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.