Wrap Up for January 2021

Alex Danco provides a summary of David Graeber's Debt: The First 5000 Years.

A desalination breakthrough in water filtration.

Diane Coyle provides a quick review of Robert Nisbet's History of the Idea of Progress. Also, this Robert Nisbet essay from the Liberty Fund.

Instead of talking about saving, talk about demand for assets.

"TFP only budges when new technologies are adopted at scale, and generally this means products, not just science."

This AEI article is definitely worth the reader's time:

"For decades, America has combined the demolition of low-income neighborhoods with regulations and attitudes that impede their replacement."

Francis Coppola notes that "The IS-LM model doesn't tell us the cause: all it does is model the relationship."

Can Congress restore professionalism in our populist era?

"...the U.S. is the only established democracy to see a major decline in social trust."

The 2010s were the lowest decade on record for population growth.

Total factor productivity was already slowing down by 1965.

How credible are central banks willing to be?

Some reflections on low interest rates as a long term problem.

A simple description of the importance of AI in medicine.

On openness: "Being open to other individuals, ideas and businesses does not mean we'll end up with one-world government. On the contrary, we need different systems of rules in order to have institutional competition." Nevertheless, tribalism is presently ascendant, and that is dangerous for continued progress.

There's a difference between our preferred options and the ones which are more convenient. Importantly, convenience is also about making the most of our scarce time.

Unwinding the Fed's balance sheet isn't as straightforward as it might appear.

Reallocation continues apace.

CEOs as a political force.

Many health aides are reluctant to trust the vaccine.

"Public agencies aren't designed to be real estate developers."

"...one focus will be on giving everyday citizens direct economic upside in the city's growth."

Money supply growth has not been adequate since the Covid-19 shock.

Fortunately there are cracks in the great stagnation.

Supply and aggregate supply aren't the same thing: "What matters for stimulus is the short run aggregate supply curve." Whereas, "What matters for the minimum wage is the long run industry supply curve."

These adaptive modules combine all utilities in a single location.

How will we adapt to collapsing aquifers?

Scott Sumner notes how the center left has changed.

Do others at the Fed share Richard Clarida's vision?

The importance of trust and social capital.

"the vast majority of people who make less than median income and live in rental housing, live in private unrestricted properties." Alas, private investors have been snapping up these properties, renovating them, raising the rent and selling for a profit. How might more of these properties remain available to people with less than median income? "We are capitalists."..."We believe in capitalism. But if it's going to survive, we have to make it work for more people. A lot more people."

Michael Strain discusses Biden's economic relief plan with James Pethokoukis.

Graphs from Marcus Nunes show "compelling evidence for the monetary theory of nominal income".

"we believe that there is a real need to accelerate and simplify the architectural process."  And, "It is not enough to design the works. It is necessary, with the same rigor and commitment, to design the logistical operations associated with them."

"A new supply-side economics would recognize that productivity growth is the right target, but it would reject tax policy as the primary means of stimulating productivity." Eli Dourado continues, "Instead, it would examine how everything government does - from permitting to procurement - could be improved to increase productivity." To this, I'd add that in many instances, governments would follow up private actors in their initial efforts to create broader and more dynamic markets. A major part of government's role would be taking sufficient time and effort to understand what's involved, before granting permissions and/or exemptions for private actors - in particular for the creation of special zones which welcome a full range of income levels. Further, governments would want to assist private actors in explaining to the public what's at stake for supply side reforms, so these extensive efforts aren't ultimately derailed by opposition. 

People and firms benefit when their good or service is "necessary to a final product, but only a small share of total costs".

Sometimes, temporary disruptions have permanent effects.

Perhaps we shouldn't be surprised that facts don't always win the day.

Dietz Vollrath is agnostic regarding total factor productivity. Indeed much depends on framing, since general equilibrium is chock full of unknowns. Nevertheless, at the center of general equilibrium, non tradable sectors function as secondary services and cumulative assets such as housing, in response to sources of wealth origination. The defined equilibrium settings I've advocated for, could frame specific equilibrium points by combining aspects of tradable and non tradable sector activity in observable local conditions. Also in this framing, since economic time value would only hold a partial relation to monetary representation, it would become categorized as a form of total factor productivity for each participating group. How so? Time as an economic unit, would provide a consistent measure of knowledge use and skill gains in each observed setting. Since these gains would function alongside a monetary base they would contribute to traditional wealth origination, but they would also contribute to total factor productivity (participating group cumulative gains), via what is not expressed through monetary representation. 

"Price appreciation is now outpacing wage appreciation in 90% of housing markets nationally."

Flexible Ownership Frees Us. But Have Markets Responded?

To a certain extent, markets have responded - at least when it comes to building construction options. But apparently, at least for the duration of this pandemic era, there will be few zoned land patterns to provide the vital support so necessary for incremental ownership to flower. Without such patterns, a dearth of community options means additional burdens for lower income levels - especially given the uncertainties these workers often face. If more accessible forms of ownership were available, the clamor for a $15 dollar minimum wage would likely be muted. What can be done, to create more flexible ownership options in the years to come? 

New land use options would also be helpful for recent retirees such as myself. Once senior citizens try to downsize from traditional single family housing, they quickly discover other single family homes to be the main consumer choice available in the U.S. For example: Thus far I've only located three areas in the country where communities create ample space for flexible housing in a full income range for people over 55. Since many seniors are solely dependent on Social Security income, that leaves a tremendous amount of untapped market opportunity!

Granted, many baby boomers such as myself never thought to seek out manufactured housing when we were young. Doing so wasn't generally perceived as a necessity, for even blue collar incomes could still purchase traditional housing well into the nineties. Likewise: even though Buckminster Fuller advocated for (and designed) flexible housing, he continued to live in a traditional home during the course of his lifetime. Plus, many people never considered non traditional housing until they were of an age they no longer required extra square footage. Part of what's important in this regard, is that homes inevitably age alongside their occupants. Consequently, at the same time in life one anticipates rising healthcare costs, the costs of older home maintenance also rise dramatically. In fact, home renovations can turn out to be more expensive than the cost of new manufactured units.

Nevertheless, if only downsizing were as simple as a non traditional housing purchase! If more land were available for flexible ownership options, lifestyle simplification wouldn't be such a daunting challenge. After all, markets for RVs, manufactured homes and tiny homes have proliferated in recent years. Just the same, older citizens quickly discover that many communities - if and when they'll accept any form of non traditional housing - mostly zone for expensive versions of modular homes on permanent foundations. In other words, these costs can be comparable to what one expects for new traditional housing. 

Since many communities could remain reluctant to add a complete range of income levels to their tax base, the best way forward may be a creation of special zones which encourage flexible ownership for all income levels. Fortunately, there are also ways such communities could help establish trust among the groups which take part. Chief among such methods is making certain local citizens can readily create and maintain economic/social ties with one another. Ultimately, simpler ownership options make it easier for individuals to adapt to evolving economic realities. Plus, once communities become zoned for income diversity, more manufacturers would gain incentive to innovate, thereby further reducing costs for flexible building components on offer. 

One advantage to incremental forms of ownership, are the possibilities of extensive reduction in privately held debt. Less debt - especially for anyone who is burdened by debt - means greater community stability in the event of economic downturn. Once owners can buy, sell, and reconfigure building components as needed, they can better rely on their own resourcefulness, hence become less dependent on others. Reduced dependence in turn, encourages more societal interdependence. Consider how interdependence is valued in the mutual coordination achieved by higher income levels. Why - as a society - shouldn't we be able to extend new potential for interdependence to lower income groups as well? Clearly, in the foreseeable future, market options for flexible land and property ownership will only become more important, not less.

Economic Integration Could Help Unify Us

After all the post election chaos, finally some relief with a change of command in Washington. Still, I know this respite could be brief, and it hardly signifies a return to normalcy. As things stand, too many budgetary issues are coming to the fore, and recent decades of structural shifts have yet to be addressed. So while Biden is a calming presence (for some of us), he's in charge of a government which is ill prepared to meet the expectations of its citizens. Unfortunately, Biden's hopes for greater unity are mostly wishful thinking - at least for now. 

For that matter - as some noted regarding the heightened inauguration security - this was no peaceful transfer of power in an ordinary sense. It may be that political unity remains out of reach, until societies become more serious about economic integration for all citizens. Importantly, what's at stake in all this, isn't about continuous cycles of additional monetary redistribution. Rather, a broader framing for market orientation is called for - one which would ultimately make less monetary redistribution necessary in the first place. 

How to think about more concise forms of economic integration? For one, such strategies would focus on the economic potential of all human capital, regardless of formal educational levels. Once a wider range of time based mutual assistance becomes horizontally aligned, skilled services would no longer be limited to urban settings and limited budgetary directives. If we can establish applied knowledge networks in communities of all kinds, aggregate time value would become a more dynamic part of our economic destinies. If we truly believe in the power of free markets, then why not give ourselves greater ability to define useful time based consumption, in line with what others hope to provide. 

More viable platforms in human potential, could increase the supply and demand of useful economic time for all citizens. Eventually, the mutual reliance of shared time would lead to greater interdependence, thereby giving people new opportunities to trust one another and become civilized again. 

Only recall how the civil societies of recent centuries, were established through a more complete representation of specific resources. Toward this end, why not make time use potential as economically viable as other forms of commodity wealth. The resource representation which our tradable sectors made possible, led to extensive societal coordination, cohesion and voluntary cooperation. Let's hope that our non tradable sectors can now take a page from these earlier positive examples. Should we refuse to put additional and unnecessary burdens on resources that are already scarce, perhaps we have a chance to reduce the "uncivil wars" of our times.

I've Been Disappointed in Myself. But What Does That Mean?

After the recent storming of our nation's Capitol, I've experienced some regret and dismay, regarding my own meager contributions toward more positive circumstances in the U.S. But I've also wondered: how could societies do a better job of preventing such calamities in the first place? It's one thing to express frustration when governments don't function well, and I believe we should. But attempts to destroy them is altogether another matter. It's certainly something I never expected to witness in my lifetime, here in my own country.  

Yet I've managed to shift from this generalized disappointment, to one more specific in nature. Why haven't I been more effective in the last 7+ years of blogging? Do seemingly lackluster results suggest I quit blogging and just call it a day? In spite of these concerns, I'd like to think the answer is no. While I'm occasionally tempted to disengage from it all, I hope to remain committed, involved, even stubborn if necessary. 

Still, it helps to remember that my main limitations are mostly age related. When I was young, I would hardly have confined myself indoors to write about supply side structural reform potential. I'd like to think that had I been aware of these issues decades earlier, my response would have included traveling across the country, while knocking on doors of those willing to listen to my ideas. At the very least, there's consolation in knowing I'm hardly alone in my age induced limitations. Many such as myself have gleaned practical tidbits of wisdom mostly in retrospect, after long slogs which occasionally included learning about life the hard way.

So how to proceed, given our most recent political impasse? For one, all citizens need a better understanding, how severe structural problems have contributed to our political reality. As a nation, we are increasingly constrained by land (place) and time scarcities which governments and inexplicably, even private citizens have yet to address. Today's fiscal policies in particular have been impacted. Unfortunately, neither Democrats or Republicans support fiscal policies which take existing land and time scarcities into consideration. Since both parties instead promote the most costly market options possible, Washington faces severe limits in its ability to function effectively for our knowledge centered economy. Is it any wonder that - due largely to lack of market integration for all income levels - both parties are now inclined to engage in mutual destruction?

Those of us who have not given up on humanity, will continue to seek means for stronger free markets and organizational systems which work well for all citizens. Granted, it won't always be easy, since there are few clear paths by which either individuals or groups can create positive change. Fortunately, there are individuals who will remain stubborn in their efforts to build a better world. Even though it's not easy for all of us to directly participate, we will stay engaged from the sidelines of our desks, while cheering on those who are willing to stay with the good fight.

The Danger is Still Present

Like many, I could scarcely pull myself away from the TV yesterday as events unfolded on Capitol Hill. What a relief afterward, when Democrats and Republicans finally had reason to unite in solidarity, against domestic hatreds which few present had witnessed up close till now. Indeed, the whole episode made me recall the Oklahoma City bombing in 1995, since the latter incident opened my eyes to the reality of our cultural struggles. And while I've never protested in the streets, there have still been occasions when I personally felt the burn of cultural hate.

At the very least in Washington, yesterday ended with second thoughts all around regarding the Electoral College challenge. For now, stability has returned and streets were quiet this morning. So we can all breathe a sigh of relief, right? 

If only it were possible to know for certain. As John Ashmore notes,

It's easy to claim this is the work of a lunatic fringe, but that ignores two crucial points.

He further elaborates that while Trump's actions and words encouraged the insurrection, the president was hardly alone in doing so. Unfortunately, others in the "highest echelons" have supported Trump's fantasies as well. Ashmore continues:

...this mob does represent a vibrant, virulent strain of American political opinion. Just look at surveys that show one in five voters there supporting the storming of the capitol - a figure that rises to 45% among Republicans.

Part of what prompted this post, are some of the relevant flags. Over Christmas for example, a few folks here finally replaced their Trump flags with American flags. Nevertheless, as the above CapX article states:

If anyone thinks these people are 'patriots', just remember that they replaced the American flag on the Capitol with a Trump one.

Given the media's propensity to highlight the outlandish, I'm surprised that an obscene F*&# Biden flag, (mentioned in my previous post) did not get more attention. I caught a brief glance of it as someone in the crowd carried it through the Capitol. And a local sheriff who had just been elected as a congressman, even tried to calm the rioters down at one point. He must have been quite startled - as someone who openly backed Trump and his efforts to remain in office - to witness firsthand the effect Trump actually had on certain 'patriots'. What else might set them off in the days ahead? 

Suffice to say that people like me don't always feel safe in this country. When I was younger, I used to imagine moving to a state or area where fewer domestic threats existed, but finally realized this is an imaginary notion. So other than the minuscule efforts of this blog, when it comes to cultural struggles, right now I can do little more than pray for peace, the safety of our next president, and for positive change. Perhaps after this close encounter with the hatred of some protesters, politicians of all stripes might finally be less tempted to play with fire, just to gain temporary political advantages.

In the meantime, given an unexpected peace between Democrats and Republicans this morning, I wondered about the possibility of improved moods on the part of nearby neighbors. So I stepped out on the front porch and furtively glanced next door. Nope, the obscene flag is still there. 

Ten Ways This Blog Differs From the Norm

If my blog lacks normalcy when it comes to economic issues, in all fairness, I'm not sure what "normal" even is. But what, exactly, makes it different? Over the past month I've reflected on that question, and have since come up with some explanations. Perhaps it would be a good idea also, to put a lightly edited version of this post on the blog sidebar.

1) In the blog's early years, I gradually developed a real economy or supply side approach to economic issues. Doing so seemed important, for while market deficiencies aren't readily amended by demand based policy options, there's too little direct focus on market deficiencies which so often result in inappropriate demand based policy. If societies were more open to innovative supply side strategies which could improve market access and participation, there would ultimately be less budgetary gridlock, and fewer inappropriate fiscal policies. Such innovation is especially needed now, since fiscal options in general are much more limited than they were, even a half century ago.

2) There are positives in supply side intentionality which are often missed. When market platforms do not accurately reflect production and consumption potential for a wide range of income levels, governments tend to step into the fray. However, this can lead to additional losses in personal and social freedoms, especially when governments quickly intervene where markets are not responsive or proactive. On the other hand, when usable platforms are designed which create opportunities for all income levels, these options are generally more benign and beneficial than governmental policy responses.

3) One thing about me which is relatively normal: A rural middle class perspective which gradually transitioned to a lower middle class reality in later years. Nevertheless, my lower middle class outlook doesn't always make sense online, where societal issues are generally debated by individuals in higher income brackets. Despite the fact a good portion of my working years were in urban environments, by my fifties, I lacked the level of income necessary to remain urban in many U.S. locales. 

Plus, the social media of intellectual dialogue is dominated by college graduates. My perspective can be off putting to someone who doesn't imagine economic integration in a knowledge based economy, as feasible for people with limited incomes or formal education. So not only am I out of step with neighbors such as those who recently put up obscene flags spelling out F*&# Biden, but also successful city people who dismiss me as another dimwit ne'er do well. For these reasons and of course others (including safety precautions), I'm careful about advertising my beliefs and ideas where people happen to see me in public. It's just better not to antagonize others, especially since I seldom know who is actively offended by my actions and ideas. In other words, as a blogger, these considerations help explain why I don't really have a public persona.

4) I generally seek out elements from classical economic thought, not only because they are more readily available, but because they provide a good foundation for additional theoretical framing. In similar spirit, I defend the validity of GDP measure and market monetarist (monetary) thought, as both help in understanding potential gains in productivity and long term growth. Many institutions continue to serve valid and utilitarian purposes. However, our non tradable sectors need extensive organizational augmentation in both skills use potential and ownership strategies. Fortunately, many aspects of tradable sector activity remain as useful as ever. In particular - given the nature of tradable sector wealth origins and remaining capacity to support non tradable sector prosperity - it can be counterproductive to claim capitalism has failed.

5) Since many recognize time as our most important resource, it's surprising there have not been more calls to make time a valid economic unit in its own right. Doing so would provide much needed context for economic time use in experiential, practical, and other workplace settings. With time as a valid economic unit, societies could help solve the problem of limited capacity to reward highly valued skills via terms of full monetary compensation. Even though our time commitments and availability will always be scarce, we should not be burdened, by the artificial scarcities which are presently putting modern knowledge based economies in jeopardy. 

6) Many now envision innovation and progress as something to further expand horizons for the already successful. However, this is a very shortsighted approach. Only consider for instance how the most meaningful progress over the millennia, has benefited citizens from all walks of life. 

While there are various interpretations of progress, I believe the one which matters most, takes into account the time constraints people face in meeting the most basic elements of their lives. Said another way, when innovation reduces time requirements for one's most basic needs, production gains in the form of progress have been realized. The problem in this regard is that extensive price making in non tradable sectors has substantially reduced the time many people have to enjoy their lives. Too many non tradable sector institutions have saddled citizens with financial burdens beyond what is necessary, thereby reducing already scarce time for other life options and challenges. No measure of productivity is really complete if it doesn't take aggregate time obligations into account for meeting non discretionary consumption. A productivity measure is needed which can strip away hedonism and signalling, to determine a base of actual necessity - one not further expanded by extensive regulations. With such a base, we would once again be able to determine both progressions and regressions in total factor productivity. 

7) One underlying theme in my work has been a constant source of motivation, perhaps in part because it has received so little attention elsewhere. Even though I've found a few references to sectoral effects over the years, I am astonished more work hasn't been done in this area. After all, shifts between tradable and non tradable sectors affect people's lives in many ways. These structural shifts greatly impact economic outcomes, particularly in terms of aggregate demand and supply. 

Unfortunately, a general lack of understanding and consideration about sectoral effects, now poses more problems than in previous decades. For instance, price making in non tradable sectors has led to quickly expanding national budgets, with consequential equilibrium imbalance which impacts a wide range of governmental goals and political alignments. Modern day economies are extremely reliant on knowledge, and they need a more direct and reciprocal approach for time based services generation. Otherwise, many nations will eventually struggle with excessive dependence on monetary redistribution for applied knowledge.

8)  My first explorations online began in 2009, and I quickly realized my inclinations toward libertarianism would be different from the norm. For instance, I preferred a utilitarian approach, but it was clear neither governments or free market advocates were focusing on means to promote the greatest good for the greatest number. However I eventually realized doing so was not a straightforward process, since achieving the greatest good for the greatest number is mostly feasible through local and decentralized means. This is one reason it is so important to understand monetary flows between tradable and non tradable sector activity, so that internal reciprocity reduces the budgetary constraints which lead to fragile politics.

Libertarianism has found limited success in part due to its lack of emphasis on free markets which benefit all income levels. I hope more future libertarians will advocate for free markets which improve the lives of all citizens, instead of mostly catering to the interests of the best and brightest. 

9) Nevertheless, my concerns for those who have been left behind, tend to take different forms from those of the political left. A lifetime of personal experience and observation has convinced me that markets could be devised which offer better production and consumption options for citizens, than governments have been able to provide. In particular, governments face more constraints when it comes to local economic circumstance, especially given their desire to appease those who hold excessive power. 

And while my concerns about class issues might seem old fashioned at first glance, today's class issues are a world apart from those in an era of industrial dominance. What depresses me most is identity politics and its associated cultural battles. Since many on the right now eagerly engage in cultural struggles as well, a much needed focus on structural realignment, has been all but forgotten. If this weren't enough, some on the right dismiss my reasoning because I believe everyone deserves meaningful roles in knowledge based economies. Restructuring toward this end should be our focus - not contributing to more social fallout by fighting over who should be deemed "worthy" of the limited slots in today's most prominent workplaces.

10) Some have emphasized the nature of a circular economy in recent centuries. Why not take a closer look at this reality, to understand how we might better manage originating or primary wealth flows. When we recognize the majority of time based services as essentially secondary markets in this framework, we come to understand how fragile these secondary markets actually are. Even though their importance is paramount, they lack the solid foundation for the economic dynamism we now need, to expand the horizons of knowledge. Fortunately, if we are willing to try, we could eventually align time value to create a stronger foundation for originating wealth - one which expands the potential of both useful and desirable services generation.