Wrap Up for February 2021

Maryanne Keating details "The Economics of the Hispanic Scholastics". 

"Understanding Modern Monetary Theory: Part 1"

An "interesting defense of parliamentary systems" with Coasian reasoning, plus further discussion in comments. Nevertheless, as Frances Coppola notes, parliaments have their own sets of problems.

Poor countries face many hurdles in their efforts to prosper.

Wastewater and sanitation methods are still problematic in some areas of the country. Yet this is only one important aspect of bridging the divide between urban and rural areas.

Governance today is not well equipped to deal with extensive technological disruption in the workplace. "While there are a few people who embrace the disruption there are many more who fear it."

High income economies need to fight COVID everywhere, not just in their own countries.

Twenty startups in Europe made this award shortlist for a circular economy. Also, turning plastic waste into bricks.

Finally, some protection from "surprise" billing.

The post-COVID period is going to be quite expensive. But who is really going to notice?

Were the ancients as prosperous as many are inclined to believe?

Cellular agriculture is the second wave. "There are about 60 companies in the world producing cell-based prototypes including meat, seafood and materials such as leather and cotton."

Even in low income countries, manufacturing is increasingly biased against low skill labour.

Some suggestions from Raghuram Rajan for "building back broader".

Sydney has had better results for increased housing supply than many areas.

When it comes to future harvest potential, all soils are different.

What might a"revenge of the normal people" look like?

Instead of creating more "skin in the game", cost sharing actually discourages people from using formalized healthcare.

When it comes to UBI, leisure and free time are not the same thing.

"One-third of the U.S. population has already been infected."

I worry the new minimum wage would fall especially hard on small businesses in small towns, and high school students who need small town jobs to save money for college and/or related costs of entering adulthood.

Dispelling the myths of AI.

Cash can't solve many problems faced by those with limited incomes.

Of late, the U.S. leads other nations in fiscal stimulus.

"Hume's amazing 'out-of-sample' success that had lasted for 256 years came to an end in 2008."

Overly expansive monetary policy ultimately leads to recessions, just as does tight monetary policy.

Does the best idea win the day, or does the story?

The coin shortage is a velocity story.

The split between Democrats and Republicans is not as simple as it may appear.

There are good reasons why it would be difficult to inflate away U.S. debt. Towards the end of the podcast, Ricardo Reis notes how he is less certain than he's ever been re the near future direction of inflation. 

Republicans aren't ready to move on.

Some musings from John Cochrane re inflation.

A new method for plastic dissembling which does not require extremely high temperatures.

The extent to which large foundations typically ignore rural poverty, especially resonates with me.

What does "the great demographic reversal" mean for the economy?

"Democrat fires do not exist. Neither do GOP blizzards." Also from The Week, Bonnie Kristian notes the limits of bootstrapping in Texas.

Greater density through hyperlocal zoning.

Teenagers are now less than 10 percent of all minimum wage earners, whereas they were once nearly a third.

Strong growth is forecast for 2021.

Dean Baker explains why wealth is not a good indicator of inequality.

David Andolfatto does some macroeconomic theorizing.

There's a surprising amount of space in the U.S. where no one actually lives.

I've yet to figure out making a proper link to Substack articles, but wanted to highlight a February 22 post from Noah Smith, "Who cares about the Ivy League?" where he makes the case for inclusion of average folks in social discourse.

Police chiefs in big cities especially need good people skills now.

Decline of in-migration is a larger factor.

The "smart" city idea may have already have fallen out of fashion.

Scott Sumner loses hope. And speaking of diminished expectations, I never anticipated a version of "Get Together" (by The Youngbloods) which felt quite like this:

Is it possible to reimagine democracy? "no consensus exists on exactly why things have gone so wrong."

Reimbursed Mutual Assistance > UBI or Guaranteed Job Programs

What if some form of universal basic income were to become a reality? Alas, should traditional employment decline in the near future, UBI is not a practical long term solution, especially given the nature of present day fiscal obligations. At most, UBI might serve as a stopgap measure, should a wide array of employment sources dry up simultaneously due to technological change. 

Chances are, UBI would also prove somewhat demoralizing, since many recipients would lose valuable opportunities for economic and social connections with others. Not only is a UBI approach likely to reduce our chances of greater economic integration, it could further polarize an already divided society - especially in terms of knowledge use and meaningful participation. 

Small communities in particular need proactive solutions for economic dynamism and long term potential, instead of compensation for basically being forgotten or left behind. Toward this end, compensation in the form of monetary reimbursement for voluntary mutual assistance, would be more practical than policy choices that don't address widespread social isolation. What's more, mutual assistance could be symmetrically aligned (via matched or reciprocal time) so as to create new wealth instead of additional demands on fiscal policy. Indeed, what could be better than creating internal rewards for our natural inclination as humans, to come together in order to get things done? 

Compensated or reimbursed mutual assistance at local levels, is also a better solution for many than guaranteed job programs. Unlike government generated work which often requires participants to relocate, compensated mutual assistance would allow local communities to create new job opportunities and workplace responsibilities in their own midst. And rather than attempting to fulfill the wants and needs of governments, the time arbitrage of mutual assistance would allow people to create entirely new local markets - markets which are responsive to shared individual wants and needs. 

Reimbursed mutual assistance contains other advantages as well. For instance, it could lead to the local creation of knowledge based services - services which otherwise tend to be difficult to access via hourly wages alone. Fortunately, the supply side approach of reimbursed mutual assistance would bring additional value to our collective time, so as to make it capable of meeting a full range of basic needs. Eventually, better coordination of time value could lead to greater community trust as well. This is especially needed in the U.S. where a substantial degree of trust has been eroded away.

New patterns of mutual assistance could lead to more voluntary and spontaneous forms of association than are now common in many time based service activities. As individual groups structure their combined efforts to build a shared continuum of activity, they gradually create new wealth which approximates what is often possible through more traditional forms of employment. In a time when advancing technology makes near future work potential less certain, people can breathe easier once viable replacements create new sources of normalcy and stability for all concerned.

Extensive Price Making is an Equilibrium Outlier

Even though many of us take extensive price making for granted in time based services, this set of circumstance is actually an equilibrium outlier among many nations. For instance, history provides ample evidence that systems of knowledge centered agglomeration which depend on other sources of wealth, can be quite fragile in the long run. All too often, when citizens can't utilize knowledge via non hierarchical means, they end up missing basic or critical steps which could help them achieve daily goals. Worse, they lack any viable patterns of participation in the institutions which bear responsibility for continued knowledge preservation. 

Since direct reciprocity has only become more difficult for services generation - especially during the 20th century - societies increasingly rely on asymmetric participation, production and consumption for a wide array of knowledge based activity. Alas, this approach has led to sectoral imbalances and accumulating debt loads. Much in the way of applied knowledge is publicly supported. However, this means that much of today's day high skill activities are financial obligations for future citizens, rather than market based production and consumption options for people who need them now. Despite the fact this set of affairs can't continue indefinitely, we still lack any Plan B which could stabilize and lessen budgetary burdens many nations face for knowledge based needs. Perhaps it's the fact no Plan B is being actively discussed, which encourages major political parties to completely ignore the possibility of imposed austerity and hardship in the near future.

A major challenge in all this, is to once again relearn how to use knowledge and skill through more directly reciprocated patterns. Not only would symmetric time use mean greater market participation for all citizens, reciprocal time matching can create more immediate wealth, thereby lessening the perceived need for governmental redistribution of all kinds. Time arbitrage is a viable Plan B which would build a more complete framework for time use potential in local community groupings. The local adaptation of production and consumption settings for knowledge, could ultimately transform communities which otherwise find themselves left out of knowledge production and consumption in urban markets.

The group time of local mutual assistance would function as a form of internalized market pricing. Since the majority of time use potential becomes accounted for in a market context, time begins to function as a valid price taking mechanism for participating groups. Likewise, being able to price take makes good deflation possible for services generation, such as extensive price taking in tradable sector activity has led to good deflation in countless forms of resource capacity.  

Consider how defined equilibrium settings can gradually restore sectoral balance by allowing participants to coordinate time more fully. Importantly, this market option makes time based services more sustainable over the long run. Meanwhile, however, the U.S. may be experiencing even more political polarization than other nations, since healthcare price making is more extensive than what generally occurs in most nations. Indeed, our healthcare organizational capacity actually makes U.S. healthcare more of an outlier, in relation to other mature economies. This extreme dependence on national support also helps to explain why it is often so difficult for both the production and consumption of healthcare in the U.S. to remain in a sustainable position, possibly even for the medium term. While price making is always an understandable urge, fortunately we can recreate market options which make room for the more sustainable practice of price taking, in the use of highly valued skill and knowledge.

The Decentralization Which Matters Most

How might decentralized options contribute to long term growth and economic sustainability? Granted, there are certain periods when centralized power structures hold certain advantages in this regard. But once governmental budgets start to extend well beyond revenue sources, centralized power gradually wanes in the long run. Indeed, we may have already entered a period when centralized power holdings actually detract from our economic potential. 

If so, what can be done? The structural framing of decentralization potential has yet to be fully explored. Meanwhile, current dialogue re decentralized options tends to be in reference to specific circumstance and factors, rather than multi system alignments. Yet the latter holds substantial possibilities for future dynamism, not to mention more sustainable economic outcomes. 

One way to think about such alignments, is how general or national equilibrium also translates into the resource potential of knowledge production. While the cumulative effects of this circulatory (primary to secondary market) environment are complex and vast, they still contain basic elements which could respond to systems design. Ultimately, local microcosms of defined equilibrium would feature complex services generation alongside local tradable sector activity. 

Presently, mature economies continue to benefit from highly complex financial systems for many important knowledge production activities. However, the extent to which these systems can further develop along similar lines, is increasingly in doubt. As it turns out, extensive price making in high skill time based product, limits entry into these vital markets not just in terms of production, but also consumption. While price making is certainly an understandable impulse, when most participants elect this route, others are left unable to coordinate more closely for the resource capacity which is actually at their disposal. And in this instance, the relevant resource is of course our aggregate time use potential.

Fortunately, defined local equilibrium could pick up where the possibilities of national general equilibrium for knowledge production, tend to leave off. Time as a valid economic unit, would lessen the need for full monetary reimbursement of a wide range of activities which people find particularly worthy of their own efforts. One reason it is so important to develop local environments which nurture knowledge production, is that extensive price making in high skill time value, has also led to political unrest and polarization. Not only would new institutions for knowledge production make it feasible for citizens of limited means to reengage with others, the rural urban divide could also be meaningfully addressed as well. 

Excess Regulation Reduces Diversity and Inclusion

How might we respond to excessive regulation - much of which stands in the way of personal potential and greater inclusiveness? Clearly, there are regulations on the books which not only reduce our most basic life options, but are also detrimental to long term economic growth and dynamism. Once regulatory environments begin to overwhelm and economic stagnation sets in, societies pay the price in lost market opportunities and a generalized loss of willingness to continue sharing in commonly held goals.

Some of the worst offenders in regulatory excess, are those which impose arbitrary limits on our own growth potential. In a services dominant economy, that translates into tangible losses of mutual assistance and support. If we can't help one another economically, what options are really left? Or how could we possibly know, the extent to which output loss in valuable skills instead stems from a supposed lack of personal ambition? Consider the many hurdles that people are expected to overcome, before they can make a concerted effort to reach out to others on meaningful yet economic terms. Not all those regulatory hurdles in particular, were put there in good faith.

We have yet to begin the crucial task of making it simpler, for people to create real value from their own personal attributes. Meanwhile, societies are seemingly caught in fruitless and demoralizing arguments, where some insist various groups lack the fortitude or ability to do what is "necessary" to achieve success in life. 

Yet much of our inability to transition to a better functioning knowledge based economy, is due to regulatory hurdles. These complicated rules of engagement make it exceedingly difficult for many people to fully engage with others in meaningful ways. Is this the best we can hope to achieve as a society? How many burdens could we be rid of, if we sought to eliminate regulations which get in the way of active and meaningful participation with others? What if we could be of use to others, without the small fortunes so often needed for full time work in a knowledge based economy? 

Chances are, our collective human capital has been limited by arbitrary regulations to a greater extent than is realized. If we continue allowing only the "best and brightest" in basic workplace responsibilities, we might be doomed to a future where diversity and inclusion are all but impossible. Let's do our best to ensure this doesn't happen. It's time to get rid of the arbitrary regulations which not only create immense holes in our social fabric, but leave many citizens unable to fulfill their own personal aspirations.