Wrap Up for May 2018

The job guarantee controversy, revisited. Timothy Taylor notes that yes, the U.S. job market would benefit from a broad shake-up. People are losing their patience for good reasons. But why haven't similar programs already been implemented in Europe? And that's just the first tough question. Also a response from Ed Dolan.

April 30th, 2018, was a critical turning point for the FOMC. And,

By paying banks more to hoard reserves than they could make by lending them, the Fed could effectively sequester those reserves, preventing them from contributing to increasing lending, spending and prices.

Is healthy food an important factor in depopulation?

When we asked rural officials about the importance of grocery stores, they shrugged: Affordable housing, jobs, schools and hospitals topped the list.

In the past, deficits didn't really spook markets. That could be changing.

From McKinsey: "The economics of artificial intelligence"

The Federal Reserve Board is one of the few institutions which has received normal treatment from Donald Trump. Can that last?

"Overheating" is hardly a likelihood from the dominance of a single indicator such as oil. Spending growth in 2018 hasn't been sufficient to warrant inflation concerns.

"Although AI is already in use in thousands of companies around the world, most big opportunities have not yet been tapped." "The fallacy that a computer's narrow understanding implies broader understanding is perhaps the biggest source of confusion, and exaggerated claims about AI's progress. We are far from machines that exhibit general intelligence across diverse domains."

Diane Coyle describes some current problems re GDP measure.

Will the pressure on profit margins from higher resource costs prove temporary?

"One of the things that comes up in studying the role of markups is an apparent paradox. The presence of markups can mean the value of aggregate output is lower than it otherwise would be, as it leads to a misallocation of inputs. But at the same time, it is possible that raising the average markup in the economy will increase the value of aggregate output. It would appear as if markups can be both good and bad for output."

Some images of jobs that are disappearing

"Can people afford American infrastructure?"

Productivity growth (a follow up post): Can we sort out positive productivity effects from negative allocation effects? Allocation markup can be positive with quality output gains, but to what extent? I also wonder whether the collapsing markups may reflect a relatively diminished aggregate supply in some instances. Especially when substantial portions of supply are dependent on government revenue. Nevertheless, if markups generated a 40% equilibrium loss in 2014, any possible efficient equilibrium outcome, would center around utility preferences.

Markups in healthcare made the U.S. an attractive market for innovation. "Yet being an engine for innovation doesn't necessarily translate into better outcomes."

Path dependency is an infrastructure problem.

Is future productivity expected to "rebound, stay the same, or decline further"? The authors suggest that "Future structural change will not reduce productivity much further." However, if the status quo were to remain intact, I'd suggest this may be due to reduced aggregate production in time based product. In other words, less use of applied and experiential knowledge at an economic level.

Henry Kissinger discusses the instability of artificial intelligence.

Cities: The passage of time affects "spontaneous complexity and intricacy".

"The benefits that the Affordable Care Act was likely to achieve in terms of expanding health insurance coverage were often oversold."

Vitalik Buterin shares some of his concerns re the need for decentralization

Interest rates have been trending downward for a long time.

Does "doing the right thing" enhance the bottom line? Some interesting experiments with corporate social responsibility.

Elite communities are leaving everyone else behind. What happens next?

"...as college became the default path to professions in the 20th century, apprenticeships fell out of favor with America's upwardly mobile culture."

Too few are taking into account, how this could eventually wreak havoc with our present prosperity: "America's Exploding Budget Deficit" Also, a global perspective.

Deductive vs Inductive Reasoning

One perspective is - of course - NIMBYs wanted it this way. "Early decade big city growth continues to fall off, census shows"

Technology Need Not Divide Us From Ourselves

An all too common theme, is that technology may soon stand in the way of our ability to pursue meaningful and productive lives. Nevertheless, this imagined "cloud" has a silver lining, for technology need not mean the loss of autonomy or personal agency. Ultimately, it is within our power to broaden the means by which individuals and groups alike, can benefit from technology and societal innovation in general.

Only survey the historical means by which we have chosen to benefit from technology in the past. Recall how the rationale of society's earlier decisions to disperse productivity gains, occasionally backfires to some extent. For example, we lost potential economic time value, when we chose immediate monetary gains (higher wages) over the ability to coordinate learning patterns with working patterns in the same environments. Whenever education is formally separated from workplaces, the results aren't always as helpful as one might expect. In an article for Brookings, "How history explains America's struggle to revive apprenticeships", Greg Ferenstein observes:

The fall of America's apprenticeships began as a political compromise between labor unions and business executives over how much to pay young workers-in-training after the industrial revolution. 

Technology's latest transformation is extensive use of data. Is data somehow "failing" us as well? In a review of "New Dark Age: Technology, Knowledge and the End of the Future" (James Bridle), Niki Seth-Smith notes:

More information is supposed to lead to better decisions, a cultural logic that has dominated the Western World at least since the Enlightenment. The warning that this relationship is breaking down, or perhaps is already broken, is being flagged across multiple disciplines. What Bridle attempts to do is to bring them all together.

Niki Seth-Smith questioned whether's Bridle's suggestion to "embrace uncertainty" was a suitable response. Societal fears such as this, also play into attempts to refuse technology the "upper hand". Yet technology need not define every waking moment of our lives, and it might only gain the "upper hand" if we are reluctant to believe it can still help us. Even deep learning AI applies skill use patterns in far more limited settings than individuals with average intelligence are capable of, and this will continue to be the case. To the extent our knowledge based relationships have partially broken down, we have expected our present institutions to disperse knowledge in much the same ways societies were able to do, prior to the 20th century. However, today's institutions are limited in their capacity to do so - especially when our economic time is structured as residuals in other production processes.

We need to reclaim our economic time preferences, so that we can once again function as a direct part of wealth creation. By allowing time to function as short term symmetric loans for mutually held time preferences, we could better choose when we want to augment or reduce labour, in relation to other forms of capital. We would also have better institutional means, by which to carry the use and experience of knowledge forward through time. By approaching wealth creation more directly, the resulting "first mover" position this process creates, allows us to work side by side with AI and other technology at the outset.

Instead of trying to stop technology in its tracks, why not take a closer look, to see where it could best augment our own reciprocal economic relationships with others. When we give economic validity to our personal time preferences, we restore our potential for personal agency, which in turn can be further enriched through technology.

What Purpose, Structural Reform?

Hint: Intentional market design is not a "one size fits all" construct, nor should it be. And yet too much political dialogue from both the left and right, treats structural reform as if one size fits all persuasions were the only possible kind in today's world.

Potential rationale for structural reform is also squandered, when policy discussions are mostly means to trash one's political opponents. Policy making serves little purpose, if the underlying incentive is to destroy someone else's wealth potential, rather than work together to build new platforms for wealth creation. Hence my dismay with some recent articles which cite failed structural reform efforts, as mostly another excuse to complain. In all these political struggles, no one will impose successful national "solutions" any time soon, given the highly diverse landscape of viewpoints, social values, and income levels that now prevail.

Structural reform could instead encourage platforms of legally sanctioned economic choices for all income levels, in terms of both consumption and production. For instance, if some don't believe Social Security will be there for them in the future, time arbitrage could make it possible for groups to coordinate for mutually desired time centered service wants and needs, over the course of a lifetime. Self directed education would also take into active consideration, the skills sets that are well suited for the work others seek. Presently, we have a very limited conception of supply and demand (or time price coordination) in time based services, since too much aggregate time value is lost to the price making mechanism of skills arbitrage.

Nevertheless, it's not been easy to imagine structural reform in decentralized settings, for those who need these opportunities. Lots of hard work is involved to initiate such processes; meanwhile, many remain unconvinced such effort is even necessary. If that weren't problematic enough, structural change requires careful attention to supply side issues, which is particularly boring to the average observer. As John Cochrane recently observed:

Supply side policy is not sexy - it involves clearing the sand out of many gears, not a Big Stimulus you can announce on the news.

Alas, we ended up with a dubious Big Stimulus instead, at precisely the wrong fiscal moment. But neither can anyone realistically expect to clean the sand out of every gear, without sacrificing far too much national wealth. Instead of trying to restart a national engine (which runs fine on some cylinders), structural reform is needed for the many engines which have essentially fallen away from the journey of life. Decentralized means of structural reform, could get many engines running again.

Even though at risk individuals often lack college degrees, by no means are these the only individuals, who suffer from a lack of full participation in society. Structural reform dialogues can be incredibly condescending, if individuals assume the marginalized are mostly an amorphous group which should settle for the political strategies of "winning" elite factions. This is true whether such strategies envision government guaranteed jobs, basic living wages, or perhaps the expectation these individuals should settle for vocational education and forget their intellectual challenges - at least in this lifetime. Indeed, if social justice is taken into account, belief in reincarnation serves an obvious purpose, if and when classes become so rigidly divided, that the faithful begin to expect any possible intellectual challenges among the marginalized, will simply have to wait till the next lifetime.

Often, individuals and communities which have been sidelined, continue to hold hopes, aspirations and dreams which are not all that dissimilar from the rest of the population. If we are to benefit from structural reforms in the near future, it would be because we finally gained the courage to permit all citizens to take part in wealth creation processes. Despite the fact many of us believe ourselves to be political enemies, we are still aligned with - and dependent - on the same general equilibrium wealth. Consequently, when we attempt to discredit others, we face the very real possibility of wealth destruction.

Indeed, many components of our economic systems still work quite well, but they can't be expected to carry the entire load. Only part of our systems are not functioning properly, which is why it's not easy to tell our economic story as a cohesive whole. If we continue to believe structural reform is too difficult, and take the "easy way out" of destroying what we don't like, all we do is deprive ourselves of the very economic oxygen we need to collectively breathe. Decentralized settings could just be the best option for structural reform. Decentralization, in order to become a viable economic tool, needs to function well for groups with diverse conceptions of the good life. The best way to preserve the stability of existing wealth, is to build new wealth, so that the struggle over existing wealth might finally have a chance to subside.

Output Capacity and Redistributional Flow

The redistributional flows of fiscal policy depend on reliable output, over time. But how would we know that - just because properties or assets can be assigned specific value for purposes of taxation - the assigned value is a true connection to the assumed output associated with the property?

This conundrum was uppermost in my thoughts, when I first read Progress and Poverty by Henry George in 2015. I found myself grappling with his land taxation ideas again, upon reading a ProMarket interview with Glen Weyl (coauthor of Radical Markets) which I followed up with a Russ Roberts interview. Henry George's work provided some of the inspiration for Radical Markets.

One of my concerns with Weyl's land use suggestions in the interviews, is that some forms of land use aren't actually capable of generating sufficient output for revenue potential - at least not in a straightforward way. Imagine three basic designations for land use: residential, government and commercial. Their approach to "output" is quite diverse! For that matter, private ownership of residential property in the present, is more closely associated with consumption, than production.

What does this reality suggest, for property as a complete form of taxation? After all, the only land (presently) with internally derived output capacity, is property set aside to create product which is readily separated from the scarcities of time and place. Other property usage is too caught in the complexities of general equilibrium flows (such as mortgage deductions), to serve as reliable means of complete taxation. Said another way, property which is utilized for tangible goods, exists in easily measurable form which is also simple to tax. When property is used for purposes which rely on the natural scarcities of time and place (physician time, hospital rooms), total land taxation of these institutions would only pull them further away, from what are already constrained output requirements, given the reality of today's operational costs.

Weyl was concerned about landlords with large property holdings. Nevertheless, if these individuals are fully taxed on land, so too are countless more who don't receive the same benefits of scale. Consequently, for the latter - whether individual property owners or small landlords, there's not much profit involved in ongoing and often extensive maintenance costs. Profits that aren't consumed by the upkeep of traditional building structures, mostly accrue once land ownership begins to scale up. How would the typical single property owner give back land tax value, and have anything left over for property upkeep?

Again, there's a lack of output for redistributional flow as well. Owners of private residential property, tend to be legally bound (unfortunately) to not use residential properties in ways that generate actual output. Rather, land ownership costs have increasingly become the costs of access to productive agglomeration. In other words, while ownership of private residential property is supposed to be capital enhancing, much of this marketplace serves as a user fee for productive economic engagement - one influenced by regional, national and global factors, as well.

By far the most confusing aspect of land valuation (based on Weyl's suggested system), would be the completely taxed land parcels which are utilized for institutional purposes that already benefit from redistributional flows. Hospitals and schools in particularly are mostly organized as dependent secondary markets, many of which would not even be in operation, were it not for tax based revenue. And yet hospitals already need to rely on price making (markups), since the time and place specificity of their product limits the output they can generate, in relation to the value of their buildings and property. How does one fully tax them, based on the often valuable land where they happen to reside? Ultimately, long term taxation potential is contingent on output, and whether that output represents what the property can generate via internal means.

In spite of these problems with total land taxation, what's helpful in this renewed dialogue, is how everyone involved can reconsider aggregate resource capacity, with what is essentially a blank slate approach. This is really important, for decentralized approaches will be needed, to address the growing shortcomings of fiscal flows in today's centralized economies.

A blank slate approach, for instance, makes it reasonable to ask: What are the most important purposes our tax systems can serve? Can we create multiple versions, instead of one size fits all infrastructure requirements? How might we arrive at mutually desirable ends, if and when taxation turns out to be insufficient? When do we actually create new wealth which is actually viable as a revenue source for redistribution? Hint: When resource use or product are time or place dependent, they can be utilized more effectively at the source, but their output revenue can't be redistributed, unless extensive markups are involved. It's all about potential circles of sustainability, and today's governments need all the help they can get, given the growing fiscal burdens of the present.

Skills Arbitrage is Linear, Time Arbitrage, Non Linear

As skills arbitrage became increasingly important for reliable employment, employment possibilities in turn, were more driven by linear relationships. These realities affect societal decision making for skills use patterns, and also aggregate income expectations. For that matter, 20th century transportation systems made many of these linear divisions of labour expectations feasible - not just in terms of highly defined work roles, but also the broadly spread population densities which these institutional workplaces came to rely on.

While linear organizational patterns have contributed greatly to the productive agglomeration of the present, they are no longer sufficient to maintain either long term growth or economic stability. This is slowly becoming evident, since productive agglomeration and its associated economic complexity, is no longer well dispersed across diverse regions. Even though linear workplace organization can be simpler to control and manage, its extensive use now constrains not only aggregate growth capacity, but also the dispersal of productive knowledge use patterns.

Fortunately, time arbitrage could provide non linear options for new growth, through differently aligned workplace patterns and relationships. Non linear patterns feature in what are termed complex adaptive systems. How might one envision such systems? Wikipedia explains their nature:

A complex adaptive system is a system in which a perfect understanding of the individual parts does not automatically convey a perfect understanding of the whole system's behavior. The study of complex adaptive systems, a subset of nonlinear dynamical systems, is highly interdisciplinary and blends insights from the natural and social sciences to develop system-level models...They are complex in that they are dynamic networks of interactions, and their relationships are not aggregations of the individual static entities.

In a recent post Ian Hathaway notes that "startup communities are examples of complex adaptive systems", and adds:

Linear thinking works in individual sports like tennis or golf, but not in sports teams like baseball, where the integration of the pieces (the players) can be more deterministic of the outcome than the sum of the parts (the combined talents of the individual players).

How to think about the difference? When groups work to create product or outcomes which benefit from specificity, linear approaches can be appropriate. However, many forms of time based product need not be quite so skill specific, at the individual level of providers and recipients. In these circumstance, often neither participant expects or desires a universally defined product or outcome - even though institutions may choose to impose standardized outcomes, so as to maintain control and reduce costs.

Time arbitrage could coordinate a more diverse range of skills and knowledge use possibilities, so that many services would ultimately function more effectively as free markets. Likewise - as Hathaway emphasized regarding startup communities - time arbitrage, in contrast with skills arbitrage, would "focus on the interactions between the people involved".

Coordinated team effort as an ongoing process, is a good way to envision time arbitrage potential. Group participants would align mutually desirable activities so as to create a more flexible range of services product, thereby making the process more relevant for all concerned. While we don't always associate greater autonomy and personal challenge with the nature of today's time based product, the digital era gives us an excellent chance, to reduce what is often unnecessary hierarchical organization in these sectors.

Prosperity Isn't a Class or Geographic Destination

Why is it, that instead of encouraging prosperity in already existing circumstance, we often feel it's necessary for people to relocate to different nations, cities, regions, or even different social classes? Indeed, such reasoning occurs across the political spectrum. In a recent article for Brookings, Richard Reeves summarizes:

Restoring the fortunes of the American middle class is a policy challenge. It is a political challenge. And it is an economic challenge. But it is a cultural challenge, too. For a start, let's start treating each other with a little more respect.

Fortunately, the middle class is hardly a lost cause! Nevertheless: By attempting to fit entire societies into a single definition of social desirability, it's easy to become too afraid of what could still happen, instead of productively responding to present realities. For instance, one should not have to be a member of the middle class to qualify for home ownership, yet this unnecessary burden has particularly been imposed since the Great Recession. If we were able to acknowledge the actual economic circumstance of the marginalized, we could better understand how their ongoing efforts to improve their lives, mostly go unnoticed.

Prosperity need not be a matter of class standing, or a struggle to fit into someone else's ideas of economic success. When societies are stable, they are more likely to encourage a full range of options for economic engagement, a range which accurately reflects the resource capacity people actually have at their disposal. If governments and special interests weren't so intent on forcing entire categories of skills and resource capacity into narrowly defined rules for working and living, people might be less inclined to judge others according to their physical stamina or income level.

Meanwhile, the struggle that matters most is at the bottom income levels. Let's work on improving our overall economic settings here, instead of obsessing over the reliability - or lack thereof - of future middle class wages. Let's begin anew by becoming more willing to expand the horizons of those deemed short on social skills, college degrees, or "perfect" health for that matter. These individuals need the legal permissions and production rights that only we as citizens can make possible, to meaningfully improve their life circumstance. It should not be illegal, for those who appear as though in need of help, to be able to legally help themselves.

When the marginalized lose societal permissions to improve their lot, other citizens gradually find themselves more likely to fall into similar traps, such as were initially set for those unable to protest the losses. We don't often recognize how these traps may too eventually affect our lives, for they result from cumulative, yet often unseen small actions, taken to protect those who are already strong.

Given the chance, people with limited resource capacity could still create real wealth. Importantly, wealth need not be defined as "cutting edge" or supposedly "superior" in nature to already existing wealth. For that matter, new economic activity which is reciprocated at the outset without debt, could actually be more historically important, than wealth which requires such extensive debt no one really knows when it will finally be repaid.

People could one day live in settings deserving of respect, which don't demand high income levels to create. Instead of simply seeking respect as vested in building values and credentials, why not make it about how people derive economic meaning, whatever their surroundings may be. Ultimately, we need to find better means for storing continuous economic value in our aggregate time capacity, and not just our buildings where credential value is still being frittered away. As Ian Hathaway recently noted, too many potential solutions for wealth building are overlooked because they don't seem significant enough:

So, before continuing down The More of Everything path, consider an alternative. Sometimes the answer is more of something. But often, a more relevant question is how well something is being done. Are you getting the most out of what you already have? What can be done to improve community cohesion today? To what extent are the existing pieces integrating in a productive way? 

In my experience, the answer to these questions comes not from adding, but from activating and transforming. That makes it an issue of culture and mindset, and means that seemingly small changes in behavior - adopted widely and practiced consistently - can have a big impact on outcomes down the road. It's not always the big moves that get you where you need to go.  

How well are we actually tapping the aspirations of humanity at a basic level? We don't have to continue throwing out the skills and intellectual capacity which our present institutions can't effectively use. Instead, we can do something different. We can build new institutions, which are capable of building real wealth from all we have to offer.

What Makes Theoretical Framing Necessary?

Some of our institutions no longer function as effectively as they once did. Yet clearly, positive institutional change takes time. Small wonder so many citizens have long since grown weary, of thinking about the nature of our economic dilemma. For that matter, economic subjects are no longer a comfortable part of social discourse - especially when theoretical concerns are involved. We know that important disciplines have gone too far down the rabbit hole of specialization and inaccessible language, when citizens can no longer rely on important areas of study for cross discipline problem solving.

Nevertheless, I'm compelled to explain why it would be dangerous, to abandon what little does exist of a theoretical framing for economic discussions outside academia. Even though economists may not need to worry about losing their jobs anytime soon (perhaps why earlier theoretical framing has yet to be reconfigured), there's plenty at stake for the general public in this regard. One would think that since governments are becoming less inclined to take economists seriously, economists might rediscover the importance of reaching out to the general public for mutual problem solving. Ryan Avent's "The Wealth of Humans" (2016), gets to the heart of the matter. In his book intro, he highlighted the institutional dilemma:

And the institutions of work - apart from family, our most important piece of social infrastructure - can no longer be counted on to fulfil its many crucial roles - from the ordering of our days, to the allocation of purchasing power, to the strengthening of the social ties that are nurtured when individuals feel as though they are contributing positively to the community.

Ryan Avent emphasized economic developments in his book which deserve a lot more attention than they have received, thus far. For example, he stressed how it's no longer a simple matter to raise aggregate income capacity for the average individual, in developed nations. Which is why I keep repeating that we need a different wealth creation approach, to improve the value of the aggregate income that we either have or might reasonably expect. Avent also noted that the economic problems of our time are not going to go away any time soon. Which means we can likely expect decades of political and social disruption, before economic stability once again appears as though a realistic societal expectation.

There's an underlying theoretical framework which is a major contributor to these problems. Crucially, many of these issues are no longer solvable from a linear perspective. That said, it's quite difficult to introduce non linear elements to the majority of the conversations we do get to have, with others. One reason we get so much dialogue "retread" in linear territory - even though resurrected policy material no longer functions effectively - is the fact these conversations can be readily understood by both citizens and policy makers. And when economists do understand what's at stake, especially in terms of production potential and long term growth, too few presently share their concerns with the average citizen. What can be done, then, given the shifting tectonic plates of tradable and non tradable sector activity which have completely altered our general equilibrium realities?

Fortunately, it's not necessary for everyone to understand the theoretically cognizant patterns which could contribute to a "Monday morning" approach for mutual employment and long term economic stability. What is necessary, however, is a new institutional framework which addresses on legal terms the shifting nature of monetary flows and sectoral activity, thereby providing new means to live and work for the average individual which would not otherwise be possible.

In the five plus years I've worked on this blog, I've attempted to understand the nature of how such an institution could function. I'd like for this new institution to be referred to as an equilibrium corporation, since it would work to restore monetary equivalence in defined equilibrium environments, but who knows what others might eventually want to call these new economic platforms. A new institution would allow broader rights of production for all citizens to coexist with today's more exclusive skills arbitrage rights of knowledge production, for instance. With a little luck, I may be able to clarify my efforts so they might finally be more broadly understood. Ultimately, that's the goal of the book project, which I still have every intention of contributing to the blog sidebar. Now, it's mostly a matter of taking care of my health as best I can in the years to come, so this work might finally realize completion.

Sustainability? Input Can't Overtake Output

When are service sector institutions capable of supporting themselves via their own resource means? The answers can sometimes be complicated. As input requirements become more demanding, increasing non tradable sector organizational costs tend to become funneled through irregular revenue flows that originate elsewhere. Such flows encourage patterns of resource use which can't be sustained over long periods, for vital forms of high skill service product.

Revenue dependencies turn into quagmires, when multiple factors in organizational costs are met through price making at numerous points - whether through knowledge production chains or elsewhere. And yet, paradoxically, price making also becomes a strategy to cope with insufficient aggregate output, in relation to the aggregate input that is expected at an institutional level.

Indeed, a recent news story illustrates what can occur in these circumstance: "Auditor 'shocked' by massive billing schemes at rural hospitals." According to the article, many rural hospitals in the U.S. are "closing at the highest rates in decades". When costs get out of control, the very structure of knowledge based service product can become fragile. What might be done, when the output that is necessary just to pay bills, becomes fraudulent or near fraudulent? Clearly, the "aggregate output" claimed by some rural hospitals has been dodgy at best. But does this mean struggling service providers should just close their doors and call it a day? Many have to, whether they are willing to do so, or not.

Societies don't always recognize when they're in the process of losing vital aspects of knowledge dispersal, since the process takes place slowly and in ways which - in part due to how the problem gets framed - aren't immediately obvious. Further: Unlike tradable sector activity - where many goods can be readily distributed from relatively few points - centralized knowledge use in non tradable sector activity, is more likely to indicate lost marketplace capacity for time based product. And while the business profits of price making are sometimes defined as a moral problem, the real problem for long term economic sustainability, is when important institutions are structured so their ongoing input continually requires more, than they can expect to recoup via their own resources and aggregate output.

Regular readers are familiar with my arguments for time arbitrage as a potential contributor to aggregate output, via means that simplify the process of time based services inputs. The reciprocity of symmetric time use could reduce the need for debt by building wealth at the outset. Symmetric time matching would also maintain inputs in a stable, recognizable relationship to system outputs. By coordinating the totality of time aggregate potential, time based service product would function in a true price taking context. Fortunately, it is often possible to create relevant input and output, in the same units of time that are apportioned to service based activities. Eventually, time arbitrage could generate circles of sustainability, for the use and preservation of knowledge.

Might greater use of apprenticeship also contribute to more productive resource capacity? While some forms of apprenticeship could prove meaningful, rural areas lack the population densities to make highly specific skills sets a practical approach in many circumstance. Eventually, however, the deep learning of artificial intelligence could assist "just in time" learning processes for high skill activities in low population densities. By visualizing time based services as an internalized, cost efficient production process for producers and consumers alike, important aspects of knowledge could finally assume a more stable role, in the marketplaces of the foreseeable future.

Economic Perspectives: What's Still Missing?

If our present economic framework is "too narrow", where might the fault actually lie? The real measure of economic value, perhaps? Scott Sumner takes issue with a recent article from The Economist, "Economists focus too little on what people really care about", and highlights this quote:

The measuring rod itself often causes trouble. Not every dollar is of equal value, for instance. You might think that if two economists were forced to bid on an apple, the winner would desire the apple more and the auction would thereby have found the best, welfare-maximising use for the apple. But the evidence suggests that money has diminishing marginal value: The more you have, the less you value an extra dollar. The winner might therefore end up with the apple not because it will bring him more joy, but because his greater wealth means that his bid is less of a sacrifice. Economists are aware of this problem. It features, for example, in debates about the link between income and happiness across countries. But the profession is surprisingly casual about its potential implications: for example, that as inequality rises, the price mechanism may do a worse job of allocating resources.

Scott Sumner responds:

This is quite misleading, as it implies that the effectiveness of the price system depends on each person placing equal value on a dollar...That's not to say the price system is perfect; there are issues such as externalities and monopoly to consider. But the specific issue of diminishing marginal utility of income is not really a problem of the price system. A better argument would have been that the distribution of income that results from the price system might not be optimal. Then you could have an intelligent discussion of the pros and cons of redistribution of wealth.

Nevertheless, "optimal" in what sense? Part of the problem for pricing, is that discretionary income and non discretionary income are utilized for very different purposes at the outset. In particular, non tradable sector pricing has not only been more closely aligned with non discretionary price making, but also the time scarcity circumstance that result. If price making requirements leave little discretionary income, some individuals may view money as the only relevant measuring rod that matters for their decision making processes.

Perhaps a broader economic perspective would consider the dichotomy between non tradable sector activity and tradable sector activity, given how these sectors affect general equilibrium conditions. What makes the differences between tradable and non tradable sector activity, so important for price outcomes? While price aggregates may be more relevant for economic stability than monetary aggregates, the long term trajectory of a price level still needs to reflect whether the relationship between actual output and aggregate consumption capacity, might actually be shifting. These changing patterns are important, given how nominal income levels also reflect the degree of economic participation in both production and consumption processes. Importantly, non tradable sectors and tradable sectors continue to travel a very different trajectory, given the differences in their approach to output levels. This variance distorts the relationship between price aggregates and marketplace capacity.

Here's another way to think about price relationships as a measure of value: In recent centuries, the good deflation of tradable sector activity during this time has greatly increased the value of a given dollar for disposable income in general. Indeed, the good deflation of tradable sector production processes, has made some less inclined to view money as a measure of value. Consider George Selgin's response to Scott's post for instance: "Going somewhat further, I would say that the whole idea of money as a "measure of value" is a throwback to pre-subjective thinking that we'd be better off without."

However, the bad (internal) inflation of non tradable activity over time, has made these pricing aggregates less responsive to subjective valuations - especially for lower income levels. Hence the apple in the above discussion was a confusing example, as it is representative of good deflation processes and subjective value.

Interestingly enough, George Selgin's earlier emphasis on a production norm is relevant, here. How so? Locally defined production norms for non tradable sector activity, could generate decentralized environments that encourage good deflation in services, housing and physical infrastructure. These new consumption options would gradually increase the marketplace value of time, so that a larger portion of monetary representation could become discretionary. By bringing subjectivity and discretionary choice to non tradable sector activity, price levels could become a more reliable tool for monetary stability, and provide a better measuring rod for economic activity, as well.

The Importance of Personal Autonomy

In a recent article for Project Syndicate, Yanis Varoufakis worried whether personal autonomy has been lost to totalitarianism tendencies:

It used to be an axiom of liberalism that freedom meant inalienable self-ownership. You were your own property...

A capacity to fence off a part of one's life, and to remain sovereign and self driven within those boundaries, was paramount to the liberal conception of the free agent and his or her relationship with the public sphere. To exercise freedom, individuals needed a safe haven within which to develop as genuine persons before relating - and transacting with others. Once constituted, our personhood was to be enhanced by commerce and industry - networks of collaboration across our personal havens, constructed and revised to satisfy our material and spiritual needs.

He highlights "branding" as part of the problem. Might Varoufakis appear overly concerned about the loss of self ownership?

Realistically, citizens have more resources at their disposal which could assist them in restoring autonomy, than the average economist or policy maker is inclined to give them credit for. The self ownership which matters most, is not how we use our time for consumption possibilities (such as social media), but the full extent of our personal production possibilities. After all, a restoration of our rights to produce, would make it possible for us not only to help one another, but to help ourselves when we need it most.

A marketplace for time value, could once again provide viable means to negotiate how we seek to experience the world with others. The real issue all along, has been loss of economic freedom in terms of personal production rights. Without sufficient economic freedom, it eventually becomes more difficult to maintain other vital aspects of freedom. Indeed, the lack of a viable platform for our economic time value, helps to explain why people resort to signaling and branding activities, so as to stand out in the oversupplied institutional space that still seeks to arbitrage skill.

What can be done about the freedoms we have lost, in terms of production rights? The basic issue is that where we've lost personal economic freedom, the market often remains artificially constrained as well. In other words, it might be an entirely different matter to attempt to regain personal production freedoms, were our prevailing institutions doing a reasonably good job of services generation for all concerned. But often, they're not. Across the globe, there's so many potential arenas, where productive agglomeration could take place via renewed production of high skill time based product. Economic options such as this continue to gain urgency, as the prosperous regions containing our most important service sectors, are slowly closing their doors to newcomers. Increasingly, there's no good excuse for extreme societal divisions in knowledge use, now that the digital era holds vast potential for widespread dispersal and preservation of knowledge.

Fortunately, citizens could build new forms of wealth creation for the 21st century, which include vital components of self ownership as an integral part of the process. A marketplace for time value would bring everyone's skills use options to the table. What's more, it would do so by allowing individuals to choose from a broad range of skills preferences in relation to the time and geographic preferences of others. People would become free agents within the processes of knowledge production, yet in ways which allow groups to coordinate for the services they seek through the course of a lifetime.

Of course, time arbitrage as a marketplace option, is hardly the only form of personal autonomy which the average citizen needs to regain. Meaningful ownership of self, would also extend to one's right to innovate and design physical environment and infrastructure. This means special zones, where groups with limited income would not be constrained by strict and often out of date building codes, which have been enforced by unions for too long. Innovation in these areas would gradually create non tradable sector good deflation, which would allow millions to rejoin economic (and social) life as responsible citizens. In all likelihood, there's still plenty of hope and possibilities for the near future. Chances are, with a little luck, it may be premature to claim that our personal autonomy has been lost.

Time Arbitrage as a Contestable Market

One potential advantage of time arbitrage, is that knowledge would be experienced and applied in non rival context. Non rival use reduces market frictions and encourages a fuller, more diverse range of group skills capacity. Imagine the process as a concentrated and decentralized community setting, for productive agglomeration. When knowledge use is non rival, there's fewer cost burdens of entry and exit for all concerned. Likewise, the resulting continuum for mutually obtained skills coordination, promotes market competition for the many - not just the few. Exchange velocity increases, since knowledge application is less likely to bottleneck or be treated as absolute and exclusive of interpretation.

Given the reality of time scarcity, we don't always have the economic time value at our disposal, to reimburse what others may deem the economic value of their own exclusive skills arbitrage. Nor do governments always have the budgets to completely reimburse skills arbitrage for given groups beyond a certain point - which in turn limits both the production and consumption potential of valuable knowledge and skill. Consequently, the extent of marketplace vitality which is possible for time based services, depends on how many actually take part. How much aggregate participation is presently lost, due partly to extreme variation in skill value which is further compounded by present day accreditation processes?

What's more, the reality of time scarcity, prevents (standard) economies of scale when human capital investment (mostly) accrues to time based product. Fortunately, time value unit symmetry would allow scaling up through added participation. Here's how Economics Online describes contestable markets:

The theory of contestable markets is associated with the American economist William Baumol. In essence, a contestable market is one with zero entry and exit costs. This means there are no barriers to entry, such as sunk costs and contractual agreements. For a market to be perfectly contestable, relevant industry technology would be readily available to potential entrants.

The existence, or absence, of sunk costs and economies of scale are the two most important determinants of contestability. On the basis of these two criteria, natural monopolies are the least contestable markets.

Nevertheless, no market can be completely competitive in its entirety. As William Baumol explains:

In our analysis, perfect contestability...serves not primarily as a description of reality, but as a benchmark for desirable industrialization which is far more flexible and is applicable far more widely than the one that was available to us before.

While Baumol's focus in this (early eighties) instance was industrialization and tradable sector activity, contestable markets as concept, could also be useful for the market potential of non tradable sector activity. In particular, for high skill time based product, a contestable market would be one in which knowledge could be utilized as freely as possible.

To this end, time arbitrage could eventually help reverse the trajectory of excess rival knowledge costs which are now lodged in rising government debt loads. And interestingly enough, while Baumol's disease tends to be associated with non tradable services income in geographic correlation with tradable sector income, non rival knowledge use could lessen the chronic severity of this "condition" in a macroeconomic capacity - given its unfortunate contribution to sectoral imbalance.

In recent decades, numerous opportunities have surfaced which could help reverse the costs of human capital investment. What's more: Of late, these possibilities have greatly increased, and AI deep learning could make it possible for the average citizen to work alongside AI in a "just in time" knowledge production capacity. Will the reality of today's growing debt burdens finally encourage societies to remove constraints of human capital investment when they are no longer necessary? How many sunk costs for today's high skill services, are actually self imposed? After all, it wasn't so long ago, that healthcare mostly functioned as an open, dynamic, highly contestable market - one with minimal entry and exit costs.

"Such are the Dreams" of the Everyday Citizen

What might the dreams and aspirations of the average individual, actually consist of? How do we really know? After all, we're most likely to be regaled in the media with the prevailing viewpoints of those who are well educated in a formal capacity. This, and the occasional reaction from those who expect to follow in their footsteps. Might it be possible to create more economic and social space, for the aspirations of the everyday citizen? Even for those who supposedly don't measure up to the expectations of societal credibility?

An old song which some of my readers may recall, inspired this post. Its lyrics strike me as unusual after all these years, for they go to the heart of everyday citizen first priorities in ways which aren't normally laid out so clearly. Even though life's most personal commitments are at times quite demanding; as we age, it gets easier to understand the rewards such commitments can hold. In spite of the personal freedoms one is expected to sacrifice for core relationships, there's the evergreen hope for a life not shot through with lonely solitude. From "Dreams of the Everyday Housewife", by Glen Campbell (1968):

She looks in the mirror and stares at the wrinkles
That weren't there yesterday
And thinks of the young man that she almost married
What would he think if he saw her this way?

She picks up her apron in little girl fashion
As something comes into her mind
Slowly starts dancing remembering her girlhood
And all of the boys she had waiting in line

Oh, such are the dreams of the everyday housewife
You see everywhere any time of the day
An everyday housewife who gave up the good life for me

When our core relationship commitments work out, they provide long term rewards for one's relative sacrifice of personal freedom. Nevertheless, we humans are complex animals - regardless of how anyone might try to simplify us through our social or job classifications. We are born with large brains, and a natural desire to freely explore in realms quite different from our core relationships. And while experiential consumption is valuable, personal experiential production is by far the best means to flourish. When it comes to freedoms vs commitment, we all benefit from life balance. Can't we come together, then, to rescue the economic freedoms we once took for granted? In today's economy, the freedom of intellectual challenge could also help preserve the viability of personal relationship commitments for all income levels.

The best outcome for any citizen, is when economic freedom also connects to one's ability to actively participate with others via the challenges of knowledge and skill. Some among today's elite are starting to enter dangerous territory, when they assume that the economic freedoms which are so important to them, don't particularly matter for the masses. Presently, too much of the work that is desirable and fulfilling, work which would be more freely chosen by all, were it not for the monetary barriers, is currently being hoarded in prosperous regions.

In all likelihood, the everyday citizen is not particularly in need of solicitous concern from others, re how they might better prosper by "trying harder" in their personal relationships. After all: For many, this area of life will always remain a high priority for personal success. Just the same, history has shown time and again, the struggles of the marginalized to build and maintain core relationships, when they lack the basic forms of economic connection that allow for personal responsibility and trustworthiness.

There's a good chance that the everyday citizen is not as lacking in intellectual challenges and aspirations, that others might assume. Let's not leave something as valuable as meaningful work, completely out of reach of the everyday citizen. Let's not allow the work that gives people real reason to enjoy their lives, to be hoarded indefinitely. Let's not assume that the dreams of the masses are only small and inconsequential, in spite of what some find so convenient to believe. In an age of knowledge based wealth and digital capacity, we are all bereft, if we allow meaningful economic engagement to be hoarded. There's simply no good reason to proceed under the false illusion that average citizens wouldn't or couldn't flourish, if they had the means and the gifts of economic freedom.

Progress and Innovation vs Secondary Market Limits

In a mature economy, some secondary markets can gradually undermine the kinds of innovation which could otherwise contribute to growth potential at a general equilibrium level. Nevertheless, in a recent Bloomberg article, "Equality is a mediocre goal. Aim for progress", Tyler Cowen begins with what seems to be a reasonable underlying expectation, re healthcare product:

Innovations should outstrip the growth of the economy. That means not everyone will be able to afford them at first.

"Affordability" is the eventual expectation. But to what extent do many healthcare procedures become more accessible, once they standardize? While Tyler's innovation assumption frequently holds for tradable sector product, often the successful commodification of non tradable sector product, is not so simple. After all: While innovation in tradable sectors contributes to increased product output, innovation which enhances human capital value, still doesn't make it possible for time based product to multiply itself. Given this circumstance, there's also more incentive to apply revenue from innovation gains to individual - rather than group - income. Consequently, many forms of innovation which particularly contribute to progress and prosperity, are more closely associated with tradable sector organizational patterns.

At the very least, some societal progress can be attributed to positive developments in non tradable sector activity. One frequently cited example, is the indirect manner by which earlier infrastructure improvements such as interior plumbing and electrification, greatly benefited public health and well being in general. Just the same, too much non tradable sector innovation accrues to quality gains which - while they increase standards of living - tend to do so by creating excessive time obligation burdens, at lower income levels.

Much of how healthcare is presently organized, means a secondary market dependence on already existing general equilibrium revenue. This makes for more budgetary problems in the near future, which Tyler Cowen particularly highlights. He continues:

To date, so much of the health care debate has been about whom to cover. Over time, it may be more and more about what to cover. It could be that all the citizens will have nominally the same insurance coverage, whether subsidized or guaranteed, but many medical and mental-health conditions will fall outside this coverage - leading to rampant inequalities in access.

It's the best problem to have. It means that medical innovation has arrived at a very high rate. If we enter the future being able to cover most medical treatments with reasonable equality, that would be a sign we failed at the task of progress. In other words, successful futures are likely to be highly unequal futures, again because medical innovation will have outpaced government revenue...It is better to focus on innovation, hoping that over time prices will fall and a greater equality of access will follow.

However: In times of slow economic growth, providers are trying to access a relatively fixed pie of government revenue, which makes it more difficult to cut the costs of already standard procedures. Meanwhile, as fiscal revenue is redirected towards cutting edge technology and innovation, there's even less remuneration from government, for routine forms of healthcare product.

Chances are, today's healthcare which remains structured as dependent (secondary) markets, would gain the most potential benefit from further research and innovation. Still, in order for basic aspects of healthcare to remain fully viable in the marketplace, standardized routines need to be recreated in a primary market capacity, so these important activities might eventually play a role in the restoration of economic growth at general equilibrium levels. Otherwise, "saving" available government revenues for healthcare innovation, won't be enough to preserve a full range of vitally important knowledge, for society as a whole.