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.