When human capital as product is purposefully separated from production cycles which include human capital as investment, much of its monetary representation accrues to specific income sets, rather than continuous networks of working capital. Ultimately, substantial income becomes caught in passive asset holdings where it is separated from further human capital utilization. More specifically, too many organizational patterns for non tradable sector time based product, aren't allowing human capital utilization to spontaneously self generate. Instead, these patterns - more than anything - contribute to the passive holdings of real estate. One can think of real estate as a sort of final repository for far too much compensated human activity, as a result.

Alas, this circumstance poses real problems for long term economic dynamism. Too much of the aggregate value of GDP is being caught in passive asset holdings, where it sidelines much of what could be complete levels of economic participation. When real estate is allowed to absorb excessive value from current and past skill sets, its passive nature can be likened to layers of sediment in a river, which slows the more active components of our economic lives.

What could be done to address this problem? Time arbitrage could secure additional economic value in what would essentially be constant economic interaction. New time value would be generated, as individuals build life work patterns among networked time groupings which have a legal life not unlike that of corporate structure. Time units as the commodity in common, provide the active wealth building component for services generation. By placing matched time units in a primary market position (mutual employment), the broken connections between human capital utilization and investment would also be repaired.

Equally important: Since time units would hold storage characteristics in common with monetary characteristics, measured time value would make the use of knowledge and skill more tangible. Recorded and otherwise stored time units would function as a repository for economic value, and give human capital a stronger anchor than the passive holdings of real estate. Not only would skills sets and knowledge use be recorded according to actual use in specific instances (rather than skills classifications), the time continuum would allow the torch of knowledge and skills dispersal to be passed from each participant to the next. Since time value would maintain a constant active function, less time value overall would be lost to real estate value as a cost of economic access. And with more economic value retained in knowledge use networks, manufacturers would have additional incentive to create low cost forms of flexible housing components, which would in turn reflect lower group income/transaction costs for services of all kinds.

Why is Economic Stagnation Still Problematic?

Even though there's been encouraging signs of growth recently, context matters. After all, the limited growth trajectory which originated in the Great Recession, has not changed. Further, since recent income gains have largely accrued to upper income levels, many individuals (and regions) have yet to recover from at least a decade of economic stagnation.

Nevertheless, for many who prosper, the all too recent economic crisis is already forgotten. Hence renewed calls to further tighten monetary policy, and the collective wish to simply move on. The world economy has "never been better", right? Authors from quite different backgrounds also find it tempting to ride the optimist bandwagon. Such rationale provides much needed encouragement for the average reader, especially given today's political instability. Yet the still growing prosperity of developing nations, makes it easier to ignore the fact that something has gone wrong, in terms of the shared prosperity of today's developed nations.

Of course, who really wants more growth, or believes it could make a positive difference? How could more growth lead to shared prosperity if it hasn't done so already? Haven't people grown weary of a "material world"? As Diane Coyle writes in a recent post:

It's tempting to accept that growth is so over, given how much stronger the sustainability concerns are now than in the 1960s. But I don't think it's so simple.

Indeed. I would add that the sustainability of knowledge also depends on the continued momentum of economic integration and inclusion. Which is precisely what today's equilibrium dependent knowledge based economy can't provide.There's two problems with today's non tradable sector dominance, especially in nations such as the U.S. with large populations:

1) Today's most critical forms of knowledge use tend to rely on the monetary flows made possible by wealth in which resource capacity was settled at the outset (no debt or redistribution as the activity base). The reason this issue has become so important, is the extent of economic activity which now takes place in conditions which lack direct resource reciprocity. What's difficult to directly observe, is that resource matching at the outset creates the general equilibrium dimensions which can readily be tapped at any given moment, by all economic actors. And presently, more of us are seeking to tap into wealth which already exists, than are actually adding to wealth creation via resource reciprocity at the outset.

2) When vital forms of knowledge use are structured as secondary markets, these organizational patterns are dependent on an essentially fixed pool of existing resource capacity during times of economic stagnation. Most supply side reform efforts run headlong into the fact that present providers consequently can't expand their marketplace capacity, unless they're willing to dilute the income they already claim. Hence attempts to increase supply for healthcare practitioners, and building density of areas with desirable employment characteristics, are not well aligned with the realities of those who own real estate or practice high skills trades in prosperous regions. In a sense, recent calls for supply side reform in non tradable sectors - sensible though such calls appear - aren't always essentially different from what progressives have sought, via taxation.

Consequently, today's non tradable sector dominance, in which private sectors are heavily dependent on government largess and closely held production rights, has led to political stalemate. Small wonder for instance that the U.S. has "hit a wall", which seemingly demands the building of a wall, as if doing so could somehow address the underlying domestic supply side issues at stake.

We need defined equilibrium options that won't dilute the income or real estate value which residents of prosperous regions have already claimed. By building defined equilibrium capacity via immediate resource reciprocity, we wouldn't have to plead with special interests to dilute their income or asset values, to create additional economic access.

In the centuries when tradable sector activity was dominant, perhaps it was still reasonable for non tradable sector activity to be organized solely as dependent or secondary markets, where individuals could also benefit from the Baumol effect. But given the present day dominance of non tradable sector activity, it's time for these sectors to make room for resource capacity which is utilized at the outset without debt or redistribution. Fortunately, non tradable sector activity can be organized as primary markets capable of generating new wealth. Just as tradable sectors have done, all along.

Knowledge Production as a Monetary Constraint

One characteristic of today's non tradable sector activity - particularly given the structural shifts which have occurred since the Great Recession - is the nature of intentional constraints for knowledge use which translate into wealth capture. Only consider the income gains presently accruing to high skill services management, which doubtless contribute to the divergence between productivity and the typical workers pay as a "relatively recent phenomenon" described by Lawrence Summers and Anne Stansbury. Already, these recent high level income gains are leading to calls to pull back on monetary policy representation, as well.

Knowledge use constraints especially affect a nation's long term growth potential, and the marketplace limits they impose could help to explain some of the recent losses in national well being. While many continue to be concerned about the implications for lost middle income compensation, I've stressed how hierarchical services sector dominance affects marketplace suppression at the margins. These arbitrary limits to production and consumption, help to explain at least some of the lost aggregate spending capacity that originated in the Great Recession. Indeed, the extensive drop in nominal representation was never fully recovered, or otherwise sufficiently accounted for by the Fed.

Limits to production and consumption in knowledge based services, are also reflected in limits to housing ownership. All the more so, since there are few mass produced housing components or infrastructure options that represent the full range of income levels in the U.S. And while aggregate income gains are normally associated with greater growth and output, the fact recent income gains are linked to sectors which intentionally limit total output, likely contributes to calls from many quarters to pare back monetary representation. Even though the idea of a possibly overheating economy seems preposterous - given today's low levels of labour force participation - this is an important part of our structural reality which has yet to be addressed.

The real challenge is not to break up the dominance of today's knowledge gatekeepers, but to encourage them to support organizational patterns that would contribute to broader participation in the production and consumption of time based services. After all, until more people participate in these activities, the limits of knowledge production will act as constraints on aggregate levels of tradable sector production as well.

Wealth capture is an understandable impulse, and occasionally it can occur in relatively benign ways. But presently, extensive limits to active knowledge use have destroyed any illusions about benign outcomes, and not just in the U.S. Hopefully, some of our knowledge gatekeepers will become more open to renewed prosperity that does not arbitrarily exclude human capital potential at the outset.

Notes on Reciprocity and Economic Complexity

Why does mutual reciprocity feel so awkward in the present, compared with forms of social reciprocity that earlier generations took for granted?

Perhaps the economic complexity of our times has contributed to this problem. Productive economic complexity, with its extensive monetary exchange and specialization, has gradually shifted how we experience our time and get things done. These changes have dramatically affected our cultural expectations. Whereas once we shared similar tastes, activities, and resources in common, today's seemingly infinite range of product, has also led to great variance in habits and personal preferences.

Scarcely anyone goes about their normal routines in quite the same way, which can lead to problematic relationship issues as well. The fact we produce and consume so differently, encouraged us to depend on market pricing mechanisms, instead of trying to decipher the wants and needs of others. And since friends and family tend to be geographically scattered, brief moments of shared time with loved ones may revolve around special consumption choices, instead of ongoing daily concerns. Consequently, for some of us, our daily routines would benefit from useful patterns for societal reciprocity.

Many with sufficient income who live in prosperous regions can take advantage of highly specialized services production. These desirable market mechanisms reduce some of the uncertainties of personal negotiation and transaction. However, service options in prosperous regions have hardly replaced the social cues that people need for reciprocal assistance and time based coordination, elsewhere. At a personal level, today's market mechanisms often fall short. Just the same: Arguments that the free market doesn't work well for personal needs, miss the point. That doesn't mean societies would want to return to how services were addressed in the past, because too much cultural regression would be the likely result. We need to rethink services by closely examining where the use of our time holds the most meaning. Then, we can better align our own aspirations to the dreams and aspirations that others hold.

How might time arbitrage address these issues?  Since we lack recognizable patterns to negotiate for services, mutual reciprocity will take plenty of practice before it feels comfortable. But that's okay. We've had to negotiate with hierarchical service institutions for so long, that communicating face to face with others will doubtless take some getting used to.

Nevertheless, time arbitrage could give us new ways to think about how services specialization can be maintained, especially for small communities. In particular, it has been more inconvenient than some realize, for residents of small towns to run to large cities every time they experience technological or medical problems. All citizens need better means to take part in an economically complex world, where they already live.

Time as Commodity: Taking "Redundancy" out of Knowledge Use

A quote from Jane Jacobs provided the inspiration for this post:

Redundancy is expensive but indispensable.

As things currently stand, though, it's becoming more difficult to maintain many vital components of knowledge based work, during a time of growing budgetary debts. Indeed, many important knowledge sets become imperiled when special interests limit their marketplace capacity, as well. Ironically, knowledge hoarding as a stand in for knowledge preservation, is being funded via exorbitant taxpayer expense.

And while various groups believe in certain "indispensable" knowledge, it comes down to the knowledge sets in question. Consequently, knowledge does not necessarily function as a reliable continuum among system networks. And when vital knowledge sets are held in a politically centralized capacity, the party in power is becoming more likely to discard what they don't consider useful, even as they remain willing to create more taxpayer burdens for the knowledge use means they prefer. Today's asymmetrically compensated knowledge is increasingly endangered, by current political realities.

In all of this, the paradox is that knowledge use "redundancies" are how we rely on the dispersal of knowledge through society, for progress and economic stability. What can be done, when important forms of knowledge become too expensive to preserve and maintain? Especially since no one is particularly fond of government redundancies?

There's two considerations at work here:

1) Jobs are a cost. Fortunately for tradable sector activity, costs can be settled at the outset via reciprocal resource measures (coordination) which leave no residual debt or societal burden. Even though each job is an additional cost, decision making processes need not be held up for hiring, because the responsibility for job costs is internal. Hence it's a simpler process, for tradable sectors to maintain a long term continuum for knowledge advancement and maintenance.

2) On the other hand, when time based (non tradable) product has to rely on existing revenue flows, general equilibrium capacity acts as a relative constant on the knowledge generation that can take place via secondary market terms. The problem of job as cost becomes externalized, which means permission for non tradable sector knowledge use can be both sporadic and uncertain.

This is all the more problematic, given the desires of today's knowledge based non tradable sectors to serve as reliable repositories for knowledge preservation and dispersal. Since budgetary burdens have begun to skyrocket, the political maintenance of vital aspects of knowledge use has become less certain. Citizens are ironically finding themselves ever more reluctant as taxpayers, to fund the very time centered activities that some groups consider vitally important.

Time arbitrage could gradually reverse this cycle of diminished knowledge maintenance, by allowing knowledge to more readily function in a direct or primary market context. With time unit value as a single price commodity (time purchases time) there would be no debt residual. Since the groups involved would be creating wealth at the outset and internally accounting for costs, this organizational capacity need not wait for uncertain political "permissions" processes. All individuals, not just professionals and the elite, would be able to take part in the origination and preservation of knowledge in an ongoing continuum.

When knowledge and time function as wealth origination, knowledge and human capital no longer appear as though redundancies which society can ill afford. Finally, the average citizen would be able to take part in the knowledge based economies of the 21st century. Only consider how different this would feel for so many, to be a part of the game. Especially since so many of us have been on the outside looking in, at the prosperous economy which our taxpayer dollars made possible. Even though our present institutions can't afford the costs of hiring us all, we can readily afford what would be the limited costs of mutual employment.

Mutual employment would handily take the "redundancy" out of knowledge use. Just think. By utilizing knowledge on wealth creating terms, our knowledge preferences would no longer have to suffer the brutality of polarizing debate. As tradable sector commodities, apples and oranges never had to wait for expert or taxpayer approval! Fortunately they will keep right on producing on their own accord, whether or not moral debate ensues as to whether they have a right to exist. If no moral debate is needed for the choice of apples or oranges, why do we demean those who "foolishly" invest in experiential knowledge, rather than practical knowledge?  One can only hope that - given a stronger link to wealth creation - knowledge in all its variety and abundance, would finally be freed from the harsh judgments it is constantly exposed to, in its organizational capacity as a dependent marketplace.

Direct Personal Interaction Can Temper Expectations

Perhaps the best way to think about tempering in this instance, is the active listening and participation which imparts strength to others. When this attention is lacking, we may respond via withdrawal and over reaction. One's expectations of others may become so unrealistic, that society suffers the loss.

We can often gain the emotional strength we need, when it is possible to share what we experience with others who provide moments of their undivided attention. Indeed, the greatest gains are when undivided attention begins early in life. In all likelihood, the more shared experiences we have with others, the easier it is to form - and maintain - rational expectations of personal and societal reciprocity.

Everyone has moments in life when they can benefit from the undivided attention of others. Nevertheless, many of today's services take place in ways which reduce personal or undivided attention to a minimum. One common theme after far too many school shootings in the U.S., is the wish that perpetrators of this horror might have gained the personal attention they needed, before it was too late.

Even though we have institutions which promote mutual assistance, they are spread too thinly to provide help where it is presently most needed. This is yet another reason I've advocated for a time based marketplace, where individuals could rediscover the value of face to face interchange. Even though many goods are now delivered in ways that no longer require face to face reciprocity, we could recreate services along the lines that more closely resemble the civility Adam Smith knew, centuries earlier, when shopkeepers still had daily personal interaction with their customers.

Direct personal interaction is particularly important, for the forms of learning that require both personal judgement and time/place specificity. Time arbitrage could provide formal means for students to mutually assist one another, which is all the more important since teachers so often lack time in their schedules to help the students who need it most.

Hopefully in the near future, we will not have to rely solely on broadcast means for the marginalized to access education - valuable though such educational materials can be. While many adults adjust reasonably well to solitude late in life, no one should expect children or young adults to spend too many hours alone in solitude. Lets try to make certain our economic systems maintain the characteristics that encourage true civility and full participation. We have the ability to restore the kinds of direct personal interaction, that make us feel fully human and, yes, sane.

Economic Time Value as a Unique Equilibrium

Often I've struggled to clarify, how a marketplace for time value could function. One reason this market potential isn't immediately obvious, is that the time arbitrage involved, would function as a unique equilibrium. Time value would be utilized in relation to itself, thereby allowing individual and group expression of economic values that exist in relation to local resource capacity.

The groups which take part in this endeavour, would generate new means for time based services in defined local settings, across a broad spectrum of coordinated skills capacity. Expressed time priorities (time arbitrage) in these communities would function differently, from how labour (particularly specific skills) is compensated in the "normal circumstance" of general equilibrium. Further, ownership responsibility and benefits would be linked to all participants, in mobile systems of building components, land use groupings, and flexible physical infrastructure.

Another problem I sometimes encounter, is discussion re what could be in an economic context, when it isn't quite clear what already is, by contrast. Even though today's services based economy represents close to 80% of U.S. economic activity, the theoretical structure of this activity is far from concise, as contrast with the much easier to measure "goods" economy, that prevailed till the latter part of the 20th century.

While production gains can still be discerned in tradable sector activity, the murky relationships of today's dominant services capacity, are far less tangible. For that matter, the theoretical nature of services organizational capacity, has yet to be differentiated from the still relevant neoclassical framing, of global tradable sector activity.

Consequently, I've argued for production clarification (tangible definition) in services which might also prove useful for economic modeling. Even though simpler methods of knowledge use would hardly be "perfect" "substitutes for skills specialization, such methods could still provide more reliable progress indicators over time, than what today's arbitrarily limited services capacity can provide. Even better, an organizational knowledge use structure which - via time units - generates new wealth at the outset, could finally relieve the long term budgetary burdens now faced in the U.S.

In all of my attempts to describe my framework, I realize my own economic "shorthand" phrasing and theoretical suggestions, fall short of what is actually needed. Hence I will continue my efforts to conceptualize from as many angles as possible, for the sake of greater clarity. After all, many observers frame economic concepts somewhat differently, depending on their own roles for economic participation.

This discussion of defined equilibrium considerations wouldn't be complete, without mentioning some normative aspects of economic freedom. When economic freedom is mostly envisioned as freedom from the actions of others, the actions of the strong over the weak mostly give free markets a bad name. Worse, a "do nothing" approach, has encouraged regulations which ultimately undermine remaining economic freedoms for all concerned.

Given the extent of economic freedoms we have already lost, might intentional economic design make it possible to begin reversing those losses? While some remain certain that "The road to Hell is paved with good intentions", I would respond that good intentions are often necessary to preserve the most economic freedom, for the greatest number possible. Fortunately, time as an economic unit, could provide apt means to preserve personal leverage for the supply and demand of services which individuals mutually prefer in the same settings.

Again, it has been difficult to express the idea of personal economic time value, due in part to a lack of clarification in the time value that people find most important in general equilibrium conditions - let alone the defined equilibrium conditions which I have described. Since too much of our potential time value ends up excluded in today's services dominant economy, our time commitments are no longer well aligned, with the environments we have built via the relationships between money and other forms of resource capacity. What's more, our personal skills race with technology continues, because we still lack the means by which to provide economic value for what we experience with others, through the shared mechanism of actual time and place.

Should we gain the ability to pursue the freedom of mutual employment, it would also allow us to relax our grip up on a skills race with technology that can't be realistically won. Yet no one need fear displacement by automation, if they are willing to explore a completely new marketplace which makes it possible to think differently about services supply and demand. A marketplace for time value, could help to restore faith in the value of economic freedom, and it would give individuals the chance to pursue mutual challenges and aspirations on more personal terms.

Margins of Safety For the Marginalized

While this title seems obvious in retrospect (for my own efforts), a recent post from Shane Parrish, made me more aware, how I approach potential non tradable sector "circles of sustainability". In "Making the Most of Second Chances", Shane Parrish provides some explanation for margins of safety:

We can make the most of our second chances by building margins of safety into our lives...The concept is a cornerstone of engineering. Engineers design systems to withstand significantly more emergencies, unexpected loads, misuse, or degradation than would normally be expected.

What happens when societies are no longer convinced they have sufficient margins of safety? What's more, it's not just citizens that are slowly being marginalized. So too, are many forms of knowledge use, which - when private interests only find them profitable up to a point - are becoming less amenable over time, to the budgetary burdens of government funding.

Also, note Parrish's engineering reference. Many economists prefer that the discipline not be approached from an engineering or problem solving perspective, but as an act of passive observation. However, this "hands off" observational approach, likely bears some responsibility, for the fact that too much economic activity has consequently ended up as wealth capture (with its associated public debt), rather than wealth creation.

Wealth capture also functions by establishing margins of safety that are mostly intended for higher income levels. Alas, lower income levels also need more viable options for risk management. Even so, it's not easy to make peace with the fact one's resources (and internal fortitude) might have become insufficient for prevailing norms. As a result, we often don't realize that it's time to let go of commitments in line with societal expectations, until they become too risky. Once this occurs, personal attempts to "bounce back" from adversity, cease to be as reliable as before.

How to know when better margins of safety are needed? Parrish provides an apt example:

There is no doubt that the prospect of death wakes us up. We don't often think about how dangerous something can be until we almost died doing it. Then...we adapt. We recognize that if we don't, we might not be so lucky next time. And no one wants to rely on luck as a survival strategy.

When people no longer have recognizable margins of safety to continue life as before, it's not just frustrating for those who personally experience setbacks, but also those who have previously depended on them in some capacity. A close brush with death can sometimes be an economic "bridge too far" as well, since societies lack sufficient local environment options which make it feasible for individuals to continue work and personal responsibility, in any "diminished" capacity.

One unsettling aspect of the Great Recession, is that this economic catastrophe should have provided a wake up call, which would have encouraged populations to build stronger margins of safety for the marginalized. Hopefully, we will be able to create local environments which are more responsive to actual income and personal resource levels, before any economic catastrophe may strike again.

Maintenance as a Basic Time Arbitrage Function

Time arbitrage includes a crucial maintenance role. Why might this be so important?

For one thing, witness the growing inability of private enterprise to extend marketplace access (production and consumption roles) to all citizens, even as firms grow more reliant on the additional budgetary burdens of government subsidies. This private sector reliance on government assistance, makes it even more difficult for governments to preserve revenue space for basic maintenance functions. Potential revenue sources wouldn't be such an issue, were it not for the fact that aggregate organizational capacity is now too thin for governments to rely on broad citizen majorities for public support, via taxation. For historical context, past civilizations ultimately failed, after losing their ability to coordinate the necessary care of earlier wealth creation - in its many forms - among all citizens.

How might we ensure a fuller range of maintenance preservation, in the near future? Even though maintenance is often thought of as mostly involving simple skill sets, many of society's maintenance roles have actually become quite intricate. Oftentimes, societies lack the ability to improve productivity and long term growth, unless populations are fully involved in the maintenance of wealth generation which has already taken place.

Maintenance roles are vital, across a full range of knowledge and skill capacity. By no means do they include just the care of individuals, buildings and physical infrastructure, for they also directly support the knowledge and skill which societies advance. Nevertheless, today's knowledge use patterns are organized in ways that don't encourage their broader dispersal across societies in general. Citizens are now in need of platforms which more closely echo the knowledge generation of the past, when individuals could still stand "on the shoulders of giants" for the advancement of knowledge and skill. Whenever knowledge is siloed and protected, it tends to be more readily lost, in the inevitable setbacks that civilizations ultimately face.

The time arbitrage of knowledge use systems would include maintenance functions at all skill levels, as a core purpose of organizational capacity. As a horizontal (symmetric) wealth generation structure, time arbitrage would give new life to maintenance functions which both private and public endeavour have become less able to provide, via the centralized nature of asymmetric compensation. Maintenance functions would be particularly important in areas such as these:

- Knowledge use storing and dispersal, for vast backlogs of preexisting useful and experiential knowledge.
- Research and development which private enterprise can't generate due to lack of profits, and which governments now lack the revenue to provide.
- Preventative care for both individuals and a wide range of existing social/physical infrastructure.
- New infrastructure means which are more closely aligned with local (current) resource capacity and global ideas for innovation.

New communities, organized as knowledge use systems, could focus on particular areas of knowledge and skill application that are important to the original participants, who in turn would seek broader participation for a full range of related activities for individuals and families alike. Each chosen primary knowledge function, serves as a focal point of framing, by which a multiple range of skills capacity can be coordinated in a year's time. Individuals and families alike could enter and exit these flexible communities as lifestyle needs gradually change. The result would be a more complete template for economic continuity, especially to preserve vital forms of non tradable sector activity which are presently restricted to upper income levels. There's also an equilibrium corporation group motto: Steadfast in knowledge, strength in mobility.

Only recall that in the past, firms extended partial templates for wealth creation in environments which also benefited from a full template of societal coordination that was only partly economic in nature. It's easy to forget, how many of those earlier broad templates for societal coordination have been lost. Time arbitrage could help to restore the broader societal coordination, that makes it possible to once again advance the possibilities of long term growth and prosperity.

The Productivity Challenge of Our Time

Lately there's been discussion about personal "moonshots", and if I were to try and describe my own, it would include addressing the ways we currently think about the nature of productivity gains. All the more so, since measurable productivity is closely linked with the economic theories we continue to rely on. That said, have neoclassical theories re productivity outlived their "usefulness"?

Arnold Kling thinks so. In recent posts, he writes:

My personal moonshot is that I wish to be a leader in overthrowing neoclassical economics.

...As I see it, neoclassical economics is characterized by two essential propositions. 

1. Production is a process that employs two primary factors - labor and capital.
2. The distribution of returns to labor and capital reflects their respective contributions to the production process. 

Kling suggests labour productivity is now a "nonsensical" number, given today's numerous intangible factors of production. Nevertheless, if it proves "impossible" to sort out how we collectively think about intangibles, GDP as concept will only face more excessive scrutiny in the years ahead - some of it unhelpful. Alas, devaluing both GDP and output measure without concise replacements, is not a desirable approach. Any supposed inability to model today's economy of seeming intangibles, ultimately means problems for accurate monetary representation, as well.

There's potentially good news in all this confusion. Since the basic labour to capital nature of tradable sector production remains essentially unchanged, neoclassical logic remains important as part of our economic foundation. That said, its applicability would be better utilized in a dual modeling framework, where productivity outcomes depend on whether tradable sectors or non tradable sectors are observed. Even though intangible factors affect the labour calculations and production of tradable sectors to some degree, the tangible nature of tradable sector output is still readily observable, as contrast with the time based product of non tradable sector activity. In particular, today's non tradable sector intangibles, suggest that something is essentially different, re societal organization of labour and capital.

Part of the productivity challenge, is to break intangibles down into understandable elements, especially since doing so also makes them more amenable to output gains. Even though we can't expect to change the intangible nature of government compensated labour, or professionally defined (time based) product - hidden as they are in other measures - time arbitrage would provide a long term approach to generate output on more tangible terms. As a direct means of wealth creation, time arbitrage also would not be subject to the political limits of fiat monetary representation, as is the case for government compensated labour and professional capacity.

Consider for instance that for tradable sector activity, a Solow framework for output gains still applies. The problem comes in when the Solow framework is applied to the time based product of non tradable sector activity. Should aggregate time participation be reduced by technology in these settings, arbitrary losses in the production and consumption of time based product may also occur, with little if any gain in either output or productivity. This is one reason why it is so important to have a better understanding, of the nature of what we now call intangible factors.

Let's consider how we derive benefit from time based product, so this form of economic interaction might gain some much needed tangible definition. In time based product, the commitment of time and specific place, are central to each individual's immediate cost. Labour, or derived time preference, becomes linked to human capital in the form of our personal investment. Time and place are utilized for mutually experienced product, which embodies production and consumption at the same time. How so? First, consumption is not just what the end consumer seeks, but also the provider, who often finds the act of provision (production) to be a highly desired consumption good in its own right. In other words, the work we desire, might be one of the most important "products" we choose to purchase in the course of a lifetime, despite the high risks that are frequently involved.

Now, consider the interactive nature of time based product, for recipients or end consumers. For the latter, even though they may not be personally engaged in specific production roles with their providers, the personal interaction which takes place can still factor into future productivity roles (direct or indirect human capital investment) on the part of the recipient.

One way to make this interactive relationship more tangible, is to utilize time as the primary economic unit for measurable output. While other recorded definitions would exist alongside this approach (particularly in terms of shared knowledge transmission and dispersal), mutually compensated time would be recorded for purposes of GDP. Importantly, time arbitrage would also provide records of the knowledge, skill and other activity that provider and recipient find noteworthy in specific interactions, as opposed to more static forms of skill representation as presently recorded for purposes of GDP.

Hence time based product via time arbitrage methodology, would combine human capital and labour (or expressed time preference), as simultaneous production and consumption. Greater productivity over time accrues via a continuum of mutual skills acquisition, as knowledge use patterns are continuously recorded by the groups involved. While these recorded knowledge and skills gains by participating groups are also quality gains, such gains can take place without the internal inflation which has long been associated with high skill time based product. Time arbitrage as a relatively constant commodity value, makes it simpler to determine both the extent of services output and consequent production gains, since the output of this decentralized services capacity isn't muddled by general equilibrium transmission.

The productivity challenge of our time, is perhaps not so much about "throwing out" the old models, but recognizing the dual nature of tradable sector and non tradable sector production. Is it possible to redefine the latter on tangible terms? Can time preferences gain economic validity? To clarify the production potential of time based product, the social implications of mutually desired time preferences would need to be recognized. After all, mutual time preferences are quite different from the externally defined labour components of tradable product. Indeed, few other aspects of economic activity hold the same potential, for greater economic participation and inclusion.

"Basket Case" Nations: Emigration as the Only "Good" Option?

First, apologies for this rather sad term, although at least it's not as distasteful as one that's been bandied about of late. As someone who has always lived in the U.S., I remain supportive of immigration from all nations. However, I don't believe it's helpful for anyone to insist emigration is the only "logical" long term option for those who lack economic opportunity, especially given today's political backlash against immigrants in general.

Why have nations suddenly decided to pretend, that it is impossible to generate meaningful economic activity beyond the places it already exists? Only recall that highly valued production processes have been widely dispersed around the globe as long as anyone can remember, particularly tradable sector activity. Even though the organizational processes involved haven't always turned out well, in the whole they still provided means for wealth generation which nations previously lacked in many instances. This is no time to be giving up, on what has been a civilizational capacity for problem solving.

I get frustrated every time someone insists nations are hopelessly bound to present day cultural outcomes. How does anyone remain convinced in the potential of economics as a dynamic, "hands on" discipline - capable of assisting nations in general - if economists encourage policy makers to give up on the possibilities of multiple nations ever "getting their act together"? Especially since advanced nations have become so reluctant to take in millions who hope for a better life.

Normally I cite articles (particularly if I write an entire post in response such as this one), but recently I was frustrated by a poorly written opinion piece, from a journalist whose articles I once enjoyed. What might have been a fruitful discussion re immigration on this individual's part, was simply thrown to the wind because it was framed in an extremely partisan context. Apparently Trump was "reasonable" to express out loud that some countries simply weren't worth our time or attention. And yet, even though some villagers would be happier to find economic opportunity in their own villages if they could, we have the nerve to boast how much better our advanced nations are for these people, even as we simultaneously limit their entry. Limited entry is understandable, it's something many nations have to do. But proud boasting about our own good fortune, knowing full well that others in the near future won't be near as fortunate, is something I don't find acceptable.

If economics is to remain viable in the near future as a dynamic discipline, I suggest that journalists, politicians and economists at least think twice before blurting out variations on these three themes, even if one is pessimistic enough to basically believe them:

1) The poor will always be with us.
2) The poor regions of advanced nations will always be with us.
3) We can't "bottle" what works so that it will help anyone else, in our own countries or elsewhere.

Firms learned how to organize "bottled" productive activity and spread it across the globe. Given the chance, a new kind of firm could also "bottle" more productive means of local knowledge use for global dispersal, via time and knowledge as direct wealth creation.

General Equilibrium and the "Closed Trail"

Recently, Tim Worstall, in a post titled "Governments Really Just Aren't Good at Maintenance," notes the $11 billion backlog of maintenance work which is accruing in national parks, here in the U.S. One issue in particular stands out: Why focus on the uninterrupted support of well paid administration in headquarters, while the average worker could more effectively tend to areas in need of personal attention?

While the "closed trails" of general equilibrium in this post are a reference to limited societal options in general, sometimes the real world provides apt literal examples. Zion is among my favorite national parks, and one of its popular trails has remained closed since 2010. Worstall sums up:

The truth being just that the long term provision of goods and services, the maintenance necessary to make that happen, isn't a process well dealt with by government.

That said, what gives us the confidence that private enterprise is always capable of keeping more consumer options on the table for the public as a whole? Healthcare in the U.S. is just one glaring example, of the problems in this regard.

Nevertheless, the ways in which private enterprise are presently structured, means firms often have little choice but to quickly respond by shutting down not just "trails" but their entire edifices, should profits be insufficient to keep desirable goods, services or amenities available. While governments often have the option of waiting for further revenue before they elect to close off options entirely, private enterprise lacks the ability to do so. By way of example, many who have traveled across the U.S. remember privately owned areas of natural beauty which proved too difficult to keep open to the public. One noteworthy example I recall is Diamond Cave, located near Jasper, Arkansas.

Why has it proven so difficult for society to provide maintenance capacity, as continuity for valued resources and assets? In some respects, before money began to substitute for other cultural functions, populations had more incentive to dedicate personal time management (and labour) to mutually valued maintenance. One reason it is now difficult to prioritize maintenance, is that productivity gains are sought in both private and public endeavour by minimizing labour, wherever possible to do so. Indeed, incentives to minimize labour are quite similar for both. Perhaps the main difference is simply that governments are slower to respond, before removing desirable public services and amenities.

How to think about these circumstance in terms of general equilibrium capacity? Private enterprise focuses the extent to which profit can be derived from partial equilibrium, to preserve institutional viability. Hence some forms of private enterprise - especially the non tradable sector activity which has led to disequilibrium - tend to seek only a limited portion of any potential consumer base. Governments lack the ability to generate additional marketplace capacity as well, given their own reliance on asymmetric organization and compensation. When production capacity (and its consequent employment) is limited, so too the closed trails of consumption capacity.

Are there ways to gain additional general equilibrium potential, for economic activity beyond the bounds of present day institutions? Given the extensive algorithm capacity now in use, algorithms could also assist individuals in the optimal coordination of symmetric, or mutual time capacity. When time value is matched at the outset to generate new wealth, producers and consumers alike would be able to focus on marketplace capacity which is difficult to provide via the asymmetric means of specific skills compensation. In other words, some of today's more desirable closed trails, could be reopened through the defined equilibrium settings that time arbitrage makes possible.

Even though every trail (all the goods, services and amenities that populations desire) can't remain open, societies could still create better organizational patterns for the ones they deem most valuable - particularly those which our present institutions have become ill equipped to provide. As we go through life, certain goods, services and amenities become more important to us. Specifically designed (or defined) non tradable sector equilibrium settings, would focus on one or else a few essential categories in this regard. These specifically highlighted group preferences, would provide unique frameworks for an overarching structure of local and mutual time management. Time arbitrage would make it possible to prioritize a full range of maintenance functions, via the wealth building capacity of time as an economic unit of measure.

However, the priorities of natural beauty and other environmental maintenance, are but a starting point. There's also the mutual care and related asset maintenance which daily life requires, alongside the practical and experiential uses of knowledge so important as a foundation for life's higher aspirations. By defining specific aspects of non tradable sector activity we find most desirable at different periods, individuals and groups would have the ability to create wealth by coordinating a full range of skills capacity, all the while utilizing the most important time period aspects of the process as unique central coordination points. Even though it is not possible to keep every trail open that we would like to explore or benefit from, it is infinitely possible, to open more trails through mutual employment and time centered wealth generation.