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.

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.

How Beneficial Is Self Interest?

Without a healthy dose of self interest, most of us would be hard pressed to gain the respect of others or maintain a strong sense of identity. Even so, self interest is one of those areas in life where balance does matter. How to know, when self interest goes too far?

Adam Smith is often recalled, as someone who promoted self interest as important for its civilizing effects on society and contribution to economic dynamism. Indeed, Smith's advocacy in this regard could help explain why self interest is often attributed to modern day capitalism. Nevertheless, self interest is too basic an element in human behavior, to assume it is somehow responsible for either capitalism or other ideological patterns.

Pierre Lemieux,  in"Self-Interest and Capitalism are Not Synonymous", stresses this reality as well. Nevertheless, some have used their support of capitalism as an excuse to impose their own self interest on others to an excessive degree. Again, recall that markets have the greatest capacity to generate civility, when individual self interest is tempered by the self interest of others via ongoing processes of negotiation. Regular readers may recall I've noted losses of civility in non tradable sector services, where personal negotiation is generally lacking for the presentation and experience of time based product. Here's Lemieux:

The superiority of free markets is that they efficiently reconcile the personal interests of the different individuals in society. Efficiency means that free markets lead each individual to serve his fellow humans while pursuing his own self-interest and this in a way that promotes general prosperity. In a socialist or crony-capitalist context, economic interactions become a zero-sum game.

Economic interactions can also become a zero-sum game when taxpayers foot the bill for extensive amounts of time based product, yet millions remain unable to benefit in any meaningful capacity from what these applied knowledge subsidies provide. Alas, these subsidies are more likely to reduce supply side capacity, instead of strengthening it. Lemieux concludes:

Evaluating public policy in a classical liberal or libertarian perspective amounts to asking not whether it furthers my interests or yours instead, but to which extent it allows free markets and their supporting institutions to work; to which extent it allows people to trade according to their own reciprocal interests; or, in certain cases, to which extent such policy emulates the workings of free markets:

Excessive self interest on the part of both public and private enterprise, has contributed to social and political circumstance where life feels more harsh than usual. Let's make more room for free markets which extend to time based services, so that each individual has a greater chance of equal participation with others in the workplaces of the 21st century.

Time Arbitrage Would Include Utilitarian Benefits

Are utilitarian outcomes a helpful way to think about time arbitrage potential? After all, it's no simple matter to decipher what might generate the greatest good for the greatest number, given the complex circumstance of modern day economies. Not only have individual interests diverged even in (relatively) single cultures, income levels are now subject to extreme variance as well. These societal differences make representative democracies difficult to maintain, when different groups end up competing for the limited options of government revenue. This is especially a concern, when it comes to already existing supply side limits for time based product.

Time arbitrage could ultimately reduce some of the pressure, by created decentralized markets for services which would not have to rely on government revenue. In local markets for time value, better alignment of common interests could also encourage a greater degree of services coordination. The result? More market induced supply and demand for all participants, would generate the greatest amount of mutually desired activity for the greatest number. In other words, a utilitarian outcome which is otherwise difficult to achieve, especially in centralized economies such as the U.S. with populations in the hundreds of millions.

Mutual time management - that which creates space for individual priorities - could gradually help reduce the market losses which accrue to aggregate time value in centralized settings. When merit requires costly human capital investments just to get things done, the resulting skills arbitrage tends to cancel out the service market potential which millions of individuals could otherwise contribute. Indeed, when the time of individuals is mostly perceived as a cost, instead of a component of wealth building potential, people who inadvertently end up on the sidelines are often perceived as having zero marginal productivity potential. This is hardly an optimal result!

Skills arbitrage also became a problem from a utilitarian standpoint, by positioning "advantaged" human capital for time based product so as to create tyrannies of minorities over majorities. In the process, the resulting supply side limits has led to employment uncertainties which have proven difficult for both monetary policy or fiscal policy to address.

One of the most positive aspects of free markets, is when they can provide what also translates into the greatest good for the greatest number. This extensive contribution to utilitarian outcomes, should be ample proof, how non tradable sector activity could also benefit from a similar free market approach - one which allows time value a more complete economic role. All the more so, since free markets have often proven a simpler utilitarian approach, than countless policy efforts which tend to miss the mark in terms of utilitarian policy outcomes.

There is no reason, why the market potential of aggregate time value should have to remain so compromised. By creating reciprocal wealth at the outset, individuals can increase the dynamism of service markets which in turn could extend to millions more citizens than is presently feasible. Even though the greatest good for the greatest number is important as ever, it is no longer a simple matter for governments to achieve utilitarian outcomes on their own. By creating the greatest economic activity possible for the greatest number, time arbitrage could embrace utilitarian principles without necessitating additional taxation burdens.

Dynamic Economies Need Ordinary People

We need more economic participation and inclusion for those with average abilities, not less. "Average is over" is not an optimal equilibrium setting! When supply and demand takes ordinary human wants and capacities into account, societies are more likely to prosper in sustainable ways. Societies always have a chance of doing well, if they embrace more than just the contributions of only the best and the brightest. Every city and community needs the chance to remain an active part of economic dynamism.

For as long as anyone could remember, tradable sector activity made ample space for the average citizen to participate. Indeed, the mass manufacture of tradable sector dominance must have felt more inclusive for many citizens, than does the dominance of today's non tradable sector activity. For one, tradable sector employment did not require the same extensive credentials which came to be expected in non tradable sector roles. Is it still feasible to recapture the economic inclusion that encouraged communities of all sizes and abilities, to participate?

Meanwhile, experts in every prosperous region, live lives increasingly distanced from those of the average individual. Some of these even lament how America has lost faith in expertise! Nevertheless: If the economy has become "too complex" for ordinary citizens to even take part, is that really rational? Only consider how long tradable sector activity made production simple enough for average individuals to contribute in the workplace. And - at least until relatively recently - tradable sectors were willing to build products that made life simpler for consumers and producers alike.

Non tradable sector activity will need to take simpler production approaches, if future citizens are to be enriched by the knowledge and skills potential of the present. Average citizens in every town need to be actively involved in production and supply side potential. No community can expect to flourish, if its inhabitants are limited to consumer roles, or else employee roles in enterprises designed to maintain the shield between the elite and everyone else.

It would be a mistake to take progress and prosperity for granted, should ordinary people remain excluded from the processes which make them possible. Daron Acemogul recently expressed this quite well:

Recent innovations have vastly increased productivity in manufacturing, improved communication, and enriched the lives of billions of people. But they could easily devolve into a high-modernist fiasco. 

Frontier technologies such as AI, Big Data and IoT are often presented as panaceas for optimizing work, recreation, communication, and healthcare. The conceit is that we have little to learn from ordinary people and the adaptations they have developed within different social context. 

The problem is that an unconditional belief that "AI can do everything better" to take one example, creates a power imbalance between those developing AI technologies and those whose lives will be transformed by them.

One danger we face (among many), is should elites elect to isolate AI so it can't contribute to the potential of individuals and communities everywhere, they may succeed. However: That success may come with a long succession of autocratic rulers who are willing to enforce the power of the elite over ordinary people, in part because of the rewards the elite would provide their governments in return. Let's ensure this does not happen. Let's make certain that technology and applied knowledge will become shared in ways which give meaning, and real purpose, to the lives of ordinary people and their communities.

Does Applied Knowledge Have a Sustainable Future?

When does applied knowledge start to take on extractive characteristics? How many will still be able to participate in the important challenges of our time, in the decades ahead, via full levels of monetary compensation? For once service sector activity dominates national revenue even further, applied knowledge - as an extractive process - will likely face systematic limits.

Why hasn't there been more concern, given how equilibrium imbalance affects both original wealth sources and their dependent markets? Alas, we can't directly observe, when common pools of public revenue potential are subjected to too many takers and competing activities. Further, no one knows when hard limits to public subsidies for applied knowledge, may actually go into effect.

In the meantime, who has incentive to reduce the price making which has come to dominate so much economic activity in general? Those earlier concerns which both Republicans and Democrats in the U.S. once held regarding budgetary deficits, have largely vanished. Yet nothing productive has transpired in fiscal policy which justifies that lack of concern. In all of this, price making has become the preferred option for individuals and institutions alike, to get things done. Even so, at the level of general equilibrium, public revenue is like oceans becoming overfished, once price making becomes the standard for economic engagement.

Whereas in tradable sector activity, resource limits are generally more obvious. Perhaps this explains why physical extraction catches a lot more heat, than revenue subsidy extraction. For tradable sector activity, sustainability is often expressed as what the earth appears capable of. Yet we completely lack any moral equivalent, in terms of what societies expect long term of their pooled revenue sources. Just the same, postponed debt obligations could well prove as problematic for future generations, as extractive behaviours which negatively impact physical environments.

Granted, extractive processes are vital as important sources of wealth origination. After all, they create a myriad of economic possibilities which otherwise would not be feasible, due to the extensive scale which is sometimes required. What matters, however, is the pace at which extraction occurs and is managed. When does extraction preserve wealth, and when does wealth end up destroyed in the process?

By way of example, Nameless Towns provides a history of the no holds barred extraction approach, which was earlier taken by sawmill companies in East Texas. Even though local pine forests were finally replenished afterward, those beautiful and ancient old growth forests were completely logged out, first. The entire area suffered greatly afterward, while many temporary communities simply disappeared. Thad Sitton and James Conrad explain:

Most companies saw no alternative to a policy of cut out and get out. Since the Southern lumber boom had begun during the 1870s, companies had bought stumpage rights to blocks of timberland along the new railroads, built mills and tramway systems, and cut their virgin pine groves as fast and efficiently as they could. Buying land made no sense to most companies, since regeneration of pines on cut-over land seemed a dubious possibility, and in any case the next marketable crop of marketable saw timber remained at least a third of a century away. And that would be three and a half decades of paying for land, paying for taxes on land, paying for more careful logging to protect the seedlings, paying for thinning the hardwoods so the pines would not lose the competition for sunlight - money spent with no return and no assurance that the person setting the policy would ever live to see the trees turned into profit...

Far better to keep operations clean and simple, most lumbermen believed - to buy stumpage, build temporary towns, cut out, and move on. Besides, the cheap lumber prices of competitors following these policies discouraged other companies' experiments with land ownership, "selective harvesting" and "silviculture", as did the Southern traditions of the "open range" which allowed landowners only limited control of their own lands. Northern lumberman had discovered to their consternation soon after locating to East Texas that Southern customs gave anyone the right to trespass, hunt, fish, and run stock on the lands of anyone else...When pressed, local courts often supported these informal usufruct rights.

So why compare government fiscal realities to an extractive story such as this? Present day national fiscal capacity has made possible the use of a vast store of high quality knowledge. But what could happen to this wealth and immeasurable value, should it face too many demands and too few sources of willing replenishment? Replenishment depends on time value for resource maintenance - maintenance which by its nature lacks full monetary compensation, as illustrated above. Replenishment requires forms of immediate reciprocity which society as a whole, may lack the patience to provide. Who is willing to work for small wages unless they have absolutely no choice? Would such patience only emerge, if and when it were completely necessary, once a high volume extraction system for knowledge can no longer be maintained? Only consider the propensity of current political parties to spend as much as possible, so long as they are the ones in control of the public purse.

It can be difficult to contemplate solutions for long term fiscal sustainability, once everyone gets caught in the struggle over access to the public revenue commons. How would governments and private interests alike proceed, should their public commons disappear? Hopefully, greater patience for reciprocity and long term sustainability can be found, before these reserves dwindle even further.

Musings on Food Deserts, Company Stores, and More

Where retail is concerned, often cities and communities may appear to have either too many or too few local options. What makes it so difficult to coordinate supply and demand that everyone can be happy with? In particular, the U.S. supposedly has too much retail, hence the ongoing death of numerous apparently unneeded malls. But what if the real problem isn't actually too much retail?  Chances are, much comes down to how proprietors are expected to offer their goods. Perhaps the bigger issue is retail offerings in communities lacking sufficient density (during working hours especially) for extensive infrastructure investment. Why do cities and towns make such investments necessary anyway? Especially since we're only human, and consumer tastes can change before brick and mortar stores outlive their intrinsic usefulness.

Many a community has questionable "build it and they will come" examples. Some of these enterprises even manage to remain open despite mostly empty parking lots, as potential customers continue to drive where more shopping amenities can be readily found in one place. Some of the biggest business risks in fixed locations with traditional overhead costs, are for perishable commodities. Often, the only way to stay profitable is to eliminate perishable inventory altogether.

Of course, following this limited waste rule to maintain profits and stay in business, has plenty of detractors in the media. By way of example, one hears complaints about "food deserts", especially when the "wrong stores" come to town, such as Dollar Generals which are reputed to prevent regular grocery stores from opening in the same vicinity.

There's a Dollar General in close walking distance from where I live, yet the fact it sits adjacent to the local grocery isn't unusual. I made my peace with the fact Dollar General couldn't make special orders, several years ago. The fact they don't, probably helps to explain how they can stay open in towns with a limited customer base. I'm just glad for the merchandise they do carry, which saves so many trips out of my small hometown. Meanwhile, the local grocery does its level best to stock as much fresh produce as possible, in spite of the fact many potential customers make the drive elsewhere to larger towns. It's discouraging to think how much fresh produce must go to waste! As a former business owner, I remember all too well, wanting to carry more perishables than could realistically be sold locally. If only the individuals who complain about Dollar Generals and food deserts could know what is actually at stake.

What about produce markets and flea markets for fresh products? For a long time this was a viable option for self employment. Decades earlier, one could find flea markets wherever they happened to travel. Indeed I would have gone back to flea market selling were it possible, once rising rents got to a point brick and mortar locations were finally out of reach. Some of what is involved for the future financial security of millions, is simply overcoming the lifestyle illusion which tries to mandate everyone living as though they can afford a standard middle class lifestyle.

One historical consumer complaint could hardly seem more different than food deserts: Mandated local shopping! Many of us of a certain age recall Tennessee Ford singing "Saint Peter don't you call me cause I can't go. I owe my soul to the company store." The company towns of a century or so earlier, often ruled over their citizens like small authoritarian governments. At the very least, these were small decentralized versions of authoritarianism not overly difficult to exit. Many a restless or otherwise "fed up" local could vote with their feet to leave, and frequently did. The ones who willingly stayed, were often happy with the local abundance of the company store.

Nameless Towns is a historical sketch of Texas sawmill communities as company towns, from 1880 to 1942. I really enjoyed this book, in part because it took me back in time to places my family came from. Two grandparents lived and worked in Nacogdoches, near the edge of what was once a vast and ancient longleaf pine forest. Company towns finally cut down the last of these majestic trees in the early forties and then disbanded. Another of my grandparents worked as a sharecropper in these thinly settled regions, and I have little doubt he would have been too independent minded for the hierarchical demands of company towns! Although that likely didn't stop him from selling a little moonshine (along with fresh garden produce) to their inhabitants from time to time, even during Prohibition.

What determined the extent of company operations in these deep woods? Thad Sitton and James Conrad explain:

The number and importance of private businesses in company sawmill towns seem quite variable, and this matter probably relates to critical decisions companies made at the origins of their towns. Very occasionally, companies like Lufkin-Land (later Long-Bell), Angelina County Lumber, and Thompson-Tucker chose to set up operations immediately adjacent to major market towns, such as Lufkin and Trinity. In these cases, private businesses lay just beyond the sawmill-town perimeters from the beginning, and there was nothing the companies could do about them except offer full-service towns, including commissaries, drugstores, schools, and boardinghouses, and pay only in merchandise checks. However, the merchandise check and company social pressure to trade at the commissary often did a remarkable job of keeping employees on the reservation, especially in the early days. Around 1910, for example, a Lufkin resident recalled that downtown merchants in the county-seat town catered mainly to the cotton-farming trade despite the presence of two 100,000-board-feet-a-day mill operations immediately adjacent to the municipality. Company economic policies effectively insulated workers from the nearby "cotton town". 

Much more commonly, however, companies bought land and set up new towns in the remote countryside close to their timber holdings, and in this case they had the option of keeping all land in company ownership and leasing it out to private businesses on a case-by-case basis, or of selling off big blocks of property in their towns to whomever paid the price. 

By the time the petroleum company town of my youth set up camp for its resident workers, the work of logging company towns was almost done. Newer versions of company towns, once many families purchased automobiles and traveled more widely, were certainly far less hierarchical. For instance my mother recalled that while engineers did live in a separate row of houses, they were built the same as any other camp houses. There was one commonality with the earlier company towns, however. These neighbors still spent their days socializing with one another, and like the children of the sawmill towns, children in the latter version had the same freedom as well, to roam about the entire neighborhood as they desired.

Once most families gained access to reliable transportation, company towns and their associated stores became a thing of the past. Initially in the fifties and sixties, local Main Street retail was prosperous in towns of all sizes. But by the time families were able to purchase two vehicles, consequently working too far from home to shop locally during the day, these Main Streets began to decline. In a sense, Main Street became the first retail deserts of our time. What might we expect in the near future, as the process reverses and families own fewer vehicles, in particular outside today's prosperous regions? How far in a different direction, might small communities go from the well to do cities of the present? Right now it is anyone's guess.

Service Sectors and the Subsistence Factor

Even in a modern day economy, time based services still involve forms of scarcity subsistence which have macroeconomic effects. No matter the level of skill involved, when economic time value is the main component of final product, it lacks productivity in the sense of full augmentation via physical capital and technology. When providers of time based product generate revenue, if their organizational capacity is expressed as high cost quality environs, the lack of traditional output scale means taxpayers and many others will shoulder the revenue shortfalls. This lack of full resource reciprocity at the outset, has already created future generational burdens.

These long term societal obligations only become more evident, if and when any nation's GDP revenue is dominated by service sector activity. Since high skill services also require local tradable sector wealth in the same environs, it has become more difficult to utilize and disperse valuable knowledge in any place which lacks sufficient tradable sector wealth.

However, these organizational limits for well compensated time based product are partially obscured, given the productive economic complexity of prosperous nations. Not only have knowledge providers benefited from the ability of these nations to utilize national debt for services generation, but also the Baumol effect which accrues to these same prosperous regions -  particularly the wealth spillovers of local tradable sector activity.

Once service sector activity dominates GDP revenue for extended periods, the lack of further market potential on similar terms, starts to become evident. The reason this matters is twofold: not only are service markets far from saturated, what high skill services do exist are creating uncertainties regarding future consumption at all income levels. Closely held knowledge use rights impose limits on productive agglomeration as a whole, as has become increasingly evident in rising real estate values.

Time based product needs to break free of its present dependent market status, in order to become a more direct source of wealth creation. Otherwise the scarcity of high skill time based product can only be augmented in value by extensive human capital investment. Yet this approach is proving too costly, for the knowledge which can still be dispersed for the gain of any society. Time is the best source of human capital investment we have. As such, not only does it need a stronger organizational role, but also a valid economic designation. Otherwise, it will remain difficult to generate the internal reciprocity which time based services could utilize as a source of wealth creation.

Likewise, the revenue limits of dependent service sector markets are responsible for the fact that today's productive agglomeration is increasingly situated in limited regions. Ken Rogoff expresses concerns re these limits in a Project Syndicate article about the rise of megacities. Part of what interested me about his article was a reference to the Lewis development curve in his Project Syndicate article. A Wikipedia article further explains the model:

The dual-sector model is a model in development economics. It is commonly known as the Lewis model after its inventor W. Arthur Lewis. It explains the growth of a developing economy in terms of a labour transition between the two sectors, the capitalist sector and the subsistence sector. 

While the Lewis dual-sector model was representative of historical mid fifties circumstance, some things haven't changed. Time based product, even with extensive human capital investment, faces scarcity restraints which affect the output potential of all nations, whatever their level of economic complexity happens to be. The best way to make time value really count, is to contribute as much skill potential to marketplace capacity as is humanly possible, without resorting to either redistribution or debt to do so.

The labour abundance which Arthur Lewis previously observed, has reemerged albeit in different form. Previously, tradable sector wealth meant that more time value could be augmented with the real wage gains of scale via manufactured product. Yet today, labour abundance has developed in a global capacity, as the labour of all nations is now correlated with tradable sector activity as a less dominant part of GDP revenue. When tradable sector activity requires smaller pools of labour, services are the obvious option. That said, if nations don't take care to generate scale in terms of human potential and aggregate knowledge gains, the subsistence factor of services could ultimately become as much a problem at high levels of skill, as it has posed for lower skill levels all along.