Inclusive Economies Can't Be Built on Exclusive Pricing

What goes into the creation of a more inclusive economy? For one, there's plenty of additional participation whenever economies are in processes of expansion. While employment tends to be the main focus, expanding economies also correlate with provision of goods in an affordability range for most consumers. Given its association with oft affordable product, tradable sector activity is more beneficial of late (thus far) for greater inclusiveness, than non tradable sector activity. Yet it's probably the growth factor which helps to explain why - upon looking up inclusive economies - I was redirected to a brief explanation for inclusive growth from Wikipedia:

Inclusive growth is a concept that advances equitable opportunities for economic participants during economic growth with benefits incurred by every section of society. This concept expands upon traditional growth models to include focus on the equity of health, human capital, environmental quality, social protection and food security.

Sustainable economic growth requires inclusive growth...an emphasis on inclusiveness - especially equality of opportunity in terms of access to markets, resources, and an unbiased regulatory environment - is an essential part of successful growth. The inclusive growth approach takes a longer-term perspective, as the focus is on productive employment as a means of increasing the incomes of poor and excluded groups and raising their standards of living. 

Much of this is relevant. Where the problem lies, however, is that we are frequently encouraged to conceptualize economic access as mostly feasible through higher wages. Alas, the conditions of general equilibrium tell the story: Say everyone wants and gets a higher wage than they had before. What has really changed? Or, should the cycle of higher wages stop before each group gets on board, how do we frame the moral story of deserving groups which didn't make the cut?

For instance, the local news has been carrying a story of a fire department which demanded wages equal to those of the police department, but the city mayor (a Democrat) resisted. The measure was finally voted through just the same. Now, there's an uproar, as some of the fire department employees will have to give up their jobs to smooth out the consequent revenue problem. In all this, the push for higher wages didn't cause the city's budget to miraculously expand. Likewise, when higher wages are demanded in private sector firms, sometimes the money is there, and sometimes it is not.

Even if we could wave a magic wand so every deserving person, association, or group gets a better wage, it is doubtful this approach can make it simpler for everyone to more effectively coordinate their time based mutual obligations. As it turns out, this is a relatively new economic problem. The uncertainty these circumstance have caused is already making our political environments more fragile, in part because we lack the ability to use our time priorities as a fulcrum at a formal economic level.

Think about it. What we are actually trying to accomplish via time coordination with money as the only applicable fulcrum, is actually quite new, historically. For centuries money has functioned reasonably well in this role. After all, most time based services occurred on the sidelines in ways almost incidental to the revenue flows of general equilibrium, even though some acknowledged a "circular flow" between industrial production and services. For the most part, tradable sectors not only determined divisions of labour, but also the output which defined a mostly commodity based general equilibrium. However, once service sectors began to dominate economic activity and more citizens were brought into the formal economy; despite the recent introduction of fiat money, the Baumol effect is slowly making money less effective as the sole fulcrum between tradable and non tradable sector activity.

When I suggest symmetric time as a way to coordinate time based services, it's not because everyone's time value becomes "equal". In time arbitrage, since everyone would be free to choose who they wish to work with, the challenge is to make one's own time value (and skill sets) desirable to others, so as to make up for one's own time scarcity as much as possible. Doing so, makes it much more likely that - for those willing to put in the effort - it's feasible to maintain sufficient access to a wide array of time arbitrage options.

In other words, instead of functioning as an "equal" wage, symmetric time arbitrage makes it possible for most participants in a continuum group setting, to set up and clear mutual obligations in real time. Eventually, we will need to let go of the seemingly never ending struggle over nominal wages, so as to improve the effectiveness of real wages via production reform in non tradable sector activity. Perhaps we'll know we've arrived, should economic expansions become directly correlated with more inclusive pricing in non tradable sector activity, such as completely new options in home ownership.

A recent Brookings post also brought a new institute to my attention this morning. The "Opportunity and Inclusive Growth Institute" is associated with the Minneapolis Fed. I was encouraged to note they already have scholars working on employment possibilities for the formerly incarcerated - one of the few areas where there is still political agreement for greater inclusion, on the part of both Democrats and Republicans.

While putting this post together I also came across a recent book from Michael Tanner, The Inclusive Economy: How to Bring Wealth to America's Poor. From the Cato review:

Rather than engaging in yet another debate over which government programs should be increased or decreased by billions of dollars, Tanner calls for an end to policies that have continued to push people into poverty. Combining social justice with limited government, his plan includes reforming the criminal justice system and curtailing the War on Drugs, bringing down the cost of housing, reforming education to give more controls and choice to parents, and making it easier to bank, save, borrow and invest.

How to think about these useful suggestions? Perhaps the bad news, at least from a libertarian standpoint, is that no one can realistically expect limited government, anytime soon. For that matter, both political parties are seemingly consumed with taking control over governmental budgets and maximizing political spending to the fullest extent possible. At the very least, from the standpoint of bridge building between parties, positive reforms of the criminal justice system could be on the horizon, and the War on Drugs might finally be over soon. As for parents having more control over educational decisions, what really matters is that students are given more chances to take better control over their destinies from a young age. Perhaps this could also be approached in ways which reduce the fight over public versus private schooling.

The main problem we now face, is that what's rational for non tradable sector bottom lines in terms of exclusive product definitions, has been slowly - but surely - increasing the carrying costs of our markets, workplaces and personal lives across the entire economic spectrum. The best way to bring back a full level of economic participation and marketplace access, is to create more flexible settings for our mutual time priorities and physical infrastructure.

Doing so, would allow both for profit and not for profit endeavour to contemplate their own possibilities for sustainability - because of lower operational costs. What is sustainability, if not our own logical wish to survive in the world, however we happen to define ourselves? When it costs less to tend to the fabric of our lives, we all get the chance to breathe easier, and find renewed energy to meet our responsibilities and obligations. Again, when it comes to nominal approximations, what if we've been going about this "inclusive economy" process the wrong way?