Wednesday, October 31, 2018

Wrap Up for October 2018

"One of the first steps to helping people out of homelessness is getting them a steady job. But what about the thousands of homeless Californians who are already working?"

Healthcare: Some supply side considerations

"Getting health insurance through work now costs nearly $20,000."

Will robots be in charge of vertical farms?

"Place-Based Policies for Shared Economic Growth" (PDF) Edited by Jay Shambaugh and Ryan Nunn

"Surprise" medical billing is one of the major financial fears.

Ian Hathaway provides a concise update of global level venture capital.

"Risk is what's left over when you think you've thought of everything."

Sometimes people can glimpse what the future may look like, but are simply unable to put together a good response.

There's plenty of variance in labour force participation rate by country.

"How fast can buildings be built these days?" On the other hand, as Scott Sumner notes, other building projects fare worse than skyscrapers.

Neural networks, explained.

Despite the fact real wages remain flat, real income is rising due to gains in both hours worked and employment levels. "Annual income depends not only on wages, but also on the number of hours a person works in a year and the share of the population that is working."

Romer and Nordhaus for the Economic Nobel prize 2018
Tyler Cowen lists helpful references for Paul Romer. Also for William Nordhaus
Joshua Gans explains their primary contributions.
A Fine Theorem goes into greater detail for both, with "How we create and destroy growth"
Timothy Taylor's post also highlights two essays on this year's winners released from the Nobel committee.
Chad Jones re Romer: Ideas are not depleted by use

If only more of us had been "warned" when we were (much) younger. Nevertheless, much about the workplace was quite different, decades earlier. Once, it was relatively easy to get good work without a college degree. "Working past 65? It's easier to do if you graduated college."

Ash Milton of Palladium Magazine challenges the libertarian ideal of charter cities and more recently, innovative governance.

When it comes to nurse practitioners, progress is slow.

Soft law as "the worst of all systems, except all the others before it." Soft law could also eventually prove important for the use of knowledge in local settings.

Over the past few decades, the "spatial equilibrium" has shifted.

"The Forgotten Americans represent 30 percent of the working age population, are in the bottom half of the family income distribution, and lack a college degree."

Perhaps the best way to approach solution aversion is to have more than a single solution. For instance, walkable communities could help the environment without imposing restrictions on everyone, and also help people who need viable options to auto transportation.

Will the dollar lose its "exorbitant privilege"?

Has corruption become the world's most important problem?

Recessions are quite different from structural problems.

Truth has many sides.

If something can be replicated, it can also be made interchangeable.

"It is entirely within the scope of a Malthusian economy to have (1) positive productivity changes such as increased commercialization and market access, (2) positive population growth, and (3) stagnant output per worker."

Twenty innovations in healthcare

"In a recent National Association of Realtors survey, only 10 percent of respondents want to live in single-use housing subdivisions."

Process knowledge is an important part of technology. Also, Dan Wang's initial essay.

Benjamin Reinhardt suggests there are eight innovation channels.

What has happened to accountability in an administrative state?

Japan has developed a unique "hometown" tax.

James Pethokoukis discusses debt and entitlements with James Capretta.

Real output growth in the past decade is still less than real economy growth during the 1930s.

What explains the early stage retreat? Will other regions still be able to successfully compete in the near future with established regions? The "new normal" is about a third to a quarter below the 2015 peak.

"modern marketplaces get their power from aggregating the demand side"

Tuesday, October 30, 2018

The Economy: More Fragile Than it Seems?

Fragile in what sense? After all, some believe the economy is quite strong. Except there's this: Many activities that citizens once actively engaged in, are gradually being reserved for a relative few in society. For those who lack money or social positioning, it's becoming difficult to make a real difference in the world, or even to get things done which were once considered quite ordinary.

Today's money/status approach to economic activity, also suggests that millions could lose the ability to fully participate in the left behind regions of today's advanced economies. For that matter, much of the near future work in these regions is composed of low paid services. The fact these jobs can't fully support existing community infrastructure and its associated costs, doubtless has bearing on the unsettled political landscape of our time.

This past week left little breathing space between outbreaks of violence, which included domestic terrorism as well. The Squirrel Hill massacre at the Tree of Life Synagogue, and the pipe bomber incident, are only the latest reminders of a world which feels unexpectedly - and inexplicably - fragile.

Might we have entered a state of prolonged, if not completely acknowledged grief? How much do the structural economic changes of our time affect this state of affairs? Are economists in denial about their contributions to the apparent zero sum struggles of our time?  How can anyone miss the fact there is no longer room for many would be participants in today's world? How can economists believe their discipline is crucial for economic prosperity, while taking refuge in cultural and sociological hand waving and dismissing out of hand the connections between economic and political circumstance?

Meanwhile we continue to lose our positive social connections. This, even as some economists stress economic conditions of recent centuries which helped build these connections, as if that were sufficient to negate the present dilemma. How long have we already mourned what is being lost now? Only recall a descriptive five stages of grief model, and what it suggests about this reality. While these stages don't assume a linear nature or occur in all instances, the processes of denial, anger, bargaining, depression, and acceptance, can still be understood in an economic framing.

Where we observe these responses, depends in part on how societal roles are internally and externally perceived. Clearly, the anger element is most obvious, not only in the media but also in our daily surroundings. Recently I was reminded of the fear based anger I suffered during the Great Recession, when I overheard a conversation in a nearby discount store. Indeed, this individual felt the need to repeatedly explain to his friend what had occurred, before he finally calmed down. The story? He had been certain of acquiring a good job with benefits, only to lose the job to someone else. The struggle over today's imposed zero sum circumstance, was highlighted by the fact neither job applicant was white (one black, the other Mexican). Was there "favoritism" toward the one who might not have been in the country legally? In any event, this became the story teller's rationale for his loss.

Whether or not his story was honest, this individual had the good fortune to meet up with a friend who was willing to lend him (again) a couple hundred dollars till he succeeded in his job search. Admittedly I'm glad that bout of fear induced frustration was peacefully resolved, since for a moment or two I wasn't sure about my safety on the next aisle. That's one thing about anger which stems from abject fear: It's not easy for others to immediately discern whether we might also "act out" on our frustration.

What about aspects of grief other than anger? While denial can be attributed to economists who did not see the Great Recession as a time to closely review ongoing strategies or explanations, they certainly aren't alone. Possibly the greatest denial thus far, is the fact many near future jobs aren't going to carry the extensive economic benefits of the recent past. Unfortunately, we may not be able to successfully navigate this new era of wage limits with the monetary requirements of aging infrastructure maintenance, not to mention the services cost burdens of our retirement years. If we aren't able to productively respond and soon, the problems of our uneasy political climate will only get worse.

Depression is quite different from anger, in part because it makes us want to isolate ourselves from the world, so as to hide what we suffer. That's why it can so difficult to make plausible estimates of depression, whereas anger prompts an almost opposite response of wanting the world to be fully aware of our grievances. It's easy to imagine anger can somehow be reduced by acting out or - at the very least - verbalizing how one feels. On the other hand, depression simply contributes to the social isolation which has become so prevalent in recent decades.

So who tends the bargaining role, in all this? For all its seeming implausibility, the slogan "Make America Great Again" was an attempt to address real societal losses that had basically gone unnoticed. Inexplicably, many economic processes end up as government responsibilities when they aren't productively addressed by private enterprise. And if private industry creates enough zero sum wealth capture, eventually people end up with zero sum realities. No wonder government "bargaining" feels so regressive, since it includes the same mercantilism Adam Smith argued against, centuries earlier. Had there been a well reasoned response to the Great Recession, when citizens and economists were still engaged in what could have been productive dialogue, perhaps we wouldn't be stuck now with rhetoric better suited to earlier economic circumstance quite different from our own.

Alas there will be no acceptance of what's at stake in this economic dilemma, if we can't successfully get past denial. Yes, it's a fragile world. But that doesn't mean we have to give up hope.

Tuesday, October 23, 2018

Notes on Money-Income Causality and Sticky Wages

The initial impetus for this post came from David Henderson's helpful encyclopedia entry for Christopher Sims. I found the money-income causality argument particularly interesting:
One of Sim's earliest famous contributions was his work on money-income causality, which was cited by the Nobel committee. Money and income move together, but which causes which? Milton Friedman argued that changes in the money supply caused changes in income, noting that the supply of money often rises before income rises. Keynesians such as James Tobin argued that changes in income caused changes in the amount of money. Money seems to move first, but causality, said Tobin and others, goes the other way: people hold more money when they expect income to rise in the future. 
Which view makes more sense? Upon applying Clive Granger's econometric test of causality, Sims concluded:
The hypothesis that causality is unidirectional from money to income [Friedman's view] agrees with the postwar U.S. data, whereas the hypothesis that causality is unidirectional from income to money [Tobin's view] is rejected.
Regular readers won't be surprised, that I also consider money-income causality effects in terms of tradable sector and non tradable sector contributions to general equilibrium outcome. Even as causality mostly originates via money to income, additional money supply (non inflationary) still originates in positive output changes. As always, real economy growth - or the lack of it - is the long run deciding factor.

While output growth is relatively transparent in tradable sectors, the lack of actual output transparency in (some forms of) non tradable sector activity, makes for too easy assumptions that causality may flow from income to money. Importantly, the income to money causality rationale can prove dangerous as well if carried too far. However, today's knowledge production dependency, which I've referred to as a form of secondary market, is so integral to economic activity that oft extensive price making in these areas isn't easy to discern. Price making in non tradable sector knowledge production can be all the more problematic, since it further impacts supply and demand for all markets in unpredictable ways.

Even though non tradable sector time based product depends on general equilibrium dimensions, once a nation's high skill professionals gain confidence in their country's resource capacity and market definition, wage or income demand becomes resistant to change, hence is "sticky downwards". Chances are, downward stickiness also provides rationale for the appearance of income to money causality, because a nation state will take extensive monetary and fiscal measures to maintain a given general equilibrium level, especially after general equilibrium conditions begin to suffer from too few ares of growth (wealth) origination.

Wage stickiness in tradable sector activity is generally less of a problem. These points of wealth origination are often quick to respond to changes in supply and demand, in that output levels which directly contribute (internally) to nominal income aggregates, can be readily shifted. On the other hand, professional time based product in non tradable sector activity, where compensation is externally derived from existing monetary flows, lacks the flexibility to quickly respond to market changes. Hence the activity of the latter imposes restraints on general equilibrium conditions which may not be easy to recognize. In a recent follow up of an earlier popular post re sticky wages, David Glasner observes:
Market-clearing equilibrium requires not merely isolated price and wage cuts by individual suppliers of inputs and final outputs that will be consistent with market clearing, but a convergence of expectations about the prices of inputs and outputs. And there is no market mechanism that achieves that convergence of expectations.
Consider why this matters, for what have become the required societal inputs which ultimately result in a "final" form of high skill time based product. Presently, the costs of human capital - due to societal expectations - are resistant to the recent ability of digital potential to contribute to learning by doing processes which could greatly reduce these initial cost burdens. Nevertheless, not only does the asymmetric compensation of secondary market knowledge application provide immense skills flexibility, it is integral to the very framework in which much of today's wealth takes place. Sticky markets indeed!

Hence what is now needed, is a digitally enhanced supply side structure for knowledge production, which can generate new wealth capacity to restore a growth frontier along the margins of today's NIMBY general equilibrium. A symmetrically aligned organizational structure creates internal reciprocity, which in turn makes internal coordination a viable economic option. After all, as Glasner rightly explained, it can be all but impossible to achieve the coordination of labour markets at a general equilibrium level. Fortunately, it's still feasible to create defined equilibrium settings at local levels, where the time value of our labour might once again contribute to overall growth and productivity.

Friday, October 19, 2018

Can Individuals Take Part in Community Design?

Of course the short term answer is not so much, and one's vote in this regard accounts to little. But why is it so important for individuals to take part in the choice sets and creation of basic economic options? Why should this form of individual choice matter for marketplace outcomes?

All too often, individual choice gets lost in broader arguments where governments and existing private interests are supposedly representative of everyone. In these scenarios, governments tend to become the behind the scenes default mechanism for getting things done. What isn't sufficiently acknowledged, is this holds equally true for many who publicly insist governments should have little to do with economic outcomes. In spite of all the bluster and rhetoric about support for small government (yes, even today in local election commercials!), the political right has too often reduced individual freedom as a factor in economic outcomes.

Again, let's consider how public choice effectively supersedes individual choice. Several recent posts dealt with various aspects of this reality, including musings from David Henderson in "The government is not the public." regarding an unfortunate conflation between the two:
In my writing, I make sure not to talk about the two as if they're interchangeable. But I have many libertarian and economist friends who use the words interchangeably.
And in an unexpectedly helpful side note (at least for me), Henderson adds:
That's part of why I have never been thrilled that the study of incentives in government is called Public Choice.
The problem? Society tends to function as if only one essential economic and social choice is all that's really possible. What's off putting for me is that some adherents for public choice are now taking part in a fierce struggle over what "should" define our most basic economic organization patterns, and way too many cultural elements appear to be part of the mix. Meanwhile, no serious decentralization potential for economic dynamism, has yet appeared on the horizon. What's more, when public aspirations get confused with government intentions, the non tradable sectors which generated such legal rigidity in the first place, only become more convoluted than ever.

Another aspect of individual choice potential: Is this mostly a matter of package bundling problems? Arnold Kling notes how the Tiebout model hasn't proven as beneficial as expected, consequently leaving little real value for one's right of exit. I also agree with Scott Alexander about exit, voice and choice when he says
...I'm reasoning from a perspective where communities are a basic unit because I believe in Archipelago, a world where the only win-win solution to our many differences about what societies should look like is to let people form highly varying communities with exit rights and let people live in whichever one they want.
That said, communities built primarily on cultural differences would be a tough call. In democratic societies, cultural attributes can quickly change from generation to generation. Even Alexis de Tocqueville was able to provide a reasonable explanation as to why, well over a century earlier in Democracy in America:
When the state of society turns to democracy and men adopt the general principle that it is good and right to judge everything for oneself, taking former beliefs as providing information but not rules, paternal opinions come to have less power over the sons, just as his legal power is less too.
Perhaps the division of patrimonies which follows from democracy does more than all the rest to alter the relations between father and children.
If one can't expect cultural attributes to remain constant, especially in communities which need to be able to offer unique societal options, how to encourage individual choice sets for initial community design which really matter?

For one thing, there's scarcely any existing design options at all for lower income levels, especially for local educational possibilities or innovation in infrastructure. For example, Isabel Sawhill recently explained how local communities wish to create closer ties between local learning and the ongoing needs of their citizens. In a new book The Third Pillar: How Markets and the State Leave the Community Behind, Raghuram Rajan highlights the fact that local community integration into the larger economy, needs to be pursued by advanced and emerging economies alike.

Infrastructural innovation is key for individual choice in community design. One reason why exit as individual choice has not been particularly effective for lower income levels, is due to the fact Republicans seek to further reduce local taxes even as a full range of services and infrastructure costs continue to rise. As this process plays out over time, more communities find themselves forced to reach out to higher income citizens as a property taxation source which can still realistically address their services and infrastructure costs.

One of the most vital options for individual choice in community, is that of walkable communities for living and working which are accessible to individuals of all income levels. Indeed, once a basic design element such as this is introduced into new communities, it immediately suggests a range of other reasonable "bundling" options, in terms of well aligned population densities and organizational services formation. Even the single design addition of walkable communities as a local community option, would make the Tiebout model more meaningful for all concerned.

Despite discussions in recent years re new cities which could make room for the marginalized, few of these have included grassroots options for structural design and implementation. A prime example is charter city construction, which would actually be collaborations between high level public and private interests. Again, while new charter cities would doubtless create additional economic value, they mostly reflect additional economic options for upper to middle income levels. In other words, these decentralized economic options still lack the platforms that could make it feasible for lower income levels to unite their efforts in shared ownership and personal responsibility.

Saturday, October 13, 2018

Maintenance as a Monetary Burden

Few things are more important to the vitality and sustainability of civilizations, than how populations conceive of - and carry out - their maintenance roles. Yet in many instances, these vital economic functions have ended up getting short shrift to a point that that wealth creation has also been negatively impacted. This time, society's maintenance roles are being arbitrarily diminished by monetary effects.

Prior to the twentieth century, societies shared a wide range of responsibilities for services generation which included extensive maintenance activities. Much of this time based coordination has gradually been supplanted by monetary representation. In the process, however, lower skilled or relatively "undesirable" aspects of maintenance activity have been shifted downward, so that some activities have lost societal respect to a degree these jobs are actually perceived as societal punishment. Likewise, the most desirable intellectual challenges are becoming reserved for the best and the brightest.

Individuals who perform society's less desirable activities, even when these activities can be enjoyable (such as cooking and washing dishes), are consequently far less likely to be encouraged to take part in activities including a higher degree of intellectual stimulus or personal challenge. Many individuals are becoming reluctant to assume low skill work, due to its still growing social stigma. Stigmatizing low skill work is a terrible cultural mistake. We need to approach work which includes maintenance roles differently in the future, whatever the skill level such work includes. As a mostly monetary function, maintenance is creating some unexpected societal burdens.

Some years earlier, I touched on the importance of maintenance as a basic economic foundation, in several posts. Also: From a macroeconomic perspective, recall how maintenance roles at multiple skill levels are essentially made possible by what is newly built, or otherwise brought into equilibrium dynamics such as employment in tradable sectors. For our purposes, service based maintenance roles are in reference to both intellectual and physical aspects of our environments. For instance, teachers and physicians alike perform maintenance roles, when they carry out knowledge based extensions of what was previously built or envisioned in the past.

Building disciplines - due to their ability to match resource reciprocity at the outset - have been responsible for the majority of economic costs for maintenance in the past century. One might envision building disciplines as a pyramid layer which sits directly atop the maintenance base. Creativity for physical and intellectual aspects of our environment, sits in the middle above the building layer. Previously, I attributed healing and understanding to the top of the pyramid structure. More on that in a moment...

Even though building disciplines have been responsible for the monetary costs of maintenance; as the bottom pyramid layer, maintenance requires far more routine effort and time commitment than other aspects of this pyramid. This is a major reason why societies have tried so hard to support time commitments for maintenance functions via non monetary means. The only other discipline which occasionally approaches a similar degree of time requirements, is the building level of the pyramid. On the other hand, the third level, or creativity, requires fewer overall time commitments to generate new designs and applications - despite the fact this is our economic "cutting edge".

What, then, of healing and understanding as the top points of the pyramid? Healing and understanding are necessary for the preservation of societal wealth building which has come before. But is healing and understanding still possible? I'm no longer certain they are in the course of my remaining lifetime, especially since the political party once engaged in wealth building often appears as though bent on wealth destruction instead. Indeed, I've come across comments recently that societal healing is an "effeminate" concern which holds no practical benefits for anyone.

Hence I can't help but wonder: Had professionals (and members of the elite in general) been more willing to share the use and application of 21st century knowledge with everyone, would this present day backlash against women in particular, have become so strong? Not to mention the horrific fact that courts in recent decades have severely punished men who lack the necessary means to preserve intact family structures. One of my profound regrets is that I didn't try hard enough to cultivate lifelong female friendships while still young, because I never dreamed how deep and wide the gender rift would become over the course of my lifetime.

Nevertheless, I want to believe there's still hope for at least the lower levels of our economic pyramid to remain sustainable. Maintenance roles need not remain solely monetary burdens, or social stigma at lower levels of skill. Just as religious organizational capacity once created ways to share a full range of skills potential, we could adopt a secular approach for effective management of maintenance roles. How to preserve our most vital maintenance functions? We need to place more of these vital activities into a formal wealth creation context, via the reclamation of everyone's time value.

It's also important for those of us living in the U.S. to remember: Should other nations become less willing to buy our debt, this would affect the extent to which we can continue reimbursing our services dominant economy on present day terms. Perhaps a number of groups are already aware of this possibility, given how quickly some factions are working to reduce potential illegal immigrant claimants to a relatively fixed pool of well compensated high skill. The sooner we have other time centered options for societal coordination in place, the better.

Much of the present danger is that we were long accustomed to the undeniable prosperity of tradable sector dominance, which allowed high skill compensation for time based product to flourish for several generations. However, as service sector economic representation grew more dominant, originating wealth had to spread more thinly, to cover a full range of maintenance across an entire physical and intellectual spectrum of possibility.

Life is not likely to feel "normal" in the near term, for we are still essentially running on the fumes of a tradable sector derived equilibrium which has also received extensive support from financial activity in recent decades. Just the same, there is only so much additional support that is possible on these sets of terms. The sooner we recognize that new means are needed to build wealth during times of non tradable sector dominance, the better our chances of preserving the global prosperity which has accrued in recent centuries.

This is why we need to tap time arbitrage potential for maintenance roles. Doing so would allow our time to actually contribute to wealth creation, instead of simply functioning as further demand on original wealth. Importantly, if services can be generated reciprocally on wealth creating terms, it might also help prevent nations from retreating into mercantilism instead of dealing honestly with the need for structural reform.

Monday, October 8, 2018

Why Isn't Recent Price Making "Excess" Inflation?

Given today's extensive price making activity - particularly in non tradable sectors - why aren't there more problems for inflation, broadly speaking? While price making (in contrast with the resource coordination of price taking) could theoretically still contribute to aggregate inflation, for the most part this potential occurrence has been internally controlled, by both supply side participants and policy makers for quite some time.

Recall that inflation is one possible result, when reciprocity for given sets of time based activities is deferred to uncertain points in the future. Granted, fiscal activity was once notorious for high inflation outcomes. But more recently, despite a high degree of fiscal dependence, non tradable sectors have become more likely to take aggregate redistribution capacity into account at the outset. Imagine for instance, how many members of a conservative healthcare administration might adamantly oppose general inflation, which of course translates into "keeping a lid" on supply side demand as well. Alas, a supply side increase in this instance could either lead to external (general) inflation, if not the relative price taking of diluted wage capacity.

On the other hand, tradable sector supply side limits occur for reasons which aren't closely related to ongoing efforts to suppress inflation. Even though families may face discretionary income limits for tradable sector product, these processes lack the stigma associated with government budgetary limits. Likewise, tradable sector activity responds more to stimulus efforts, since much of this production is easier to ramp up or down as needed. Meanwhile, a growing reluctance to ramp up non tradable sector activity, currently translates into a low growth environment, despite our historical time frame of services dominance.

Despite the recent decades of low inflation environments, there's plenty of reflexive reaction regarding potential inflation, even though actual inflation has scarcely been problematic for advanced nations since the Great Inflation. Yet during the sixties and seventies, monetary policy struggled with various levels of structural fallout, as non tradable sector dominance began to supplant a longstanding dominance of tradable sector activity. In this not so distant past, price making contributed not only to the internal inflation dynamics of newly dominant non tradable sector activity, but also the external inflation of nations, albeit in retrospect for a relatively brief moment in time. Still, plenty of multi sector jostling for space ensued, before central bankers determined the necessity of imposing limits.

Towards the end of the twentieth century, what had been a long held consensus of globally coordinated price taking, started to suffer the effects of locally derived price making patterns and their demands on disposable income. And once overall resource utilization became less capable of spontaneous coordination, capitalism was also increasingly called into question. Not only did sectoral shifts reduce production potential, but also the market capacity which knowledge and skill could otherwise contribute in a 21st century economy. Too many people were needlessly being left on the sidelines. In spite of what were often extensive investments in human capital, many workplaces were unable to capture more than a fraction of the potential their employees were actually capable of.

Since the desire to maintain low inflation levels still runs strong, this will continue to affect what the existing supply side for time based services can realistically provide. One important aspect of this development is the likelihood of minimal healthcare supply side response for retiring Baby Boomers, in the years to come. Any substantial expansion on current price making terms, would only add to fiscal burdens which are already quickly multiplying for other reasons.

To sum up, recent decades of the growing practice of price making, hasn't significantly contributed to general equilibrium inflation. There's an understandable preference to suppress aggregate demand in (general equilibrium dependent) secondary service markets, to prevent this occurrence. Again, the current structure of healthcare in the U.S. also puts additional pressure on the Fed, for it is compelled to acknowledge numerous constituents which are unwilling to face additional inflation.

Paradoxically, even as populations seek more time and knowledge centric services in the near future, they recoil at the additional inflation potential of this price making structure. Yet the time value of services generation, still deserves a valid price taking context. We need new forms of organizational capacity which allow resources to be reciprocated at the outset. Immediate reciprocity for time based services would generate wealth on terms that not only contribute to greater productivity, but also provide a real economy gain that safely generates monetary expansion without undue inflation.

Saturday, October 6, 2018

"Making Room" for Experiential Choice

Where we live does much to shape our lives. Douglas Clement of the Minneapolis Fed recently highlighted a study which argues how one's choice in location can be a special asset:
...think of location choice as an investment decision. A person without savings who loses his or her job can survive the shock by moving to a less-desirable city, "borrowing" from that location to pay current living expenses. In contrast, someone benefiting from a positive shock - an inheritance, say - might "invest" in a good location and enjoy sustained payoff from its better housing, schools and employment. Either decision involves an intertemporal transfer of consumption - choosing whether to consume now or save for a rainy day.
While monetary aspects of location strategies are important for young adults - particularly anyone with a college degree - experiential considerations are involved as well. However, without a college degree, location strategies are a bit more complex. What restrictions do these individuals currently face, as they seek to "make more room" for positive experiences in their lives through location choice?

Even though it's often argued that money can't really "buy" good experiences; alas, one's financial standing has more bearing on the nature of positive experiences than it initially appears. In many instances, the places we work and live require a level of non discretionary income which leaves little for experiential choices and the well being they make possible. Ultimately, a broader array of experiential options are needed, for anyone whose monetary compensation comes up short for discretionary spending.

Why is experiential choice so important, and what does it involve? Several factors determine our overall lifestyle choice sets. Workplaces can be vital not only when they offer possibilities for intellectual challenge (knowledge use as experiential choice), but also insofar as they make home and automobile ownership more realistic. Home and auto ownership open up possibilities for a whole range of enjoyable activities which go well beyond intellectual endeavour, should this be missing in one's work. For those who lack a reliable full time job with benefits, it's not just a matter of going without sufficient personal space or social mobility. Unfortunately, the experiential possibilities that come with meaningful relationships can be reduced as well. And in many instances, two part time jobs simply can't create the security that can be generated via a single workplace commitment.

It's the experiential options in our lives that provide the greatest chances of achieving happiness. Fortunately, intellectual challenge can be what we make of it regardless of circumstance, but pursuing such endeavour without the added engagement of workplace friends or family, can be quite lonely. While some of life's most meaningful pursuits also take place in solitary nature or the countryside, the city living option is still quite important for a wide range of experiential options, particularly when we're young.

Should one's experiential life choices become limited, it's easy to become too reliant on social media and related forms of entertainment, especially should we face difficulties traveling or visiting friends and family. Also: Even though services such as Uber and Lyft now make it simpler to gain city employment, options such as this likely won't be available for rural areas in the foreseeable future.

A two pronged place based approach is needed - one which brings new forms and means of housing and transportation within reach of those with small incomes. After all, good experiential options shouldn't be limited solely to the realm of well compensated workplaces, where people already have more experiential options than time to exercise them.

In the country, rural areas would benefit from community design which (re)creates walkable options for living and working. Cities and populated regions could grant special zoning permission, for areas of flexible building components/infrastructure to generate space for mutual services and access to city jobs. Importantly, the best way to design such community efforts is through mutual ownership of the endeavour that creates social mobility for those who take part. One unique aspect of this for profit enterprise, is that it can be built through the diverse groups which directly benefit from their mutual commitments to one another.

Monday, October 1, 2018

Democratic Representation and the Services Factor

While I agree that democracy is an important component of economic growth, present day fiscal policies mostly contribute to additional growth up to a point, once economies become services oriented. More specifically, increases in fiscal velocity don't necessarily expand general equilibrium capacity, especially when they need to maintain a secondary market spectrum. Much about growth and productivity depends on how services are organized and designed. Why do so many basic service activities rely on high income forms of production and consumption, for instance? This framework makes it difficult to discern what true services marketplace potential may actually consist of.

Since so many time based services are closely defined quality product, a stark contrast in income based production and consumption has emerged, which leaves little room for lower income levels to contribute to democratic societies. Should lower income groups remain prohibited from creating their own service corollaries, democratic representation may be increasingly called into question.

Fortunately the United States didn't face this acute services conundrum in its earlier history. Indeed, modern democratic society became possible in part due to circumstance whereby citizens had freedom to generate the vast majority of their own services. Few with limited income really needed to vote for governments to provide something that many were already able to provide on their own. Nevertheless, over time, special interests here (just as elsewhere) gained preferential treatment from Washington, which in turn gradually reduced what citizens could legitimately create for themselves.

More than a century and a half earlier, Alexis de Tocqueville doubted democratic representation in part because of the services the poor would demand, should they dominate the vote. In "Democracy in America", he described three classes (rich, middle and poor) and questioned whether democracy was an economical approach given existing inequalities. First he noted that should the rich make the laws (via the vote), economizing public money wouldn't be problematic since their taxation would be of minimal effect. And if the middle classes were instead responsible for lawmaking,
Then one can be sure that they would not raise extravagant taxes, for there is nothing as disastrous as a heavy levy on a small fortune. 
What if the poor carried the majority of the vote?
Countries, therefore, where lawmaking falls exclusively to the lot of the poor cannot hope for much economy in public expenditure; expenses will always be considerable, because either taxes cannot touch those who vote for them or because they are assessed in a way to prevent that. In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Even though there are numerous reasons why such thinking is flawed, his arguments still hold weight today in some respects. Nevertheless, a newly formed United States was likely willing to embrace representative democracy in part because its own citizens bore responsible for the majority of services production. These earlier similarities in resource utilization, created a majority which held a similar voice and could assume a more precise level of societal responsibility.

Wide disparities in income today have changed the calculus greatly. Yet despite the fact it's not feasible to represent entire populations on similar terms (particularly in large nations), there are still ways to bring democratic representation closer to disparate income groupings. The creation of uniquely defined equilibrium for non tradable sector activity, would allow similarly inclined groups to contribute to their communities on more equal terms. Even though some sorting already takes place at upper income levels, innovation in environment design could more closely reflect the capacity of all income ranges. Such an approach could do much to preserve representative democracy - not to mention direct democracy for local service generation - in the foreseeable future