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.