What We Can Do, What We Can't Do

New years are a good time to reflect on life's possibilities, especially when it comes to societal progress. Nevertheless, how do we distinguish between realistic potential, versus what is essentially wishful thinking? For example, even though the world needs a lot more mutual respect and civility, desired outcomes such as these cannot be coerced. 

And while Adam Smith and many others celebrated the free markets which so contributed to civility in recent centuries, much of this fortuitous societal coordination takes place in tradable sector activity. Still, it's not unreasonable to ask: Could our non tradable sector markets also contribute to greater civility? How might they gain their own newfound freedoms? In particular, is it feasible for the resource of our scarce time, to garner more economic and societal value in the near future? Or will vital markets for time value, remain outside our realm of direct influence?

In the twentieth century, housing and time based services were regulated in ways which reduced the degree of autonomy and control individuals held over their own destinies - particularly those with substantial income limits. If millions were to regain control via new production and consumption potential, how much civility might we all regain in the process? At the very least, we still benefit from the civility which goes hand in hand with high levels of tradable sector resource coordination. And while we will never put a stop to what's bad in the world, we could still create more good, by allowing symmetrical (hence reciprocal) coordination of time via market tested means. Time arbitrage is one entry to this realm of possibility. It is a broad spectrum approach for improving personal autonomy and self worth, with potential to bring new hope to people from all walks of life.

With additional economic value for mutually coordinated time, millions more citizens would derive a greater sense of self worth. Consider one important reason why this matters. So much in the world which is unfortunate and destructive, includes the reality of poorly defined self worth. How can we expect people to be trustworthy or unfailingly good to others, when their time use potential lacks sufficient economic value to build a normal life? Granted, not everyone would personally benefit from stronger markets for time value. Just the same, millions more would finally learn to effectively negotiate with others for their wants and needs. I believe that gaining the chance to do so, would result in fortuitous circumstance whereby people are more inclined to be kind and civil. 

Even though the passing years have given me cause to excessively dwell on what can't be done, I still believe we are not helpless to act in positive ways. Clearly, we have reason to do so, when the evening news also dwells on what we seemingly cannot remedy. While there will always be instances when no one can decipher personal motivations for violence and hatred, there will still be positive ways to respond. Sure, some market efforts are going to fail, sometimes even miserably. But I continue to believe that viable and carefully representative market platforms are the best means we have, to build a better, more inclusive future. Plus, as Ricardo Hausmann recently noted in "The Missing Link in Economic Development":

If someone is not doing something that we as a society value it might be because they can't, not because they don't want to. This weakness in economics has far-reaching implications for our understanding of economic growth and development, which is fundamentally about the social accumulation of productive capabilities.

Markets should not be so willing to devolve, into a twisted rational of what societies supposedly can't do. When they become rigid and inflexible, does anyone really wonder why capitalism gets disparaged? Why not work to ensure greater freedom for our vital domestic markets, so they might better contribute to human civility and hope for the future? Why not 2021 as the perfect place to begin? Lets turn our non tradable sectors into realms where we regain hope for what we can do as a society, instead of remaining hopelessly divided over what we can't do.

Wrap Up for December 2020

"Although cities are often categorized as lonely places, city dwellers are actually more likely to have a neighborhood spot than those living in other types of communities." 

Will we keep turning politically inward?

The 911 emergency medical system has been sorely tested by the pandemic.

"The 2018-2019 tariff increases represent the largest return to protectionism in the U.S. in the post-war era."

Some considerations regarding federal budget deficits.

A case study from Canada for low long-term interest rates.

Plus, Greg Mankiw asks, are low interest rates a boon, or a danger?

Logistics are a major concern for mass vaccinations in the days ahead.

Optimism and pessimism are generally warranted. Still, those who can't imagine a better world ultimately lose their motivation.

Future gasoline demand may not reach its pre-pandemic levels.

Why hasn't more attention been paid to the big questions of economics?

Arnold Kling reviews Classical Liberalism and the Industrial Working Class by Alberto Mingardi.

The pandemic recession includes shifting patterns of energy demand.

Sam Hammond and Brink Lindsey share their ideas with David Beckworth, for more inclusive and dynamic growth.

How has the middle class changed?

Scott Sumner takes on MMT logic. Plus here and also at Econlib. Some conclusions.

What if "store of value" really isn't a particularly useful designation for money? However, Scott Sumner has a different take.

"Do bankers understand money?"

What determines whether inflation occurs?

As it turns out, class biases can even affect Christmas card reciprocity.

There's renewed interest in the Einstein-Szilard refrigerator.

Why hasn't the euro become more dominant?

There are gender differences for one's personal inclination to cooperate.

Addressing the federal fiscal imbalance.

David Wessel opines on rising federal debt.

For Beethoven, freedom was important.

It's been 73 years since American migration was this low. 

Covid doesn't go away just because impatience wants it to.

Alexander Hamilton would not have endorsed MMT.

The value of time currently estimated by the U.S. government, is too low.

"People who agree with market prices have a low expected subjective gain from trading. People who disagree may either become spectacularly rich, or spectacularly poor."

Some benefits of a multigenerational workforce.

What might someone actually mean, if they express a lack of concern about inflation?

David Glasner highlights the relationship between Say's Law and Walras's Law.

Even when populists lose control, those who are left behind continue to feel abandoned.

Is inflation really dead? Not so fast...

How should income inequality be calculated?

Health provisions are an important part of the year end pandemic response bill. Nevertheless, healthcare budgetary gains are temporary.

2020 also brought "advances in AI language generation".

"while tiny houses have far more potential than their scale might suggest, it's at the other end of the size spectrum that the most major breakthroughs in construction remain to be made."

However, originating tiny house communities will need a new approach which includes innovative infrastructure, before older communities are likely to consider tiny homes as viable alternatives.

Fires pose unexpected problems for plastic pipes.

Is racial identity associated with support for free trade?

There are plenty of economic challenges ahead for Biden.

Thomas Sowell on writing (2001): "The manuscript of Basic Economics sat around for about a decade." (HT Timothy Taylor) 

Robots dancing as if 2020 were a good year! 

Post Highlights from 2020

Here are some reflections on posts from 2020. This has been a year which - for many readers - is thankfully almost behind us! I wish everyone the best for 2021.

Jobs as a Form of Societal Permission

Even though artificial intelligence can improve aggregate output in non tradable sectors, tradable sector activity includes AI exponential effects as direct wealth sources. This particularly matters since we've long relied on the monetary redistribution of exponential output, to create jobs as societal permission. Since production efficiencies are translating into relatively less tradable sector work (and its associated exponential output revenue), we need a more direct wealth creation approach for time based product, to ensure that non tradable sector services retain societal permissions as well. After all, some of our most meaningful and challenging work lies in these areas. Artificial intelligence could also be utilized (via societal permission) to augment symmetric time value for all individuals in services generation.

The Hidden Danger of a "Fully Grown" Economy

Once the pandemic finally recedes, will we still be grappling with economic stagnation? For instance, some argue that a decades long slowdown actually indicates economic success. Even if such assertions are valid, problems remain - especially in terms of inequality. After all, millions continue to hope for a stronger growth trajectory which increases their own chances of active participation in the economy. In the meantime, too many non tradable sector market options are not responsive, to the reality of lower income levels. Since production reform is still needed in non tradable sectors, it could be counterproductive to rely on the idea of a fully grown economy as capable of supporting economic stability.

It's Time to Build Strong, Lightweight, Yet Affordable

Millions were already trying to find ways to live more affordably, before the additional burdens of pandemic circumstance. Since non tradable sector options for lower income levels were already limited to begin with, governments face additional struggles in assisting citizens who need help the most. If real innovation had been made possible for low cost housing, financial burdens would not be so severe, now. Chances are, more societal upsets such as pandemic could occur again, sooner rather than later. Before that happens, let's ensure that more low cost living options become available.

Education: Let's Restore Local Community Threads

Ask members of small rural communities about their most pressing circumstance, for what is often a two part response: Securing reliable housing and maintaining a full range of local services. Likewise, these are also important issues for left behind urban communities. In short, many areas in the U.S. would benefit from a more innovative approach to building/infrastructure manufacture and time based services. Local citizens need to be directly involved with these processes as well. The recent pandemic especially highlights a need for local healthcare coordination which reduces dependence on scarce hospital beds during public emergencies. Mutual assistance in educational efforts could go a long way towards alleviating this problem.

Fiat Money as a Framework for Human Capital

Fiat monetary policy has been largely responsible for the transition to a knowledge based economy, in recent decades. However, even though many nations got off to a good start with this approach, a stronger real economy methodology is needed to support monetary policy. In part due to extensive price making in time based services, the present services dominant general equilibrium lacks inclusive levels of economic participation, ownership and growth potential. More opportunities for economic integration and knowledge use are needed, for millions of citizens who still seek means for productive engagement with others. 

Notes on Trade Offs in Systems Design

When we think of budgetary needs for infrastructure, how do we frame system wide efficiencies? One reason this is an important issue, is that today's infrastructure does not fully meet the needs of many individuals and communities. Some systems trade offs are sub optimal since their designs don't reflect the resource capacity of lower income levels. How might a wide range of infrastructure more closely respond to what people can actually contribute? Just the process of answering this question, could go a long way to reduce a wide range of negative externalities, which societies all too often think they "must" live with.

The Solow Residual is on a Cultural Collision Course

Experiential time value between individuals is subjective. Even so, economic time needs to be understand in terms which are sufficiently concrete to measure in relation to shifts in long term productivity. Without such a perspective, there is a societal tendency to either accentuate or downplay activities with important economic ramifications. And presently, many time based services are considered intangible, in that much of their organizational structure is contrary to the resource reciprocity of tradable sector production. Due to their intangible nature, both practical and so called "impractical" forms of time based activity are being called into question. Ultimately, economic time value needs to be more reciprocal and immediate in nature, so as to better contribute to future productivity gains.

Design Markets That Let Basic Incomes Meet Basic Needs

If more markets could readily serve all income levels, citizens would not need to constantly call on their governments to come to the rescue. We have lacked the economic freedom to create markets which could tend to basic needs for lower income levels. Such markets, if they existed, would not need to be constantly questioned in terms of efficacy and worth. However, should societies elect to create forms of basic income in the near future, why not support non tradable sector production reform, so that basic income recipients might build respectful lives for themselves. 

When We Forget How to Live and Let Live

Before the pandemic, there were already pressing structural issues which had long been neglected. For instance, political polarization has been in part due to artificial scarcities. Yet despite the artificial scarcities of professionalized time, the time we have to fulfill our societal obligations is truly scarce. How might we do a better job of improving economic time value for all citizens? Should we elect to do so, the time we all have to get things done, would go much further than is the case today. And once we become more confident in the ability of our time to accomplish what is necessary, perhaps more of us will also become more inclined to live and let live.

An Economic Alternative for the Baumol Effect

When it comes to services and the need for greater productivity, there's a paradox. How to create greater efficiency in services (for continued prosperity), when we wish for more personal attention (time) from others than they can provide? Wouldn't productivity gains translate into even less time availability? Alas, so long as services are funded by other sources of wealth, yes. However, we do have ways to work around this long term problem. By matching our economic time directly with others, we could create direct forms of wealth via symmetrical alignment. Local transformations in educational patterns, could go a long way to make this process possible.

Economic Considerations are Vital for Sustainability

Even though the sustainability of our planet is often debated - and rightly so - economic sustainability deserves a more central role in these dialogues than it has received thus far. Broader and even holistic considerations need to be taken into account, when it comes to general equilibrium stability and long term economic prospects. One significant problem in this regard, is how many of today's institutions no longer function well for lower income levels. When societies neglect the structural circumstance which affect these groups - such as recently noted by Nicholas Eberstadt for AEI - economic conditions will eventually suffer the consequence.  

In the U.S., neither Democrats or Republicans have thought seriously about vital aspects of economic sustainability. Not only have long term budgetary possibilities been sacrificed to entitlement requirements, but short term policy actions fail to take broader market dynamics into consideration. For instance, what good can be expected of fiscal austerity measures that primarily result in arbitrary limits on knowledge based social interactions? 

Alas, there will soon be many inevitable fiscal limitations, whether anyone desires such budgetary restrictions or not. Given this reality, the least we can do is ensure they don't stand in the way of sustainable economic outcomes, by building more inclusive market conditions to benefit all income levels. And - in the meantime - we could encourage policy makers to loosen the regulatory restrictions of our domestic non tradable sectors. 

It's a shame we have experienced various forms of fiscal austerity which were poorly thought through and scarcely benefited anyone. In a knowledge based economy, if fiscal limitations are due to government spending on less worthy causes, the outcomes aren't necessarily as benign as the budgetary restraints of earlier times during tradable sector dominance. Only recall that preference for monetary stimulus during tradable sector dominance was also closely associated with economic stability and positive outcomes. Nevertheless, it is ironic that today, when discussions regarding budgetary restraint still arise, it's usually when one political party wishes to impose fiscal austerity on the party currently in power. 

Any discussion about long term debt and budgetary obligations is incomplete, if it fails to consider market dynamics as a whole. When policy makers lack this broader perspective, they may attempt to either avoid or impose fiscal austerity, without understanding the potential ramifications of their intentions. Further: While fiscal policy losses aren't necessarily problematic for governments during long stretches of tradable sector dominance, there are altogether different factors to consider, once a substantial portion of GDP is derived through fiscal redistribution for applied knowledge. Since this has in fact occurred, knowledge based non tradable sectors can be less responsive to monetary stimulus (in lieu of fiscal stimulus) than one might expect. What's more, much governmental redistribution - at least in the U.S. - is intended for higher income levels. Hence while economic growth is of course needed to continue responsible stewardship for planet Earth, more is involved. It's time to ensure that aggregate growth potential includes output and production gains for all income levels, not just those at the top. 

Ultimately, the greatest potential for economic sustainability occurs when new market possibilities are extended to all income levels and groups. Achieving this, means creating new market use patterns which go well beyond the limits some firms and organizations might otherwise impose on others.  Granted, profits will always be a necessary component of economic sustainability, both for profit based firms and non profit organizations. Just the same, the greatest profits are possible, when the greatest number of participants can actively pursue their own dreams and aspirations as well.