Wrap Up for November 2019

Once a minimum wage has been raised, it is no simple feat to bring old jobs back.

Do low interest rates impact productivity growth?

Why do people treat countries as if they were anecdotes?

Perhaps the future of transportation is rethinking the places we wish to connect.

Hardly anyone is willing to seriously address the explosion in federal spending.

A major part of today's inequality is actually due to wide variance between companies, and the extent to whether they rely on intangibles. Plus intangible assets are not well suited for debt finance and traditional investment.

It's very unlikely the entire Internet would just stop. But what if it did?

What is given up when deep organizations become more flexible?

"The Global Equilibrium Real Interest Rate: Concepts, Estimates and Challenges"

"Now that the US is no longer the world's undisputed technology leader, US President Donald Trump and his advisers don't want to compete according to a rules-based system. Their goal is to contain China's technological rise." Even if doing so sets back an early 5G rollout in low income countries.

The biggest problem for rural police departments is a lack of qualified officers, especially considering the pay disparity with larger cities.

Alas, and sadly, this was explained to me by members of extended family nearly forty years earlier.

"Decades before environmental organizations and governments encouraged reuse, recycling, and circular economies, the wiping-rag industry had mastered the art."

Tim Harford notes the importance of the weakest link theory.

Success regarding job retraining for mature adults in the U.S. has been mixed.

Gregory Mankiw explains why he is now voting as an independent.

It seems David Graeber has written the most contentious economics article of the year. Both Noah Smith and Scott Sumner respond.

While substitution has its limits, a wealthy country has more economic options, when a diverse range of commodities and goods means that many of them consequently gain luxury status.

When tax forfeiture goes too far.

Workplace certificates might also position college students to more successfully complete their degrees.

David Beckworth and Binyamin Appelbaum discuss The Economists' Hour: False Profits, Free Markets and the Fractured Society.

Pessimism is more of a problem for capitalism, than for socialism.

Has the world gone mad? Cullen Roche provides some clarification.

"...workers with graduate or professional degrees will be almost four times as exposed to AI as workers with just a high school degree."
Their report also breaks down the exposure of different areas of employment to AI.

In what context is money mostly just a medium of exchange?

The natural rate of employment is not a straightforward concept.

Agnes Callard explains that no one is entitled to gratitude, remembrance or appreciation:

Write something worth reading. Put your ideas out there and hope that someone will make something of them. Give with an open hand and stop thinking about the tokens with which you will be repaid. Be happy to be worth stealing from. The future owes you nothing.

Completed suicides are rare, which helps explain why they are so vividly remembered by those who try to help.

Gregory Mankiw also suggests it's not a good idea to punish the frugal with additional taxation that the spendthrift is able to avoid.

Arnold Kling notes that new methods of classification are needed for an increasingly intangible economy.

Why are mandatory eye exams necessary?

Perhaps decades will pass before AI can really transform the economy.

Might MMT reasoning become an inevitable budgetary result? A CNBC article highlights a recent paper from the Federal Reserve of St. Louis, re national debt.

What's the Point in Work With Limited Pay?

For some - regardless of past earnings - this question may appear to have a simple answer. There isn't! Yet plenty of work we perceive as either enticing or necessary, takes place via no monetary compensation to speak of. How to think about this reality?

What encourages us to choose the work we are willing to do, regardless of compensation? After all, much more is at stake than a "fat" paycheck. By way of example, voluntary work we deem desirable, may either contain the internal reward of intellectual challenge, or represent our sense of duty to others. For that matter, work of a seemingly mundane nature is worthwhile, since daily chores and routines play important roles in maintaining our connections to our environments. Some will likewise sacrifice reliable paychecks to work on autonomous terms, particularly since doing so makes it simpler to juggle competing responsibilities.

Nevertheless, we find most aspects of work more meaningful, if we aren't constantly having to worry about keeping a roof over our heads and food in our pantries. Should low pay work appear insufficient for meeting basic needs, some will refuse to work for others on those terms. And yet there's plenty of work needing to be done, which for the most part can only be paid poorly. Consequently, progressives and conservatives alike are discussing the possibility of creating either "living" wages, or else wage subsidies as government support for employees (via their employers).

Even though I'm pessimistic as to whether either approach is actually feasible, I'm an optimist about the possibility of creating local environments which better reflect low to mid range wage capacity. Supply side innovation for our non tradable sectors, could create greater personal security and stability, for those whose primary work only gains minimal monetary compensation.

So: Consider the range of work possibilities we might consider for ourselves if we don't also have to worry about keeping a roof over our head, and food in our pantry. Would relative financial stability change our mental framework as to what is possible?

Regardless of automation and AI, modern day economies are likely to need a full range of skills complexity in the near future. That said, a lot of employment options may not pay quite so handsomely as before. One problem in this regard is that existing municipal government budgets may become stretched to the breaking point - an event would lead to knock on effects elsewhere in the economy as well. Even though millions continue to seek high compensation for personal levels of high skill, the reality is many budgets will come up short for this human capital approach. Indeed, while lower skill work has been displaced to some degree by automation, AI is a more recent technological development which could impact high skill levels, especially if it becomes utilized in response to budgetary limitations.

Eventually, more cities and communities are going to need to redirect extensive resource capacity to basic elements of infrastructure maintenance. Hopefully, this will encourage the creation of infrastructure and services which don't cost so much to operate and maintain in the first place! Once we have more local settings which are easier to maintain, more individuals may ultimately find value in pursuing intellectual endeavour which does not necessarily come with a large paycheck, or a pension for that matter.

Another consideration, is that the twentieth century redefined how we perceive many non pecuniary obligations to others. These cultural shifts are quite substantial and are still having ramifications. One reason a marketplace for time value is needed, is to restore important forms of mutual assistance which have essentially fallen by the wayside. Also, the use of skills arbitrage for widespread employment, has contributed to increasing physical distance from friends and families as we age. Time arbitrage - given its encouragement of physical proximity for economic activity - could help restore mutual assistance in ways which allow us to rebuild trust locally.

Should people refuse to work for "peanuts", often there are good reasons why. Fortunately, we can create new forms of institutional means which make it more worthwhile to do so. One important aspect of these processes is greater economic security, via innovation for more affordable local environments. Plus, we commit to a restoration of personal workplace autonomy, for participating individuals. Why so? Only recall that one's ability to personally manage workplace circumstance, is a major reason why people are often willing to work for less money. And even though making room for the personal autonomy of others would include occasional inconveniences on our part, only recall how much we appreciate it, when others extend to us, the same privilege of personal autonomy.

Frontiers For Basic Gains Are Also Progress

What makes the possibilities of frontier so important for the progress of nations? Much more is at stake, than frontier progress which expands opportunities for human wants along the margins of a given equilibrium. While this high income approach to economic progress has been dominant for some time, something is missing. Our non tradable sectors have paid scant attention to millions who would more fully participate in the economy, were they able to do so. What about the wealth potential of newly generated local settings which could encourage low income groups to fulfill basic life goals? After all, this approach would ultimately create more consumers able to encourage the growth frontier of "cutting edge" at the margin, once millions of individuals gain sufficient footing in more basic endeavour.

Chances are, the frontiers which matter most, are those which include starting points for the innovation of need based circumstance. Part of what makes these kinds of frontiers so important, is their potential to allow people of all income levels to more directly manage and create their own life circumstance, thereby contributing to economic growth in the process. Too many such opportunities for self control of local environment, have instead been given over to special interests, redistribution and subsidies, in the belief that experts "should" instead be managing the circumstance which low income groups face.

Indeed, innovative gains which contribute to basic life conditions, are also those which add to economic growth in ways that can actually surpass what occurs along the"cutting edge" of a given equilibrium margin. Alas, the latter more often involves shifts in wealth and resource capacity from one form of consumption to another. Only consider how the relatively recent frontiers of the New World also created new opportunities for citizens to start over in need based terms. Ordinary citizens of those frontier days, often had the good fortune to play starring roles in these earlier stories of new wealth creation. One of the primary challenges of our time is to create new forms of economic frontier, where gains in the innovation of basic needs on the part of everyday citizens, continue to define how we experience our world.

All too often, experts assume that basic economic settings where ordinary people might gain a new lease on life, are a thing of the past in modern day economies. However: Even though immigration is a good solution where possible, it should not be relied on as a sole means of economic escape from conditions that aren't conducive to survival and human thriving. Especially since immigration has only become increasingly difficult for many would be emigrants. Perhaps we could set ourselves an easier task, by creating new forms of economic frontier for beginning anew. In these local settings, many aspects of regulation would be greatly simplified so as to encourage basic innovation on the part of those directly involved.

Let's not assume that need based economic gains are a part of the past, especially in advanced nations where this approach to progress has mostly been abandoned. There are simply too many citizens and communities left behind, to focus all efforts for wealth frontier on further gains for higher income levels. Chances are, need based frontier for wealth creation could be just as useful and practical as ever. Basic human needs in general, could greatly benefit from occasional examination and social adaptation. Modern day economies should not remain limited to a focus on expanding the wants of higher income levels. The economic needs of lower income levels and the potential for supply side innovation in this regard, will always hold relevance in the continued pursuit of progress.

Why Do Services Need Monetary Equivalence?

Much of today's political chaos, can ultimately be traced to struggles over who retains access to high skill knowledge. Consequently, it helps to consider: How much of this skills capacity might be artificially scarce?

Still, artificial scarcity was built into quality services product for understandable reasons. Originally, professional services were largely intended for citizens with relatively high income levels in prosperous areas. Over time, however, professional services provision gradually became the norm, replacing the mutual assistance which citizens with limited incomes had long provided for one another. Even though the move from mutual assistance to professional activity has been a centuries long transition, the real turning point towards complete professionalization began about fifty years ago.

By the late seventies, professional healthcare had mostly replaced the last vestiges of local and less formal services options. Nevertheless, the details as to how skilled forms of mutual assistance were legislated away, aren't really well known. Even the latter stages of these transitions were scarcely noticed, since the professionalization of services in general, benefited from widespread media support.

What is belatedly apparent, however, is that when production rights are withdrawn from groups lacking the money for extensive human capital investment, markets for useful services are going to suffer. Fortunately, what has become a woefully insufficient services marketplace, can be addressed. But doing so means not being afraid to explain to citizens what actually happened. The less blame in this regard, the better. Forgiving what happened, means we get the chance to create a more productive and hopeful future. We now have the opportunity to create greater economic meaning for time value, and doing so would extend the skills capacity needed for today's knowledge based economy. Much of this skills capacity will also need to take place on non pecuniary terms capable of creating monetary equivalence.

Why so? Healthcare is mostly a dependent secondary market. Since much of it relies on government support, periods of slow economic growth impact the revenues actually available. Consequently, even though demand continues to grow - especially due to aging populations - healthcare providers have limited ability to expand supply side capacity via the same pricing terms. Yet how could healthcare providers be paid substantially less, if their human capital investment costs remain relatively fixed?

For the U.S. in particular, present day organizational capacity was created during relatively long periods of increasing tradable sector growth. This organizational capacity was also accomplished via strong price making mechanisms, especially in the latter decades of the 20th century. Now, in certain respects the price making approach has reached its natural limits, given other near future budgetary obligations. In other words, even though more capacity is needed, revenue can't realistically grow to meet that demand. Consequently, services demand now needs to be met by different means than what have occurred in the U.S. thus far.  This is the dilemma many high skill providers currently face. What can be done?

The moment is right, to create human capital organizational patterns which include reliable and easily defined non pecuniary rewards. This approach would help compensate the fact that healthcare as a secondary market position, cannot respond to further demand with full monetary compensation for an expanded supply side. Non pecuniary rewards would create greater monetary equivalence for those willing to participate in healthcare, through new forms of organizational capacity.

Services such as healthcare could gain greater monetary equivalence by increasing time value as part of an applied knowledge continuum. This process could be undertaken with relatively minimal costs for human capital investment. Education for services skills would be integrated into local communities and their workplaces. The symmetry of time arbitrage would allow education and other services capacity to function as components of wealth creation, instead of simply more demands on other existing wealth.

Such an approach could be a tremendous boost for communities which presently lack the resources necessary to compensate today's high skill knowledge providers. Plus, monetary equivalence for human capital investment via non pecuniary means, could help stabilize skilled services markets in general. And in modern economies, services stabilization is certainly important for wealth stabilization as a whole.

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.

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.