Tuesday, November 12, 2019

Decentralization For The Greatest Good

When many rules have centralized origins - especially in large populous nations such as the U.S. - governments struggle to achieve the greatest good for the greatest number of citizens via taxation. The fact that utilitarian outcomes aren't easy to come by for diverse populations, helps explain why policy makers of opposing parties have become less willing to compromise. So why do we insist on imposing the same sets of requisite rules and standards on everyone? Why can't our economic freedoms be more closely associated with the possibilities of economic diversity, so that all citizens might live in settings where they can create good lives for themselves and others around them?

Nevertheless, one may take comfort, in the fact rigid expectations are nothing new. People have attempted to impose one size fits all regulations and social requirements on one another for a long time. For instance, even though Walden was published in 1854, Henry David Thoreau details how the social expectations around housing, contributed to the impoverishment of many in his time:
Most men appear never to have considered what a house is, and are actually though needlessly poor all their lives because they think that they must have such a one as their neighbors have. As if one were to wear any sort of coat which the tailor might cut out for him, or, gradually leaving off palmleaf hat or cap of woodchuck skin, complain of hard times because he could not afford to buy him a crown! It is possible to invent a house still more convenient and luxurious than we have, which yet all would admit that man could not afford to pay for. Shall we always study to obtain more of these things, and not sometimes to be content with less? Shall the respectable citizen thus gravely teach, by precept and example, the necessity of the young man's providing a certain number of superfluous glowshoes, and umbrellas, and empty guest chambers for empty guests, before he dies? 
Sometimes, societies impose such standards as a way to exclude others who they believe cannot adequately contribute to the needs of given communities. The problem however, is that more communities aren't created with infrastructure which accurately reflects what many individuals could contribute to the well being of all concerned, given the chance. Where, exactly, are excluded individuals and groups expected to go, especially when there are few domestic markets competing via product innovation, to enrich the production potential of lower income levels? And why haven't such individuals already gained the economic freedom to create anew for themselves, what many institutions have proven reluctant to provide?

Social expectations around housing requirements in particular, have proven especially harmful for the bottom 50% of working adults in the U.S. without sufficient income to live where reliable work can readily be found Even though lower income levels have been losing real wage capacity for decades, we have scarcely begun to discuss supply side approaches which could lead to more positive outcomes.

Alas, no one can realistically pretend that trends for low pay work will be reversed soon. We need economic options which allow us to bypass the sticky markets of today's extensive non tradable sector requirements, so that low wages will go much further than is presently feasible. Decentralized local settings which more accurately reflect what small incomes are capable of, could give millions new hope. Such settings would have far more ability than any centralized government, to create the greatest good for the greatest number of citizens. Defined equilibrium for housing, infrastructure and services would also make use of limited regulatory patterns, for groups which find mutual assistance a way to improve the well being of all concerned.

Consider as well that when it comes to housing, one need not classify Thoreau's housing sentiments as anti-materialistic. It's one thing to disavow material possessions in order to seek other time use options, yet altogether another to disavow certain forms of consumption which many individuals can't realistically afford in the first place. Life is much easier when we can accept such realities and move on, instead of having to constantly struggle with income differences in the face of one size fits all regulatory absurdities. People should be able to make low cost choices where desired, yet still have plenty of local economic options to lead meaningful and respectable lives.

A supply side approach would allow us to take the focus off struggles concerning aggregate demand and government "solutions". Doing so is all the more important, since governments hold considerable responsibility for the centralized consumption regulatory barriers which impact the lives of low income groups. Let's build decentralized settings where non discretionary costs might finally come within reach, of millions who seek to make the most of the resources they actually have available.

Saturday, November 9, 2019

Some Productivity "Mysteries" Are Solvable

One often hears, "To what extent does technology contribute to productivity?" But an equally important question is, "What else may be closely involved?" For instance, when do societal expectations of what comprises quality product, get in the way? Are those expectations creating additional burdens for our already scarce time use options?

If quality product expectations (such as housing and services) keep requiring ever more of our scarce economic time, more citizens will end up excluded from basic market processes in the years ahead. Essentially, this means aggregate productivity is also being lost, despite productivity gains which may still accrue at upper income levels. Markets aren't as beneficial as they seem, if the costs of basic life necessities leave little room for discretionary spending options for millions of people. On the other hand, free markets are a major boon for all concerned, if they offer accessible basic products and services for all income levels - thereby creating a base of sustainability. Should this in fact take place in the near future, some of our production mysteries will also have been solved.

Certain features of our non tradable sector activity have been reducing aggregate productivity gains for quite a while. Nevertheless, there's good news, for we have the ability to simplify some of the current confusion as to potential productivity gains. How so? One of the most basic elements of productivity gains which still holds, is how such gains accrue to our advantage when they give us additional time options, monetary options, or both. Importantly, even though we now inhabit a services dominant economy, this is as true as it ever was.

Productivity gains, when they do occur, tend to take place in more than just a single dimension. An apt 20th century example for productivity benefits at multiple levels, were washing machines which entered our homes around mid century. Not only did we realize wealth gains from increased aggregate output (and output scale created a positive wage benefit), washing machines freed up lots of time for other activities as well.

Only imagine how easily we could realize similar production gains today, by adopting lightweight yet strong materials for a broad range of building functions. Indeed, many building components could combine to create relatively small structures (compared to today's square footage requirements), simple enough in form to require a mere fraction of the maintenance and renovation which is now necessary. These new living/working options would restore millions to a sustenance level of activity at the very least. In other words, far more individuals would remain closely attached to wealth creation processes, than if they were dependent on others for shelter. Any society that forces undue dependence through excessive living costs, will also tend to create less overall output or wealth. Whereas greater independence in living and working arrangements, leads to more personal choice for countless other market options, hence greater output and productivity gains.

Let's reduce the production mysteries in our dialogue, by addressing how arbitrary product definitions and social expectations impact our time commitments and ability to freely choose. We could reasonably ask of products or services: Can they free up our time for activities we might prefer over present activities? If not, then why not? When we don't take this kind of approach, we inadvertently allow "quality" product requirements to reduce the larger possibilities of our lives. Even worse, we allow those arbitrary product definitions to reverse a centuries long process, of the productivity gains which added so much to real wealth and societal progress.

As Diane Coyle notes in a recent Project Syndicate post, we could all benefit from a more nuanced understanding, as to what makes productivity relevant for our lives. She stresses how already in OECD countries, four out of every five dollars "purchases services or intangible goods". Coyle is spot on, in suggesting we need to think in broader terms about productivity measures and how they may affect overall well being. Otherwise, without a better approach to measured services output (and I suggest time arbitrage), it will only become more difficult, to determine whether societies can keep moving forward as before. Let's stop our struggles over how government demand among citizens is apportioned, and pay more attention to the supply side circumstance which matter most for everyone. Many of us have a good chance of thriving, if we can regain our former rights to select for size. Being able to do so, is what economic freedom is really about.

Thursday, October 31, 2019

Wrap Up for October 2019

Politicians place too much emphasis on foreigners re international trade issues, instead of focusing on domestic issues which are vital for a nation's economic health. 

Scott Sumner provides highlights from a new paper on NGDPLT, by David Beckworth.

Tight labour markets have helped low end wages.
Just the same,
"Falling labor demand for non-college-educated workers has weakened the returns to work and lowered labor force participation for many workers."

Waste in healthcare isn't a new problem.
Perhaps waste reduction isn't interesting enough to be a priority. (A JAMA network perspective)

Three forces shaping the world (Morgan Housel)
"It's almost certain that the educational system will be upended. The current arrangement of needing a college degree in order to have a good chance at becoming and staying middle class, but taking on life-changing amounts of debt to do so if you don't have family assistance, can't last."

A baby boomer contemplates the fact millennials aren't particularly concerned by the national debt.

The return of regional divergence (Krugman) He stresses how strong this divergence actually is, and the fact that policy can't reverse it.

Martin Weitzman changed Tim Harford's thinking on climate change.

"A calendar is more than the organization of days and months. It's the blueprint for a shared life."

Andrew McAfee found, to his surprise, that the U.S. is now taking a less materialistic path in the use of many resources. While this is certainly good news, I still have to wonder, how much this circumstance might be arbitrarily imposed, since many people forego a lot of material consumption when they don't also own traditional housing and transportation means. Plus, some individuals understandably voice anti-materialist sentiments as personal choice (rather than financial necessity), for this ownership anomaly now goes well beyond lower income levels.

Bloomberg debates the possibility of world recession.

What happens to national debt over time, if the rate of interest is less than the GDP growth rate?

"Democracy on a Knife-Edge"

The next recession is likely to be met with a fiscal approach which includes more debt. How much of this might morph into MMT rationale?

Alex Tabarrok provides numerous links for this year's Nobel winners (Banerjee, Duflo and Kremer)
Two more from Tyler Cowen, here and here.
Also a contribution from the blog "A Fine Theorem".
This paper from Michael Kremer is "a hit among students".

Olivier Blanchard suggests a nominal wage target.

David Beckworth recently edited a book on Allan Meltzer's life work.

Corruption can be difficult to uproot, when the process becomes a top down witch hunt against a government's political opponents.

George Selgin responds to a revised criticism of NGDP targeting from Lars Svensson.

Non profit hospitals are also driving up the cost of healthcare.

Final thoughts from Alice Rivlin, on healing divisions in America.

Diane Coyle reviews Productivity Machines

Democratic presidential candidates have not given enough consideration to changing workplace realities. Specifically, what's lacking in "talent development ecosystems". And, "Many of the candidates' proposals merely extend the status quo."

Miles Kimball highlights this LSE blogpost:
Perhaps economists are simply more inclined to use Twitter to communicate with one another, rather than the public. Sometimes economists seem to have given up on the latter, especially since political dialogue has grown more strident. Yet one can't help but wonder: Which is cause, and which is effect?

1550 to 1650 could have been the crucial century.

Despite the understandable angst, we will struggle to get past our current disillusionment with "lousy jobs" until we make our time more valuable for one another on economic terms.

The best defense against Trump is to refuse to be tribal.

Even though average U.S. rent was "too damn high" in 2017, it went even higher in 2018.

"Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis"

"The top 50% pays almost all the federal income tax."

"Srinivas Thiruvadanthai on the Sectoral Financial Balance Approach to Macroeconomics"

"...startup community building is a lot of guesswork and trial-and-error. It requires curiosity, humility, an informed intuition, and a general comfort with not having all of the answers."

Cardiff Garcia takes the interviewer role on this Macro Musings podcast, to talk with David Beckworth about NGDP targeting.

Sarah Skwire provides a list of what essentially boils down to "you may be a crackpot economist if..." Oddly, a certain amount of pride (what, no shame?) goes with these descriptions! Hence her post reminded me of a classic song lyric from "You're So Vain", "I bet you think this song is about you."

How susceptible are we to "neuromyths"?

The Week staff provides historical perspective for the impeachment of Andrew Johnson

How will increasing services dominance play out in international trade?

Update on a synchronized stagnation.

J.W. Mason looks at the implications of downward revisions in interest rates.

NPR interviews surgeon Marty Makary

The Fed is gradually moving towards a market based approach - one which may help the U.S. avoid recession in the near future.

"Automation and New Tasks: How Technology Displaces and Reinstates Labor"

A season of discontent is underway.

Diane Coyle reviews Human Compatible: AI and the Problem of Control

Morris Kleiner and Evan Soltas argue that the welfare costs of occupational licensing are higher than the actual benefits.

Airbnb is changing Himalayan villages.

A consideration of real wage factors for inequality over time.

Is there an optimal response to the California power company blackouts? Plus scroll past the trolls for useful comments which reveal the complexity of this issue.

Childcare has become one of the main time/resource coordination dilemmas of our era.
Even though 63 percent of full time workers find childcare costs prohibitive, one daycare manager explains that she actually loses money "on every infant and 2-year-old in her care".

The first Five Books interview ten years earlier with Robert Barro, on the lessons of the Great Depression.

Tyler Cowen recommends a job market paper which highlights downward rigidity in wages for new hires.

The trend rate of growth is (surprisingly) strong. But can it last?

Tuesday, October 29, 2019

When is Hierarchical Structure a Good Approach?

When do hierarchies contribute to getting tasks accomplished more effectively? This is an important consideration for time arbitrage, which would mostly function via horizontal divisions of labour in relatively flat organizational patterns. Many participants in these processes - regardless of age - would assume active responsibility for the services they seek to create and provide. Often, one's limits in this regard would stem from what other individuals are willing to accept, rather than what institutions refuse to allow in terms of skills provisions and access.

Some aspects of our working lives don't particularly benefit from hierarchical patterns of organization. All the more so, when vertically aligned decision making imposes unnecessary costs and makes it needlessly complicated to get anything done. Fortunately, a wide array of time based services could adapt to a simpler framing which encourages internally managed decision making. Our present day services institutions use hierarchical approaches in part since vertical structure makes it easier to price make for additional income. However, the price making which often comes with hierarchies, discourages the price taking that is full societal time based coordination and participation. Yet it's the latter which encourages people to reach out to others for the full course of their lives. Without such encouragement, the constant permissions process of meritocracy can lead many to believe they are "unworthy" to take part in even basic forms of mutual assistance!

Meritocracy also gets in the way of natural expression. Ideally, an important takeaway for many forms of time based product, would be how participants perceive the experience. Nevertheless, when these activities are institutionally (externally) defined, there's little consideration for the actual circumstance which individuals may face. This inability to take unique factors into account, can detract from the shared experiences of providers and recipients. How much freedom do they have to manage and create a services experience, in the interactions of institutionally defined time based product? If these services could be offered on simpler terms, free markets would more closely represent what individuals actually want to create and provide for one another, as freely participating agents.

On the other hand, there's an entirely different set of organizational considerations, if divisions of labour contribute to final product which is clearly delineated from human input. By way of example, we find strong rationale for externally defined divisions of labour in tradable sector activity, since its final product is the sum of many different - yet specific - actions. Without divisions of labour standardization in such instances, final product could not serve its functional purpose. Hence tradable sector final product is likely to be composed of many different divisions of labour which benefit from external and possibly hierarchical coordination.

Even though time arbitrage could provide many opportunities for non hierarchical patterns of organization, there are still occasions when hierarchical organization could be efficient and even desirable in these settings. For instance, externally defined divisions of labour can be useful to define skills expectations in local projects which are seldom needed. Some skills sets may not be needed locally, to an extent they can be readily included in the local educational patterns of time arbitrage.

Another rationale for hierarchical organization is when multiple participants may be new to local coordination processes. In these instances, communities may not have had time to contribute to local learning opportunities which would simplify egalitarian approaches to mutual assistance. Nevertheless, many hierarchical requirements for services generation need not be ongoing. After all, most individuals hope to assume more autonomous roles in their working relationships, once they become familiar with the needs, expectations and aspirations of their own participating groups.

There are also hierarchical considerations for workplace teams, since team members frequently contribute specific skill sets to the outcomes of group endeavour. Healthcare in particular developed a team approach in the 20th century. However, while healthcare team based price making has functioned reasonably well for higher income levels, it hardly suffices for lower income levels. By way of example, if Medicare in the U.S. were extended to all citizens, the present healthcare system would be quickly bankrupted! A better approach would be to allow lower income levels to adopt knowledge use systems which allow them to internalize educational alignments for mutual assistance. Time arbitrage could ultimately create means for participating low income groups to meet a wide array of healthcare activities.

A certain amount of hierarchical structure would also come into play, for the start up community design of knowledge use systems. Importantly, organizers would want to ensure that community designs aren't needlessly divided between opposing visions of the good life. Everyone's time is scarce, and time arbitrage would include time commitments as a component of local community taxation. Hence opposing visions could quickly get in the way of local aggregate time use possibilities. System co-founders would not be doing their job, if they don't work to ensure that diverse community designs are feasible which reflect the full range of what individual groups hope to create.

Once a given community design is determined, local grid and infrastructure patterns would reflect the main services lifestyle preferences, via a walkable core. From here, more flexible lifestyle and transportation options would begin to define community peripheries. Once these physical aspects of community design are in place, walkable town centers would become a welcoming place for people of all ages, in free markets which represent true services freedom of expression.

Friday, October 25, 2019

Long Term Commitments Need Non Pecuniary Stability

Some non pecuniary settings are more beneficial than others. Regular readers know the ones I believe could prove most helpful: Simpler building and infrastructure choice sets, plus a wide array of services made possible via time value as an economic unit. Often, non pecuniary advantages tend to be random and otherwise ill defined. However, by clearly spelling out such options, defined equilibrium designations would highlight the advantages of real wage stability over elusive nominal wage gains.

During long economic periods when nominal wage growth is lacking for any reason, non pecuniary economic options could prove more valuable than they might first appear. Once costs of living are dramatically reduced, lower income levels can more readily achieve regularity in their daily routines and work patterns. Reliable economic patterns could certainly give these individuals greater courage to assume the risks of long term commitments, so they might lead normal and productive lives.

Only recall that all income levels need reliable economic patterns, before it is realistic to make emotional commitments with others in good faith. Investment potential for lower income levels, can be quite different from what higher income levels expect to assume. Further, even the best of relationships can become derailed, when life/business partners can't find suitable locations where the resources at their disposal are sufficient for building a good life. Why not create more locations which could thrive with minimal revenue requirements, to address the inequalities of our times?

In a dialogue for Project Syndicate "Say More", Harold James touches on educational aspects of cultural fallout due to inequality:
A very important series of books and studies...have shown that in advanced societies, inequality is driven partly by marriage preferences and social bonding among the "elites" who pass on non-pecuniary advantages in education. The logical conclusion is that functioning families should not be a privilege reserved for an educated upper class. That is the path to social collapse.
Let's be careful, before drawing conclusions these problems somehow need to be resolved on pecuniary terms. Once substantial amounts of wealth accrue to the time value of human capital (relative to tradable sector output), it is no longer a simple matter of utilizing money for existing inequalities, or even getting things done communally in general equilibrium settings. Hence the better solution is to increase the value of all human capital, so that more of society's most important work can be done without the monetary expectations which now accrue to upper income levels.

Fortunately, we don't have to access the education, or even the wealth of the elite, in order to live good lives. We can approach learning and human capital investment differently, so that resource capacity is better aligned for all concerned. We can approach physical environment design differently also. These forms of production reform would do much to address the organizational deficiencies of our non tradable sector institutions. There's still time to avoid social collapse. Why not get started while it is still feasible to do so.

Friday, October 11, 2019

Have We Lost Our Desire for Freedom?

And might economists be traveling a similar path? In an article for Cato, Pierre Lemieux reviews James Buchanan's What Should Economists Do?
Economists continue to be mainly interested in advising Leviathan on how it can manipulate people rather than how it can help people better achieve their desires, as Buchanan thought economists should do.
Perhaps the impulse to advise states instead, explains why economics sometimes becomes so political that its contributions to growth and prosperity are called into question. Lemiuex continues:
In America, both major political parties now seem to embrace government power as the only means of "running society" as opposed to spontaneous coordination through markets and individual liberty.
He notes how Buchanan feared that citizens preferred the state to make decisions on their behalf, in order to secure a stable outcome. Might we assume, then, the sacrifice of personal freedom as necessary for a life of relative tranquility?

Chances are, such a disheartening assumption isn't quite so simple. By way of example, most people I've known (including both sides of my family) are quite stubborn about giving up most levels of freedom, in terms of what they hope to gain for themselves! Plus, when governments do reduce freedoms, they tend to do so in ways that aren't clear about what's being further eroded - all the more so for lost production rights which generally morph into more professional ways of getting things done. In many instances, when citizens demand better outcomes in the form of economic access, they aren't exactly offering up their freedom as a sacrifice. And they may also be seeking amends for earlier losses in production means.

Further, the creation of artificial scarcities via professionalization of intellectual property, is how present day special interests assume and share greater authority with government. Given this reality, it is inaccurate to assume governments as the only ones with "parental" inclinations, considering the additional authority bestowed on private interests. When citizens lean excessively on government, they often do so because they believe their market options have been otherwise limited.

Recall as well, how governments set themselves up as mediators between private interests and the public, whenever private interests elect to limit their direct negotiations with citizens. Alas, that's the price special interests pay, when they demand further concessions from government for their benefit! Why would they assume they could somehow keep the resultant government meddling from happening on their turf? As it turns out, what is likely the citizen's innate desire for freedom, comes into conflict with the strong desire for economic freedom on the part of special interests. And when this process goes too far, some begin to assume "freedom for me but not for thee" means no meaningful freedom remains possible, hence become willing to proceed from this political assumption. Let's just hope we don't go there, for we are already too close in some respects. We see how other nations have already gone there before us and may do so again.

When special interests gain additional production rights, knowledge based artificial scarcities affect our freedom to choose as both producers and consumers. In Life is a Series of Presentations, Tony Jeary explains how imposed scarcities affect human decision making:
We are surrounded by advertising messages that promise certain deals "For a Limited Time Only" or "While Supplies Last"...Ironically, one of the main reasons we respond viscerally to these come-ons is that we cherish our freedom to choose. According to a field of study called reactance theory, writes Dr. Cialdini, "Wherever free choice is limited or threatened, the need to retain our freedoms makes us desire them (as well as the goods and services associated with them) significantly more than previously. So when increasing scarcity - or anything else - interferes with our prior access to some item, we will react against the the interference by wanting and trying to possess the item more than before."
Again we probably have not lost our desire for freedom. It could be more likely that nations lose freedoms through endless struggles to maintain them. When are special interests to blame? Is this a process set into motion when citizens lose too much of their ability to directly negotiate with special interests? What happens when citizens can't directly contribute to how market engagement takes place, or how markets are ultimately defined? Yet when citizens end up turning to government intervention instead, doing so often makes things worse. If special interest groups were more approachable, chances are citizens would not be as inclined to seek out governments as intermediaries, and governments might lose some of their paternalistic attributes.

Importantly, while governments tend to relish paternal roles just the same, their effectiveness in this regard will likely be reduced in the near future. It is becoming far more difficult to protect those who lack means to protect themselves, now that the bar for economic participation has been raised so many times by governments and private interests alike. Alas, governments have considerably damaged their own effectiveness, by making extensive agreements with private interests to control supply, even as they become indebted for the support of that supply. These losses in government and market effectiveness, only make authoritarian tendencies more dangerous.

What might these realities suggest for those who (still) believe in free markets? Since libertarians have had such limited success in the political arena, perhaps they might encourage economic settings where political concerns are put aside. Idealistic libertarians who have seemingly gotten nowhere in Washington, could contribute to local market generation which would be geared towards all participants, not just those who happen to have high incomes. When markets work for everyone (and yes, in the U.S. they were more efficient when I was young), there is less incentive for anyone to ask governments to intervene on a regular basis.

For that matter, opening useful markets which were previously shut off, closed down, or prevented from emerging for the first time, could once again encourage lower income levels to become more supportive of markets and free enterprise in general. These markets don't have to materialize in the prosperous regions of national stages where they pose problems for special interests. Nor need these market conditions become imposed on special interests, by authoritarians who are fed up with market limits which impact their own constituencies. They could be constructed in decentralized equilibrium by libertarians, instead.

It hasn't worked out well for economists or libertarians to get caught up in the cultural and political struggles of our day. And it's doubtful that many of us will be able to reduce authoritarian tendencies by engaging in the who gets what of cultural debates. Fortunately, there are still economic solutions that present better options for all concerned. Let's move forward once again, by ensuring that markets create real and useful choices for citizens of all income levels.

Tuesday, October 8, 2019

Musings on Retirement and Defined Equilibrium

Many who have recently turned 65 probably have retirement budgeting on their minds, even though full Social Security in the U.S. for this group is now age 66. Yes I decided to wait. While I've found it helpful to review retirement advice online, lots of suggestions are geared towards people who are retiring on more than Social Security alone.

What about the rest of us? If Social Security income is going to be the only buffer, hard choices come into play - especially if it's just one income for life's exigencies. Chief among these is when we are tending to an aging body and an aging home at the same time. Often, expenses for one are going to edge the other out!

So I've gained new appreciation, for moments when financial care of body and home don't appear as though simultaneously necessary. One consideration re the body option: Medicare costs might initially outweigh benefits, for those in reasonably good health who have managed (thus far) to avoid regular doctor's visits. In particular, basic Medicare doesn't cover as much as one might assume. Perhaps that escalating 10 percent penalty per year on monthly payments, might not be so bad after all if I could tend to some housing needs first. Nevertheless, should a major heath issue arise, I may need to rethink that strategy.

Should our initial major choices run along these lines, recall how - fortunately - improvements in physical environment can also improve health. Two for one budgeting, so to speak. How often does a doctor's prescription actually stem from a house which was "ill" in some respect, making more health problems for its inhabitants as well? This possibility occurred to me when I was reviewing a migraine log with its list of potential migraine triggers, only to realize those triggers can be magnified by a house in need of repairs.

Of course, the above decision making process on my part is a short run approach, or a response to relevant circumstance in the here and now. Wherever we are, however we live, we work with resources we already have in any given moment. But how might our resource options appear, if we could conceptualize new possibilities for long term gain? In other words, what could expand our choice sets for a fixed retirement income in defined equilibrium settings?

Presently, zoning and regulations both get in the way of what most low income retirees can accomplish. Living simply and frugally is no easy matter, when building requirements are excessively rigid and complex.

Hence first, some groups would need to set aside places where the physical infrastructure of defined equilibrium can be legally set into motion. Then, once ground infrastructure is manufactured and locally assembled as a community grid, flexible building components attach to this semi permanent network. These components would in turn attach to electrical wiring, plumbing pipes and fixtures in self contained units. Once old connections need to be replaced, these disposable units would readily detach from others. Old electrical wiring and plumbing would no longer contribute to so many life hassles. What a relief for millions of future retirees, when they no longer have to tear into their homes just to access electrical lines and water pipes throughout the building!

Separate units for plumbing and electrical alone, could immensely contribute to the well being of aging retirees. Yet the benefits don't stop here, since such building options could help people of all ages and abilities. Not only would self contained plumbing units mean less termite damage; self contained electrical units could ultimately mean fewer house fires as well. The added flexibility of these self contained units could make it easier for communities to bounce back after natural disasters. Plus, ground level electrical work between these communities might make it less necessary for power companies to turn off community power during periods of extreme drought.

Alas, potential innovations such as this are not yet on the immediate horizon. But I can dream. After all, the real wage value of Social Security income will only become thinner in the years to come, if we don't get extensive innovation in our non tradable sectors. That said, should these possibilities come to fruition, even low income retirees would be better able to manage body, mind, and house. Again, at least one can hope!

Friday, October 4, 2019

Can Structural Dialogue Transcend Its Limitations?

Even though structural arguments have been getting some airing of late, they aren't being discussed in ways which really get at the root issues. Consequently, dialogue about the potential for progress can come across as superficial, which certainly isn't what the participants are intending. Or worse, entire debates about our economic realities get reduced to the language and struggles of identity politics.

In some respects, it's not hard to understand why this is happening. Since we live in an economy which has had ample time to mature, general equilibrium conditions are so well developed (entrenched?), that structural experimentation is best approached outside these boundaries. Still, it hasn't been easy to imagine decentralized settings for structural reform. For instance, how to create new service markets via internal means, when so many time based services rely on the redistribution of centralized states? How do we create new forms of building manufacture and infrastructure, and expect institutions which rely on traditional buildings and infrastructure, to make room for them? It's not always possible to do so, which is why new communities are needed which are more likely to embrace structural innovation.

One reason structural dialogue gets undermined, is that additional redistribution remains the expected norm in most instances. Yet redistribution is - and has been - an unrealistic approach for some time. Not only would it would reduce a needed emphasis on new wealth building potential, general equilibrium revenue would make it more difficult for defined equilibrium settings to contribute to economic potential via their own terms of engagement.

Another problem which inhibits productive dialogue, are arguments which accomplish little because they occur at such an abstract level. One notorious offender is whether capitalism bears the "blame" for our most pressing economic problems. We can't afford to continue vague arguments which do little more than assign blame. Rather, we need to determine where capitalism does actually come up short, and respond to that reality. Specifically: What if there are not enough markets, instead of too many? What if the supply side of our modern economies is completely MIA, in communities too numerous to name?

How so? Consider how non tradable sectors have essentially ignored millions of individuals, among the two thirds of the U.S. population who lack college degrees. Sometimes it seems these sectors only care to compete for the high income levels among us, or they simply aren't interested. And much of what is produced in these sectors is also non discretionary. Given the importance of this product, how, exactly, are people without college degrees expected to live normal lives? Where are the options they can feel good about, for housing, infrastructure and a full range of high skill services? Even though we understandably celebrate how tradable sector activity has reached out to low income groups in recent centuries, no one can realistically "rest their case" on the achievements of tradable sector representation for all income levels. Alas, tradable goods are discretionary, hence this isn't enough.

What about the vast market potential for human capital, which has yet to be tapped? Even though human capital is responsible for much of a modern services economy, how our institutions have utilized human capital thus far, is not necessarily a good fit for millions who seek inclusion. If structural dialogue is to break free of its restricting boundaries, human capital has to be taken more seriously, as an integral factor of knowledge based production.

The real potential of human capital is not solely the province of the best and the brightest. It is more about the aspirations of the millions who aren't yet successful, but are doing the best they they can to build a good life for themselves. When we conceptualize further progress and long term economic growth, what makes us imagine the best and brightest among us are going to be the ones convinced this is the way to go? Why should the most successful among us, be the ones who desire more growth and progress, when they are flourishing and fully vested in the world that already is?

All too often, when we think about progress, our minds dance along the "cutting edge" of prosperity, where we imagine well to do groups flourishing even more as the latest and the greatest is introduced. But what is prosperity, if it contains too few means to positively impact the entire landscape of human possibility? If we don't think the potential of applied knowledge holds real promise for those still left behind, chances are we aren't equating the masses of humanity, with what we believe progress to actually consist of. Yet it cuts to the core, when we forget that long term growth and prosperity, is really about creating economic means for all who seek to grow and flourish. We cannot forget that the ones most likely to embrace innovation and change, are precisely the ones who have yet to be vested, who consequently are most likely to invest and advocate for, the places where experimentation is just beginning.

Sunday, September 29, 2019

Wrap Up for September 2019

"Shifting visions of the good job"

We want to remain close to family, friends, workplaces and cultural amenities. Even technology doesn't change this, and broad transportation options have become increasingly limited.

For India, the war on informality has become a war on the economy.

"A UBI in its most basic form would be massively expensive yet do little to reduce inequality or advance opportunity."

Which politicians are still willing to defend free trade?

Regarding the Phillips Curve:
"When you estimate a demand curve without being able to identity shifts in demand, you are not estimating a demand curve, you are estimating a reduced form that combines - and fails to identify or distinguish between - both demand and supply."

"The True Toll of the Trade War"

Mapping out racial diversity

China sales to the rest of the world have more than offset losses in exports to the U.S.
Both China and India have been building internal supply chains.

How might the Fed respond to dollar dominance?

"Most of these malls shut down because of the roof."

Telemedicine has come a long way.

David Beckworth and Alex Tabarrok discuss long term growth prospects and economic dynamism.

What other policy framework would exist around universal basic income? It can't be realistically discussed in isolation.

"We are part of the equilibrium."

Ben Ramanauskas reviews The Technology Trap.

"Is the US Economy having an Engels' Pause?"

Tim Harford explains the logic of holiday timing.

Taxing robots would be a quick route to quashed innovation and progress.

"The term 'sterilization' refers to policies that cause newly injected money to be set aside as a store of value, rather than circulate as a medium of exchange. One can think of IOR as a policy where the Fed pays banks to hold the new money being injected into the economy, rather than have it move out into circulation."

In spite of our efforts to "stay young",
"Repeated periods of poverty can accelerate the ageing process."

Trump has caused problems for the U.S. when it comes to trade.

The Book of Why is also an argument for philosophical persuasion.
"Modern machines...are nothing like our minds."

Bruce Bartlett explains how Keynes was a conservative.

What is happening to wages? Much depends on methodological choice.

Brookings: "...an increase in interest rates is not necessary to generate the decline in future national income."

"Who are the biggest exporters?"

Binyamin Applebaum talks about his new book with James Pethokoukis.

The successful continuation of tacit knowledge is another good argument against centralization.
Yet the ability to transmit visually apparent tacit knowledge at scale is quite recent.

Recent decades have seen considerable economic divergence between Democrats and Republicans.

"...productivity growth tends to be lower when interest rates fall."

For now the dollar remains dominant.

Diane Coyle highlights a great quote from Elinor Ostrom.

"...the days of entering a hospital without security clearance will soon seem as quaint as walking a family member to an airport terminal."

"In nominal terms (measured at current exchange rates), the Chinese economy is only about two-thirds the size of the US economy. In purchasing power parity terms (adjusting for differences in prices), the Chinese economy is actually larger than the US economy. That's because China has much lower prices."

"Stake out the street grid; separate public from private space; and leave room for what's to come. Then let the free market take over."

Documenting national industry concentration in services.

Allison Schrager defends economics.

In this short clip, Paul Romer explains how the importance of economic growth, is really about growth in value. Some thoughts: Quality product has yet to be distinguished from growth in terms of output versus nominal gains. Might some aspects of quality product negatively impact long term growth and productivity? How to know whether GDP gains from quality product contribute to economic dynamism? To what extent might aggregate output be the most important form of long term growth, for market representation?

When it comes to monetary policy, the size of a country matters.

The old conservatism versus the new conservatism.

"Ironically, despite the expense of owning a car, going carless in America often requires having money".

"It is the scarcity of physical objects and the potential for conflict that such scarcity creates that is at the heart of why we have private property at all." Granted, there's strong rationale to make knowledge non rival. However, imposed artificial scarcity is still an institutional response to real scarcities of place and time, for high skill time based product. Perhaps a better way to build continuum for knowledge in non rival context, is seeking out settings which greatly reduce the costs of space and time constraints.

Philadelphia as a microcosm of income variance.
"When an additional 1% of income goes to the top 20% of income earners, GDP falls. But when the same gains are made by the bottom 20%, GDP rises."

"Moving the needle" on progress.

The Constitution can't save democracy, but citizens can.

Wednesday, September 25, 2019

Potential Monetary Characteristics For Time Value

Is time value capable of assuming economic functions similar in nature to what money provides? More specifically, how could local defined equilibrium make it feasible for time value to serve as a medium of exchange, a unit of account, and also as a store of value?

Granted, time value has long been considered too variable to serve as a standard unit, especially given the extremes of individual abilities in open economies. However, in the last century there have been extensive price making claims on time value, in relation to the revenue sources it depends upon. When prior monetary claims include production rights for knowledge use, the process exacerbates already existing differences in personal aptitude. This arbitrary skills polarization only makes it more difficult for different groups to effectively coordinate time based services with one another. We need economic options which broaden services markets by restoring skills capacities in a closer range, so that modern day economies can benefit citizens regardless of income level.

Unlike tradable sector markets where the wealth representation of resource capacity is obvious, market capacity in non tradable sector activity relies on wealth claims which lack immediate reciprocity. Consequently, many present day services sector costs are actually being shifted towards future generations. Time as an economic unit of value, via symmetric alignment and coordination, could eventually resolve more services provision costs in the present. Hopefully, once time value gains monetary characteristics, it will generate non tradable sector market capacity which goes well beyond the present price making demands on general equilibrium revenue.

First, time arbitrage would play an active role. Voluntarily matched time preferences would create new supply and demand in services markets, on price taking terms. Matched time is the initial activity which allows time arbitrage to function as a local medium of exchange. Eventually, once a given group becomes established, the debt cancelling function (time purchasing time), allows time arbitrage to become monetarily and institutionally backed. Since this mutual employment process functions as a source of wealth origination, it not only creates additional resource capacity, but greater economic inclusion as well.

Time arbitrage as a unit of account, would also serve as a record keeping device with a long term storytelling component. As a unit of account, time arbitrage would not only generate a history (or continuum) for group activity, these records include pricing signals which allow mutually held priorities to function more effectively. Unit of account storytelling suggests learning opportunities which occasionally extend beyond local participants, to others who might become part of the process as well.

For time arbitrage, the store of value function may prove most useful for the benefits of recorded time insurance which accrues in one's own lifetime, rather than what goes into a recorded group continuum. A store of value option could help individuals reserve future commitments in simple skills from the group by initially providing their own. In particular, the more time one gives to those in need of assistance who presently can't reciprocate, the more one might gain assurance of the same, at a later point in life.

This is a more direct approach to coordination potential, than what is presently available in markets for time based services. All too often, insurance offerings or perhaps informal commitments from others for life needs, leave us hoping for more personal attention than what is realistically feasible. Further, many who wish to better their lives in the present, understandably set their sights higher than simple services provision for others. This reality occasionally creates trust issues for those who are mostly left with simple services options, instead of choosing them willingly. Time insurance for simple service offerings would make it easier for all concerned, to continue pursuing meaningful challenges in other aspects of life and mutual employment opportunities.

Monetary characteristics for time value, could help restore growth on terms which few can really argue against. After all, time use potential is one of the few natural resources which is clearly underutilized in modern day economies! Even if monetary framing for time value seems as though a technical approach, it still provides a key which could open an entirely new realm of possibilities, for inclusive and accessible services generation.

Friday, September 20, 2019

Markets Could "Find a Way" for Services

In a post for Econlib, "The Market Finds a Way", Scott Sumner states:
Experts often warn that we are soon going to run out of a natural resource. If so, then we might expect an increase in price which encourages conservation.
What if the impulse to conserve comes well before the price rises? Consider how markets for time value in high skill services, essentially took this approach in the 20th century. Still, even though augmented time value (which includes extensive human capital investment) can be priced at a premium, many forms of time value haven't been factored into the same general equilibrium equation. Consequently, supply side conservation of special skills capacity, may come at the expense of supply side potential for markets as a whole. Clearly, some disequilibrium circumstance is due to artificial scarcity, which may ultimately result in an incomplete market equilibrium for time value.

Presently, the resource potential of aggregate time value appears less promising than should be the case. For many individuals, the total value of their employment potential (working time hours) is insufficient to compensate the service product they may need from existing service markets. These limits in coordination capacity have meant unnecessary production losses and arbitrary supply side limits for markets as a whole. Given the growing demand for high skill services, immigration controls are now the latest prominent "conservation" efforts. As fully compensated time value becomes hoarded by the relative few, more nations are convinced that the time value of millions is insufficient to make their potential contributions worthwhile.

On the other hand, natural resource capacity other than time value is more likely to experience conservation efforts after periods of marketplace abundance and accessible pricing. Time as resource has suffered from imposed artificial scarcities to such a degree, it's difficult to contemplate the fact of its real scarcity for all concerned. Hence the confusing framing of actual resource potential for time value, makes it difficult to build dialogue for a more realistic approach to human capital and applied knowledge conservation.

Sometimes the best way to overcome the problems of market limitations - whatever their cause - is to simply create a new approach for production, altogether. In the above linked post, Scott Sumner goes on to note how aquaculture proved to be much more than a response to high prices, since it also created market solutions for the seemingly intractable problem of overfished oceans:
In many cases, however, that price increase unleashes a new and unforeseen alternative supply. Consider the fishing industry which used to rely on fish caught in the ocean.
He then highlights a graph showing that while capture production peaked in the mid-1990's, there was a considerable rise which was completely attributable to aquaculture. The difference? Capture production was slightly less than 100 m tonnes in 2015, while aquaculture increased total production for that year to approximately 175 m tonnes.

One can also imagine "fish caught in the ocean" as comparable to current service provision expectations in general equilibrium budgets. Many of these "overfished" expectations for applied knowledge are in need of a more concise, locally organized approach. Since aquaculture exemplifies a locally managed setting, it can be likened to a defined equilibrium, much the same as human capital with a potential for local development.

Like aquaculture, time arbitrage could build new resource capacity which exists independently of what the "ocean" (general equilibrium) continues to supply. And like aquaculture, time arbitrage might ensure that more human capital resources become part of the harvest. After all, when time resources are already scarce to begin with, why should aggregate time value become even more scarce due to human capital potential which is still being thrown overboard? With a little luck, markets could still find a better way for the future of services generation.

Saturday, September 14, 2019

Can Democracy be Preserved?

Are our brains not as well suited for democratic participation, as one would expect? Rick Shenkman, author of Political Animals: How Our Stone-Age Brain Gets in the Way of Smart Politics, highlights some arguments from Shawn Rosenberg, who is decidedly pessimistic about democracy's future prospects. In a speech to the International Society of Political Psychologists in Lisbon, Rosenberg insisted to the group that despite what autocratic leaders might do to undermine democracy, citizens hold the real blame. Shenkman notes Rosenberg's reasoning:
Democracy is hard work. And as society's "elites" - experts and public figures who help those around them navigate the heavy responsibilities that come with self-rule - have increasingly been sidelined, citizens have proved ill equipped cognitively and emotionally to run a well-functioning democracy. As a consequence, the center has collapsed and millions of frustrated and angst-filled voters have turned in desperation to right wing populists. 
His prediction? "In well-established democracies like the United States, democratic governance will continue its inexorable decline and will finally fail."
Presently, excessive centralization as to how knowledge gets utilized (in the U.S.), only makes it more difficult to bring the opinions of rational citizens to the table. Democracy is not so much problematic as a societal concept; but rather, because of the unevenness in its application, as special interests continue to capture means of knowledge based production. Since the reality of lost production rights has not been addressed, citizens vote instead for access to service production outcomes. Indeed, many understandably believe this to be their only option, even if it often does not make sense. Worse, the ongoing struggle for quality services access is based on supply side means which were structured as secondary markets for wealth creation.

In all of this, education has mostly been intended as a sorting mechanism for a meritocratic elite. If democracy is to be preserved, education needs to become actual engagement in the workplaces and consumption choices of a modern economy, especially in left behind communities. Yet the danger now, is that formal education is questioned regarding its true applicability for citizen majorities. These are the wrong arguments, for education needs to be transformed into economic integration at all levels of society. Losses in knowledge based production rights have proven particularly difficult for countless smaller cities and communities, since it leaves them ill positioned to take part in a 21st century economy.

We have to be careful going forward, once people in positions of power start to reason that most citizens aren't "smart" enough for democratic engagement. That's not so much a natural fact of life, as something that special interests have made more prevalent over time, in their attempts to limit the settings by which meaningful discourse and economic action take place. Such limits create perceptions of genius scarcity, not to mention an imagined scarcity of citizens deemed capable of contributing to societal well being. One's ability to take part in knowledge based work has gradually become more dependent on merit and social position. Only consider how this plays into progressive attitudes as well, as elites denigrate rural citizens who instinctively rebel at being left in powerless positions. Ultimately, preserving democracy means creating new and productive means of economic engagement, for the regions and individuals now stranded along society's periphery.

Fortunately there are still ways that authoritarian impulses might be overcome. However, the most promising approach would be for prosperous regions to actively reach out and become more supportive of regions and communities along society's periphery. New organizational patterns for applied knowledge would allow millions more to take part, in work which also happens to be conducive to the creation of responsible and thoughtful citizens. By taking a decentralized approach to new services generation, small communities would also contribute to a larger whole, by creating new wealth and economic vitality.

Democracies could be preserved, via local forms of direct democracy which align time value for the generation of new service markets. Democracies could still prove sustainable long term, should policy makers gain the courage to restore knowledge production means to the many, not just the few. Future prosperity may well depend on it. There is plenty of logic in augmenting knowledge production means, instead of constantly struggling over knowledge production outcomes.

Sunday, September 8, 2019

Many Services Need Better Market Coordination

In spite of regular reminders to improve our skill sets as we go through life; the fact remains, as Karen Weese notes in "America's Fastest Growing Jobs Don't Pay a Living Wage", that some jobs don't translate into fully compensated human capital. How to think about this paradox?

For example, a community worker discovered in one locale that women were mostly working full time with wages at approximately $24,000 a year. Alas, even though this sounds like reasonable wages to old folk like me, it's not sufficient to cover much more than basic bills in many instances. How on earth do these individuals successfully coordinate their services with those of others? And since many of these women worked as home health aides and personal care aides, they were actually seeking assistance in the form of uniforms or scrubs. Ouch, these don't cost much. I priced them at $10 at the local Dollar General after reading the above linked article, and that's when they're not on sale. Weese continues:
Over the next 10 years the occupations with the most job growth in America will not be the techy jobs that most of us think of as the jobs of the future, like, say, solar-panel technicians or software engineers. Instead, they'll be the jobs held by the women in Hyde-Miller's community center neighborhood: home health aide and personal care aide. More than one million new aides will be needed over the next decade, in addition to the 3.2 millions already in the field, the Bureau of Labor Statistics reported Wednesday. What's more, six of the 10 occupations providing the most new jobs over the next decade will pay less than $27,000 a year. That's more than 15 million people, working hard at jobs that simply don't pay the bills.
There's another problem regarding this reality which is not always taken into account. She asks: What about those who do gain the needed education to exit this kind of work, for better wages? More to the point: what if everybody did so? Who would be left to tend to those who are in need of additional assistance from others?

Like many, Karen Weese argues for higher wages for low skill work, which is understandable. Nevertheless, even when workers benefit from nominal gains, those gains are temporary. Only the real economy can create the supply side conditions which make multiple wage levels relevant. As a quick aside: Without production reforms, UBI could become a particularly thorny taxpayer burden, as its recipients find themselves in similar circumstance to today's low skill wage levels. All the more so, if UBI or perhaps government guaranteed work is implemented as means for policy makers to relieve themselves of time based service responsibilities. One can only hope, they might see to it that new service market options are in place first.

More progress can be made, by creating better services coordination and innovating our way out of the present hurdles of today's building and infrastructure requirements. A more pragmatic approach is needed - one capable of creating good deflation for a wide array of non tradable sector product and services. Only after new equilibrium is explored, would societies find it realistic to build knowledge use systems which don't fully compensate at the expected monetary levels of the present.

Fortunately, there are ways that basic skills sets can be shared with more challenging skills sets, for all concerned. Besides the normal voluntary matching of time arbitrage, time based service product could also be coordinated via local community "service taxes". Another useful approach would be time value insurance, which creates market space for individuals to "pay it forward" for those who can't reciprocate. For instance, should someone stop and do yard work for an elderly person on a hot summer day (does he really need to be out there pushing that mower?), their activity would also become part of a local public record, ensuring someone remembers to do the same for them, later on.

When we purchase insurance essentially of a social nature via money, the results are not always efficient, particularly when what we really seek is the time and attention of others. By way of example, in the U.S. we are encouraged to wait as long as possible, to tap into the insurance of Social Security. And while Social Security is primarily a matter of monetary security, the Medicare aspect of this form of social insurance, is mostly about access to the time of others when we need it most.

Here's the problem. Even though Social Security can no longer be taken at 65 without penalties, we still need to start monthly payments for Medicare at age 65, regardless. And if we don't, there's a ten percent penalty for monthly Medicare payments which grows an additional ten percent each year. How is one supposed to come out ahead by delaying their Social Security as long as possible (when they don't have other sources of income), if the previously required Medicare time frame still applies? The head scratching discrepancy between Social Security and Medicare requirements, makes all too evident the fact that money does not represent our aggregate time value as well as one might imagine.

Time arbitrage could help create markets for time value, which are more direct, representative and efficient, than what money is currently able to provide. There are ways to create better coordination, for vital and useful services of all kinds. We just need to begin the process of exploration, to discover what is possible.

Friday, September 6, 2019

Have Monetary Foundations Lost Their Relevance?

Since the Great Recession, perceptions as to the importance of monetary policy, have changed considerably. But how stable is this new reality? Indeed, what happens not if, but when a new consensus is pushed too far? Harold James gives voice to some of these concerns in the concluding paragraphs of a recent Project Syndicate article:
The new narrative that has emerged is ideal for populists. It holds that the financial crisis discredited traditional economics, and that "neoliberialism" was a dangerous illusion. The neoliberal insight that came in for the greatest criticism after the crisis was that fiscal restraint is a virtue and rewards adherents with lower interest rates, cheaper credit, and enhanced consumer spending. According to the critics, government spending is not only free, but also an unalloyed good.
In this brave new economy, no one seems to be able to say authoritatively how much debt is dangerous. But that doesn't mean there isn't some level of debt that could trigger a dramatic reversal. If depositors and investors become nervous, debt could become expensive again, making the existing debt stock unsustainable. Only then will the populist magic stop working.
Those who want to restore conventional politics and the old rules find themselves in an unenviable position. Although they do not wish for an end to prosperity, they sound like they do when standing next to populists. Nobody wants to vote for Cassandra when Pollyanna is on the ballot. By the time Cassandra's warnings are borne out, it is always already too late.
His article was also an apt reminder, how important are some elements of what has come to be called neoliberalism, for continued prosperity and economic stability. I've long hoped that new forms of wealth might be built alongside existing wealth without excess disruption of earlier patterns. Now, however, I occasionally find myself wondering whether extensive wealth might instead be lost, before societies learn to create wealth via new and sustainable means.

Instead of disregarding the vital connections of monetary representation with prosperity, a broader understanding is needed for how monetary processes correlate with aggregate output and real economy conditions. Without sufficient focus on these quantitative aspects, central bankers sometimes protest that monetary policy can't be expected to accomplish everything. Which only leads to a further disregard of the quantitative nature of money, and what monetary policy can accomplish. Nevertheless, fiscal policy simply can't do the heavy lifting. Only real economy adjustments and accurate nominal representation will suffice for long term growth prospects and continued prosperity. It is becoming more important by the day, to explore how monetary connections relate to ongoing changes in aggregate output and real economy circumstance.

In all likelihood, I probably come across as one the Cassandras referenced in the above article. Alas, why continually remind people about accumulating debt burdens? Or the fact future wages can't rise to the extent enjoyed in an era of tradable sector dominance, with its ever expanding output? Or that traditional housing and infrastructure is beyond reach of many near future incomes?  Who wants to be told that important and useful services could be in jeopardy for millions, once governmental budgetary burdens get out of control?

Nevertheless, I emphasize these things because I believe they can be productively addressed in the long run - even if the short run mostly holds out hope of decentralized experimentation in new community. A few years earlier, I realized it felt important to stress some of what could be done, before going more fully into the whys of what happened in the first place. Hence the real "Cassandra" portion of my story, otherwise known as book two, became sandwiched between segments of potential responses. Once I complete the first portion of the book project (for the blog sidebar), which - not surprisingly - is a little behind schedule, I anticipate a return to concentrating on the whys of this economic dilemma. With a little luck I can get there before the end of this year.

Saturday, August 31, 2019

Wrap Up for August 2019

Among other things, "A gold standard would make deficit spending much more expensive."
Miles Kimball responds to Politico.

How did Hayek come to write The Road to Serfdom? Bruce Caldwell provides historical context which is also timed with the 75th anniversary of this well known book. Caldwell notes that "After Road, the burden is on those who argue for socialism to say exactly what they mean by the term, how it would work, and why it is not susceptible to the problems Hayek identified."

Do increasing markups matter?

Is there a market for neighborhoods?

1931 was an important year for the German banking crisis.

The best way to think about low interest rates is as an outcome, not a tool.
Furthermore, negative rates are a bad outcome.

Summer teen employment has gradually been drifting downward.

Noah Smith considers the Baumol effect.

States aren't the only problem, when it comes to authoritarianism. "The conceit is that we have little to learn from ordinary people and the adaptations they have developed within different social contexts."

"Having easy access to a large number of trading partners is an important determinant of where economic activity is located."

It turns out that self checkout encourages shoplifting.

The Milken Institute reviews "Priced Out", Uwe Reinhardt's last book.

Scott Alexander reviews Secular Cycles.

A new contract of "honesty, openness and willingness to accept responsibility."

What do we even mean by progress? The fact everyone has different answers, suggests a more decentralized and exploratory approach.

A switch to "free" higher education would mean other changes as well.

Stephen Gordon provides some thought provoking graphs on changes in real wages.

Alfred Marshall on the socialists of his time.

More gold standard discussions:
John Cochrane explains why the idea of reviving a gold standard is misguided.
George Selgin weighs in.
And from Frances Coppola (2013)

As Hayek emphasized sometimes change is uncomfortable. Embrace it anyway.

Giles Wilkes recently started blogging again, here he suggests it's time for macro economics to become political once more.

An account of Hayek's The Constitution of Liberty.

It turns out Starbucks customers are providing their company with free debt.

Much of the dollar's strength is due to the U.S. financial role in the global financial system.
Frances Coppola also notes the high price of dollar safety.

"The Atlas of Economic Complexity"

Peter Boetkke explains how Applebaum's NYT article blaming economists actually aims at the wrong target. Boetkke also includes a link to an article from Gregory Mankiw, "The Macroeconomist as Scientist and Engineer", written prior to the Great Recession.

Do "utility monsters" distort redistribution incentives? I would add that utility has more meaning with a non discretionary framework as a starting point.

A review of Kenneth Arrow's most important work.

Some writing tips.

Platforms can - and do - implode.

Superintelligence no longer has the public facing discussions which existed a decade earlier. How has it fared?

"It is often argued that the U.S. could cut its trade deficit by restricting imports and increasing exports. But this would seriously restrict dollar liquidity in the world."
Also, The global economy still depends on government debt - particularly that of the U.S. - as a source of safe assets.

Utah has approved a pilot for non-traditional legal services.

Scott Sumner explains some connections between trade wars, monetary policy and the business cycle.

Monday, August 26, 2019

Is Growth Necessary For a Successful Economy?

Is growth actually the best way to measure economic success? Dietrich Vollrath says it doesn't have to be so, and explains why in Fully Grown: Why a Stagnant Economy is a Sign of Success, which is due out in January. From the University of Chicago Press review:
Our powerful economy has already supplied so much of the necessary stuff of modern life, brought us so much comfort, security, and luxury that we have turned to new forms of production and consumption that increase our well being but do not contribute to growth in GDP. 
Tyler Cowen also highlights a text excerpt which gets into some of the specifics of Vollrath's argument:
Although there were plenty of changes in the individual markups firms charge, many of them actually fell over the last twenty years. What explained the overall rise in markups from 1.18 to 1.67 was that spending shifted away from firms with low markups and toward firms with high markups. Which high markup firms did we shift our spending to? Well, a lot of service firms, including those involved in communications, technology, health care, and education. In short, the rise in economic profits and markups we see at the aggregate level is part of the overall shift toward services we discussed a few chapters ago.
Here is where things get a little weirder. Baqaee and Farhi show that the shift toward high-markup firms was good for productivity growth. Whatever the source of a high markup, it indicates a product that is very valuable relative to its marginal cost. If we take the inputs required to produce a low-markup product and use them to instead produce a high-markup product, then we have raised the value of what we produce. As this increase in value came from reallocating our existing inputs toward a different use, rather than from accumulating new physical or human capital, the shift in spending toward high-markup firms shows up as an increase in productivity growth.
Nevertheless, we still need to consider the fact additional growth remains desirable at a global level. For that matter, nations with advanced economies continue to seek local growth, particularly since many citizens and communities lack full participation in a 21st century knowledge based economy. Only consider these realities in utilitarian terms. Have we already created the greatest good for the greatest number, before making luxury the default option for economic goal setting?

If citizen and community majorities were already engaging with sustainable infrastructure; assets and services in the form of luxury product would be aggregate gains. But there's a problem. We still have insufficient market capacity for simpler and more basic forms of non discretionary options. Meanwhile, citizens and communities continue to add on debt to sustain luxury versions of infrastructure and services which are actually out of their reach. In other words, the market has yet to create the greatest good for the greatest number at basic levels of need, as opposed to the wants of discretionary choice. Yet no institutions - at least to my knowledge - are yet addressing this supply side reality directly. Which could help explain why some policy makers are likely to continue seeking higher growth levels in aggregate, whether or not economists believe it necessary to do so.

As to Vollrath's arguments, if sufficient basic non discretionary options were in fact available for low income levels, his conclusion might be essentially correct. Today's low growth economy would be reasonable, if citizens and communities were already proceeding from a financially sustainable base - one that doesn't need a growing revenue stream so as to pay down debt. However, there are problems with luxury consumption when it cancels out basic infrastructure, asset and service formation for low income levels, especially during times of great income variance such as the present. And today's non tradable sector institutions lack the incentives to ensure that lower income levels gain basic economic options by which they could live relatively normal lives.

Again, luxury consumption as a broader component of GDP is likely positive, so long as more basic forms of consumption are not suppressed. When they are, as is currently the case, societies take on additional budgetary burdens which are not easy to resolve, long term. Even though lower income levels have benefited from the real wage gains of additional output in recent centuries, much of their real wage gains are a direct result of the good deflation of countless forms of tradable sector product. Let's not forget the benefits of good deflation, and its role in economic stability over time. We still need good deflation as a contributor to many local settings and communities, so these citizens can hope to lead productive lives well into the future. More output with less cost is central to economic prosperity. Good deflation is the best way to address the extreme income variance in society which will doubtless continue.

New creation of non tradable sector good deflation is imperative, given our historical moment of relative wage stagnation which leaves supply side means as the main recourse to improve the real wage capacity of lower income levels. Only recall as well that a predominance of luxury options in product which does not scale, reduces market capacity in areas which do scale. The resulting imbalance bears considerable responsibility for wage flattening, since service sector activity generates less output in relation to tradable sector output.

In short, more good deflation is needed in areas which remain exclusively devoted to luxury. Let's create valid supply side options to ensure that those with small wages can live normal and productive lives. Should we elect to do so, policy makers might not view higher monetary GDP levels or excessive fiscal policies as the sole options for economic gains in the near future.