Wrap Up for July 2020

Can the U.S. sufficiently recover from its present decline?

Like the coronavirus, the debt problem didn't just "come out of nowhere".

Illegal immigration has not risen since the Great Recession.

Don't start a cold war with China, it's just not worth it.

"...NGDP is still 5.3 percent below its pre-crisis path even after 2022."

Keep NGDP on target, for supply side conditions to remain as stable as possible.

State bankruptcy would be complicated. But what makes it compelling?

For police, the danger imperative is paramount.

MMT is too focused on a particular causal relationship.

Dixie cups were the breakout startup of the 1918 pandemic.

"...even prior to 2008, there were important splits in the field of monetary economics."

"Simplification" for citizens, or for bureaucrats?

What can be learned from the laboratory of state experiments?

Bitcoin and ham radio "are both clunky and old-fangled" However, their decentralization is their strength.

Rich countries benefit from a "citizenship rent".

Credentialism is still a problem.

COVID-19: "I'd say at best, we're a quarter of the way through this thing. This is unsettling, which is why people are rejecting reality."

K-Briqs is one example of several recent brick innovations.
Also, a bricklaying robot in action.

Birthrates aren't likely to rise any time soon.

How is COVID-19 similar to a natural disaster, for healthcare systems?

"What will bounce back after the pandemic, and what will never be the same?"

An interesting reading list from Sarah Skwire.

"The United States has more pervasive licensing requirements than most European countries."

COVID-19: Symptom data helps estimate risk levels.

Nicholas Crafts discusses the long productivity slowdown with James Pethokoukis.

How does the Swiss political system manage to avoid political polarization? For one, "Voting necessarily means understanding that things are never clear cut."

Conservatives are not in agreement about zoning reform.

When it comes to urban design, experiences matter.

We shouldn't expect past economic momentum to carry us through the present crisis.

How would Medicare reimburse hospitals and other Part A providers if the fund runs out of money?

Timothy Taylor highlights a recent Brookings series which explains how COVID-19 could change the economy.
Also from Brookings, Bernanke and Yellen on COVID-19.

"Unschooling allows kids to follow their own interests and define their own curriculum."

"The Closing of the (Urban) Frontier"

Cancel culture is pervasive.

Experiments are important. So why do we hate them?

Assortative mating and income inequality.

Good news for plastics recycling.

The best coronavirus tests are frequent, fast and cheap.

A road map for reemployment from AEI.

Tech is becoming a regulated industry.

COVID-19 may worsen public perceptions re finance

International trade: "The high watermark really was around 2008, just before the financial crisis."

"The Henry Fords of Healthcare" Standardized procedures for better group coordination. However, this approach is not always politically viable. In this instance the process creates (mostly) middle class access.

Some of the recent fiscal stimulus will certainly help. But how much of it is properly aligned with actual need?

"Working as an ICU nurse is like flying a plane."

Claudia Sahm interviews David Beckworth: a discussion about NGDP.

Bookkeeping operations by the Fed still can not "conjure up real resources". And more needs to be done to avoid moral hazard.

Libertarianism has become dysfunctional, but liberty is as important as it ever was.

Some early data for the pandemic effect on world trade. Also, a loss comparison between the U.S., the EU and China.

Arbitrage Potential Includes Time, Resources and Systems

How does arbitrage function as a component of economic dynamism and long term growth? While many associate arbitrage potential with monetary gains, this feature is only a fraction of what arbitrage is capable of. Indeed, one might envision monetary arbitrage as a residual effect of aggregate efforts and time based priorities. After all, the nominal representation of general equilibrium depends on the extent to which all resource capacity gets defined. What matters most for monetary provision is its continuous accurate representation as a level nominal target, so that all arbitrage potential might remain stable as well.

As humans, we are naturally inclined to make improvements on whatever resources happen to be at our disposal. Three arbitrage possibilities are especially important: physical resources, time arbitrage (human capital potential), and systems arbitrage. In particular, time arbitrage could benefit from stronger market patterns and commodification. Only recall that when service offerings become highly specialized, by definition this limits access and commodification, as is currently the case with many high skill services.

Today, wealth creation as systems arbitrage has become mostly associated with movers and shakers in prosperous regions. Yet only a century earlier, individuals in millions of small communities were also direct contributors to wealth creation processes. Much of the earlier participation in physical resource arbitrage was decentralized. Even though it offered sustenance for local individuals and communities, these production patterns did not always generate sufficient additional output to be readily captured for broader economic activity. Time arbitrage existed alongside resource arbitrage in these settings, often on even more limited terms of monetary representation. As time arbitrage becomes more important in the near future (once again), it needs to return with a formal baseline monetary representation, to create additional incentive for local community trust and mutual reliance.

The physical resource arbitrage of yesteryear, gradually transitioned into immense wealth that negated the need for local production in countless communities. Unfortunately, even though small town populations gained in terms of tradable sector consumption, they still lack the ability to fully participate in high skilled time based services. That said, the need for decentralized services generation in the present, is vastly different from the production patterns societies once utilized locally. And since time based product is naturally limited, it is the logical employment replacement for tradable sector production - given the latter's centuries long history of exponential output. Even though time arbitrage would include microeconomic characteristics, it still offers a macroeconomic solution set to help solve long term employment issues.

Time arbitrage in the form of new markets for human capital, could also expand general equilibrium in ways that money has only been able to partially represent. Consider why this matters. Skills arbitrage, though certainly a reasonable approach to human capital investment, becomes unable to fully maintain a strong growth trajectory once tradable sector dominance gives way to non tradable sector dominance. Hence the need for further systems arbitrage, which instead of replacing prior systems, would function alongside them. Economic time reciprocity would give applied knowledge the conceptual space to function as a more direct means of wealth creation.

Many communities struggle to take part in time based services production today, since high skill services tend to rely on the redistribution of residual wealth. More often than not, this limits the most important facets of useful knowledge to prosperous regions. New forms of systems arbitrage, would allow time reciprocity to expand human capital roles beyond their present reliance on wealth redistribution. Once applied knowledge takes place via direct means, it can also serve as a valid source of community building. Systems design for new communities would establish knowledge priors as prime reasons for community origin. Flexible building components and infrastructure, would give these communities added mobility which is similar to what private firms are capable of. These components could be reconfigured according to the knowledge priors which are most readily coordinated during any given time period.

Since time based services markets lack the ability to grow exponentially in terms of output, we need ways to regain time arbitrage as output defined in quality gains for all human capital potential. Time arbitrage has the capacity to directly coordinate mutual time priorities. Indeed, systems of time arbitrage make it possible to utilize human capital as a lever in the production equation, so that less intense human capital investment is necessary in the first place.

The Solow Residual is on a Cultural Collision Course

Perhaps there are broader implications of mature economies which we have yet to fully explore. For instance, skills arbitrage which includes highly sought human capital, is distributed (for knowledge providers) in ways which leave little room for further inclusion. But what about intellectual activities which are sometimes more desirable for participants in work settings, than their actual (or potential) consumers? Is is logical to think of participants in the latter example as the "moochers" of economic systems? Even though others who also rely on general equilibrium redistribution are more likely to benefit from the fact their skills include high consumer demand? Or, if "moochers" were somehow disallowed in a time of stretched budgets, what would this suggest about the value - or lack thereof - for experiential services in general?

What's more, how does the Solow residual factor into these considerations? For one, redistribution for the secondary markets of knowledge provision, is also dependent on total factor productivity. Much of TFP is expressed by the Solow residual which Investopedia defines as:

The Solow residual is the portion of an economy's output growth that cannot be attributed to the accumulation of capital and labor, the factors of production. It is a measure of productivity growth that is usually referred to as total factor productivity.

Alas, progress and long term growth as defined by the Solow residual, were more reliable before the dominance of non tradable activity in services generation. Previously, when tradable sector activity comprised a greater portion of general equilibrium, societies were naturally more inclined to make room for intellectual activity - regardless of how it was applied in the marketplace.

As it turns out, more than the Solow model will be needed for wealth creation, before societies regain confidence in full market application for intellect and knowledge. Meanwhile, aggregate productivity is compromised, as high demand human capital gradually crowds out other desirable economic activities. If this weren't enough, "moocher" arguments question redistribution patterns in their entirety, on identity based terms. Arnold Kling, in "Maybe we *are* in an Atlas Shrugged" moment", responds to the recent take down of Scott Alexander's blog, and notes:

Scott Alexander, Less Wrong, and the Intellectual Dark Web occupy a sort of Galt's Gulch. They see the moochers as intellectually deficient. They are trying to uphold an old-fashioned value of scientific objectivity against the moochers' assault of oppressor-oppressed framing. 

Kling further explains his perspective:

I think of the conflict in Randian terms, as industrialists vs. moochers. The industrialists (not in the Rand sense of heavy industry but in the sense of software eating everything) take pride in having shown an ability to build something. It might be something as humble as a section of computer code that gets used. Or it might be as grand as a successful company, or two. The moochers have never built anything, and they are looking for other ways to assuage their egos and fight the zero sum game of status. The moochers have found that social justice activism is a useful weapon for lowering the status of the industrialists.

One problem with the "moocher" categorization, is that until recently, direct sources of originating wealth were easier to come by. Indeed, only a century earlier, most anyone in the U.S. could still take part! Unfortunately, as traditional forms of Solow model productivity have become ever more efficient, the places where wealth origination still takes place, continue to retreat from our personal view as a society. How many local economies are still included? Not near enough! In the aftermath of tremendous Solow model efficiency (on tradable sector terms), is it really reasonable to define millions of individuals and communities as "moocher" status? Doing so is demoralizing for average people with average intelligence, who may desire to build their lives up through physical means. It is also demoralizing for people who - on the other hand - could be happy with life as a series of meaningful experiences.

These are just a few reasons, why we need to redefine what wealth origination actually consists of, in the time based terms which all of society could still utilize for productive and meaningful lives. Until we do, we may end up pointing fingers at society's supposed "losers", while investing in "special" human capital which only continues its collision course with the global redistribution patterns of today's wealth.

Incremental Ownership Could Restore Hope for Millions

The COVID-19 pandemic poses problems not only for small businesses, but homeowners and renters as well - especially those with limited incomes. Indeed, according to CNBC, 28 million individuals could possibly end up homeless. For perspective, approximately 10 million lost their homes in the Great Recession.

Alas, when it comes to maintaining financial flows, rental costs are similar to the monthly obligations of mortgage payments. Both can be substantial enough to derail personal autonomy for renters and homeowners alike, if sources of steady employment are jeopardized. Given this reality, when income streams are disrupted for any reason, it's not always easy to regain one's footing afterward.

Incremental forms of ownership could do much to lower the risks of economic uncertainty for all concerned. And should employment opportunities prove unreliable, flexible ownership options could allow many individuals to gradually rebuild their lives without the undue risks so often posed by the costs of housing. By purchasing the most basic elements of living needs first, when income streams are sufficient to do so, ownership can accrue incrementally on terms that don't require debt. Fortunately, "pay as you go" ownership could lessen the monthly obligations faced by those with limited income and/or unstable employment sources. Once individuals are able to establish basic elements of ownership, temporary disruptions in wages would be less likely to derail the whole process.

Also, from a macroeconomic standpoint, flexible ownership arrangements could ultimately lead to simpler roles for monetary and fiscal policy. By reducing the contractual debt burdens of housing, monetary and fiscal policy would have less incentive for overreach. Greater flexibility for citizens could mean greater flexibility in policy responses. After all, since private enterprise in the U.S. has considerable flexibility to hire and fire at will, is it not logical to offer citizens that same degree of flexibility in markets for housing?

Given the wide variance in income levels today, incremental ownership could prove an advantageous response to economic uncertainty. Many citizens could thrive in environments where simpler living arrangements are possible - citizens who otherwise tend to struggle with what is presently required. Already, companies are starting to experiment around the world with a wide array of building materials and modular components. Hopefully, there will also be communities in the U.S. in the years to come, where simpler ownership options are welcomed and encouraged.

Notes on Trade Offs in Systems Design

Even though governmental gridlock is often frustrating, in some respects it can be more practical than the alternative. Among other things, gridlock acknowledges extensive competing demands on government budgets. And due in part to changes in lifestyle and individual priorities, some budgetary commitments no longer contribute to economic dynamism as ably as before, such as traditional physical infrastructure. Unfortunately, an undue focus on traditional infrastructure tends to detract from systems design options which more accurately mirror a fundamentally changed economy.

Systems maintenance trade offs are important as well. When we can't decipher how our time commitments translate into societal obligations, it only gets more difficult from there, to apportion remaining time for our own needs. We've gradually tossed much of our redistribution potential, via taxation, into a vast chasm of societal responsibilities. Could some of these processes take place on more productive terms? Even highly skilled knowledge is in certain respects a mundane maintenance function, yet we have few settings where it can be readily applied as such. In the future, as budgets become more constrained, what monetary values might public goods and services continue to hold? We need to create new market options while we can still think clearly about what will be involved. In other words, well before budgetary shortfalls make it necessary to do so on more stringent terms.

Each of us has a limited amount of money, time and resource capacity, for what societies wish to implement and hopefully, maintain. Alas, it is becoming less practical over time, to further add to environment maintenance costs (whether local, state or national) without clear specification of the trade offs, not to mention which income groups are actually expected to be responsible for costs. Much of what currently transpires is no longer realistic for societal coordination, given the wide variance in today's income levels. All the more so, when money mostly serves as a stand in for personal time or resource commitments.

Despite the importance of systems design on multiple levels, the broader trade offs that impact societal well being are not being accurately debated. Future systems design will have a greater chance of success, if and when it takes our broad income diversity into full account. Whenever income levels prove insufficient for systems maintenance, we can build respectable and desirable alternatives in the form of new environments, for those who lack the full monetary rewards of meritocracy. I would be remiss if I didn't add: When it comes to trade offs in general, this part of the public discussion has scarcely begun. Plus, when trade offs are discussed from a public choice perspective, it's not helpful when they are framed as "we would be better off without", if no market alternatives are being actively prepared for implementation. The rise and fall of Obamacare is just one egregious example.

A lack of systems design which could take different lifestyles and income levels into account, has also led to struggles whereby various groups attempt to impose their lifestyle preferences on other groups. In many instances it would be simpler to start from scratch, especially for the creation of walkable communities. New beginnings in systems design could ultimately lead to less political polarization, and more hope for the future. Restored hope in decentralized prosperity, could likely mean less struggle over opposing visions of the "good life". No one has ever successfully imposed their version of "best life" on any one else. People are far too stubborn for that to happen. So why do centralized governments keep trying to impose either/or lifestyle scenarios, which they inexplicably expect all citizens to live by?

However, the cronyism of special interests, has inadvertently contributed to today's either/or scenarios as well. Now, consider the consequences: When governments give in to the protectionism impulses of private interests, where is the logic in belittling citizens for responding by demanding similar protections? Despite the fact that protectionism has come full circle, and of course the global implications, there may yet be time to back away from this precipice. Why not work to reduce centralized and protectionist impulses while we still can. Why not build upon systems design which makes room for everyone, not just whichever fortunate individuals happen to be in power at any given moment. Ultimately, the best way to achieve sustainable trade offs, is to create ample economic options - options which allow all income levels to contribute and participate in society.

For Progress, Basic Innovation Remains Necessary

When it comes to societal progress, inventions that improve basic aspects of living are as crucial as they ever were. In considering why this is so, one also hopes future progress studies will encourage participants to envision basic innovation as much more, than past historical records. Innovation is not solely about creating new economic options, to further tempt those who already have plenty to spare! Indeed, with concerted efforts to innovate local environments, productive transformation could come to non tradable sector activity where it is most needed: time based services, building components, and physical infrastructure.

Oftentimes, achieving more supply side output means getting more people involved in the entire process. Alas, societies tend to lose this perspective, and they end up traveling paths in which ever fewer citizens are able to go. And while a more inclusive economy is often discussed in terms of greater monetary redistribution, basic forms of real economy activity are actually more important, so that all citizens can remain fully engaged. Much about societal progress relies not only on our active participation, but our personal ability to contribute to system maintenance as well. However, without ongoing production reform which lowers basic systems costs, they eventually become unsustainable, as growing majorities of citizens find themselves unable to contribute to systems upkeep.

Another way to think about supply side possibilities: How can we create more good deflation in these basic areas of our lives? What the supply side makes possible in terms of production and consumption, often matters much more than our actual income differences. Only recall, how the benefits of good deflation in tradable sectors have led to greater economic access and centuries of progress. Production reform in non tradable sectors would ultimately translate into additional economic activity, allowing millions more to build meaningful lives.

In certain respects, good deflation functions as other forms of productivity gains, in that it achieves more output via the resource capacity already at our disposal. This is why we also tend to observe lower costs in areas where good deflation does occur. That said, quality product gains also affect this relationship. In particular, preserving good deflation potential in non tradable sectors, means being careful not to allow perceptions of quality product to determine the extent of our personal economic time commitments. Especially given required costs for personal environments which are already non negotiable! Many businesses already have ample incentive to increase productivity, so why hasn't a similar approach been applied to the resource potential which communities actively share? After all, there are plenty of means for doing so, which can preserve the freedom and autonomy of all involved.

Without the possibilities of good deflation, too much non tradable sector activity would remain a financial burden for limited income communities. It's time for real change in these basic systems. Even though existing inequalities will always be with us to some extent, we could still bring vast progress to non discretionary goods, services and environment structure which involves asset ownership. Whether or not societies prosper in the future, may well depend on how our non tradable supply side capacity is organized and conceptualized. There's plenty of work to be done, to improve these vital areas of our lives.