Wrap Up for April 2021

Were it not for the costs of housing, people would not be so food insecure in the first place.

A misunderstood - yet widely cited - article on the theory of the firm.

In monetary policy, Robert Mundell was "the most important proponent" of the price of money approach.

Plus, Paul Krugman describes Mundell's evolution in macroeconomic thinking.

The world economy is experiencing a two track recovery.

Might the global unrest be a prelude to even more destruction? "today's protests are generally not succeeding in forcing liberalization."

What parts of the globe have been most affected by the pandemic?

Bidenomics as a political movement.

Bradley Hanson's first impressions of Jonathan Levy's new book Ages of American Capitalism.

"Why are economists losing prestige?"

Noah Smith questions whether high speed rail is really feasible in the U.S.

Will the latest stimulus lead to a multiplier effect?

"Instead of emphasizing the failures of current systems, libertarian energies are now focused on the possibilities of entirely new ones."

Paul Graham explains why new companies can gain value so quickly.

"Business Exit During the COVID-19 Pandemic"

Covid is the exception, but what causes standard recessions?

And when it comes to maintaining velocity, central banks face the same essential challenge.

Cass Sunstein clears up some misunderstandings regarding regulation.

Russ Roberts discusses poverty with Mark Rank.

On hysteresis and the business cycle. "there's no such thing as a pure supply shock." However, is the divergence from trend in this discussion, actually overestimated?

"Winners of $20M contest make concrete to trap carbon dioxide."

In other good news, "A rediscovered forgotten species brews promise for coffee's future."

And, a farming robot uses lasers to eradicate weeds on approximately 20 acres per day.

The wage data is different this time.

"It is the self-deluding withdrawal from the international economy over the last 20 years that has failed American workers, not globalization itself."

"Emerging from the Great Stagnation"

A review of Arts and Minds by Anton Howes.

An alternative approach for stopping the next pandemic.

Identity politics has created even more difficulties for zoning reform.

News media is still evolving.

Sheriffs and ranchers are bedeviled by increased border migration.

Perhaps still relevant today: "Nine Principles of Policing from 1829"

A considered explanation of the New Right. "The enemies are well defined: Hayek and Friedman, Locke and Jefferson."

Are accelerated math classes associated with inequity?

Some global trends for the world of 2030.

Some cracks are showing in a seemingly stable facade.

3D printing and the housing shortage.

The changing nature of global dollar dominance.

Alas, better electrical infrastructure is no simple matter.

The public policy pretense of campaign cash is gone.

The knowledge gap impacted my office work expectations in the early nineties. Even though many of us had been using computers in our workplaces during the previous decade, we were not prepared for the new software which allowed professionals to take on what previously had been secretarial work.

Brookings on the 2020 census data release.

Nancy Qian explains why China isn't quite as wealthy as many imagine.

The Importance of Economic Sustainability

April 22nd was the anniversary of Earth Day (beginning in 1970) which emphasizes environmental restoration and sustainability. However, this global acknowledgement reminds me that some aspects of sustainability get emphasized over others which are seldom noted. In particular - despite ongoing efforts to achieve financial and monetary stability as well - why has economic sustainability not received more attention?

After all, citizens need to be able to manage their own lives effectively, before they turn their attention to the physical care of their environments - at least insofar as sustainability is generally presented in the media. If sustainability dialogue focuses on anti growth or perhaps anti capitalism, then why do so many proposed environmental "solutions" end up costing more money than the poor can afford? Plus: paradoxically, the poor actually contribute to earth's resource preservation in many instances, since they have little choice but to limit their own consumption. 

Perhaps economic sustainability has not been considered, since instead of government dictates, it involves market centered options which lead to fewer financial burdens for low income levels. Unfortunately, when domestic providers prefer to keep consumption costs high, this results in an upward price spiral, as citizens respond by demanding ever rising wages to meet non discretionary costs. If this weren't enough, groups which lack the political power to demand "living" wages, also lack the ability to garner respect from society for the work they do. 

Let's reduce the spiral of ever rising wage demands, by bringing non tradable sector markets - especially time based services and basic housing components - within reach of all citizens. Once production reform becomes a reality, we will all benefit from the process. The road to greater stability in economic systems, is one which creates a more open version of market potential than is currently taking place.

Fortunately, there are many ways to make domestic innovation and production reform feasible. Should municipalities prove hesitant to make room for walkable options, why not create new communities which integrate walkable elements in the core of their design. When cities and towns won't address zoning and regulations which limit housing, create new communities that are willing to build flexible forms of housing and work spaces. And most of all, build new communities which actively engage in a full range of time based services generation. Make sure all residents are included in local calendars for work, play, and more, during the course of every year. 

All these elements might add up to a sustainable future, one where high income levels are no longer necessary to live a good and meaningful life. Once we create viable market options which don't require excess use of earth's resources in the first place, sustainability might finally be envisioned in broader terms.

Quality Product Isn't the Same as Rising Standards of Living

Often it appears that quality product gains and productivity gains are one and the same. However, might quality product occasionally detract from rising standards of living? Confusion about quality product as an aspect of productivity, deserves more attention than it receives. For example, recently Timothy Taylor opened a post re the productivity slowdown after 2005 with this observation: 

In the long run, a rising standard of living is all about productivity growth. When the average person in a country produces more per hour worked, then it becomes possible for the average person to consume more per hour worked.

But, how do we know when this desirable process actually occurs?  When might organizational processes to generate product quality, diminish aggregate consumer potential instead? Societies need better measuring indicators to determine how aggregate input/output requirements affect basic levels of consumption potential. Only recall how presently, many of the costs of excessive inputs for quality services are being shifted to future generations, via deferred debt and budgetary burdens. Indeed, much about our future economy, depends on the extent to which human capital contributes to exponential output gains, symmetric time coordination, or else the excessive time scarcities that today's knowledge providers have generated.

The differences in time versus exponential product designations, are vitally important for how we frame organizational capacity and the productivity which contributes to GDP representation. Nevertheless, these sectoral differences are difficult to conceptualize, because productivity is not often described in such terms. Consequently, the highly valuable yet costly product of time based services, poses undue financial societal burdens. Our lack of understanding as to the actual inputs and outputs that time scarce services involve, might consequently leave some of this future organizational capacity in doubt. 

Oddly, much of the present confusion, actually comes down to a one size fits all productivity perspective. Given the lack of more precise tradable sector and non tradable sector measures, the present combination is statistically confused as what an "average person in a country produces". Since this perspective doesn't distinguish between time centered output versus exponential forms of output, many forms of applied knowledge lack economic clarity. In particular, we still don't know approximate time increments that are expected of the average individual for the most basic aspects of non discretionary consumption. Before anyone gets sidelined by productivity factors such as leisure time or seemingly "free" consumption gains, basic non discretionary requirements are really the starting point for other productivity considerations. Plus, knowing a base level of expected consumption costs in relation to multiple income levels, provide clues how production input/output ratios matter most for consumers and producers. 

Should tradable and non tradable sectors gain more accurate forms of input/output representation, it would become simpler to think about the differences in approach these groups really need for purposes of long term productivity gains. All the more so, since when non tradable sectors focus on quality product, thus far they've inadvertently done so in ways which detract from further consumption options in the marketplace. 

Ultimately, even though quality product isn't the same as rising standards of living, that doesn't mean time based forms of product aren't important. Not only are many forms of time based product desirable, the time scarcities of production and consumption are among the most important considerations for total or multi factor productivity. Even though organizations logically seek to "save" time (via traditional productivity reductions of time/hours in relation to other inputs), there's still our personal motivation to "use" our economic time in the most significant ways possible. 

Occasionally, the best choices in this regard turn out to be experiential time spent with others. For the most part, we seek to balance the economic time we hope to gain from others, with the economic time we hope to share with them. Rather than leaving such decisions to a relative few professionals or possibly artificial intelligence, the best approach really comes down to the kinds of economic time that all citizens hope to take part in.

Housing is in Need of New Profit Models

Were it not for the structural inefficiencies of our non tradable sectors, the pandemic would not have proven so difficult, and Washington might have been less compelled to add more long term budgetary burdens. Alas, these fiscal "rescues" intensified in part due to the housing costs of lower income groups. Lower income levels also suffered more employment losses than other groups. If all this weren't enough, as the pandemic eases, employers are finding it difficult to hire new employees, since there are too few low to medium priced housing options in places with good employment potential.

These are just a few reasons why housing needs new models for ownership and profitability. Not only could new housing models benefit from further manufacturing innovation, but also organizational capacity which includes lower income levels in land based ownership. Even though lower income levels presently have access to manufactured housing, for instance, they still suffer from a severe lack of land use options for these homes. 

In recent years there's been plenty of dialogue about the problems of housing supply limitations. Yet the main response (thus far) has been encouragement for more of the same, in terms of traditional building methods. Where are market innovators for housing when we need them most? According to Axios:

America has a record-low number of homes available for sale - just 1.03 million, according to the latest NAR data. 

Only consider how this compares to the recent housing supply peak of more than four million in July of 2007. However, what many believed to be a bubble in the last price run up, was occasionally linked to excessive building in places with limited zoning. As it turned out, many places where people wanted to live, weren't where home building was still actively encouraged. These were also years when communities disallowed flexible ownership arrangements, such as settings where manufactured homes could be brought in. 

What kinds of short term responses might help these circumstance? Bill McBride of Calculated Risk recently offered some suggestions and additional thoughts about near future housing supply. Even though many market observers are pessimistic re housing in general for 2021, McBride expects sellers to resume putting their homes on the market, once pandemic circumstance subside and sellers regain the confidence to interact with buyers. For that matter, rising interest rates might decrease demand. As to policy, McBride notes that if higher income owners were offered a one time waiver on capital gains, more higher priced properties would be placed on the market. As to lower income levels, recall how many single family homes and condos had been previously converted to rental units:

Another policy that would help would be to offer a tax break to landlords of single family homes and condos, if they sell a rental property this year. 

I for one would be especially pleased if there were more condo offerings on the market, since condos are one of the best ways for aging homeowners to downsize and lessen their maintenance responsibilities. That said, insofar as new housing prospects, traditional builders mostly find profits in the sometimes excessive square footage of higher income level housing. Increasingly, builders face their own pressures in hiring construction workers, not to mention the rising costs associated with their own supply networks. These factors make it difficult for traditional builders to even realize a profit from lower income housing. 

It would seem these realities are something many municipalities have been reluctant to come to terms with. Not only has NIMBYism gone too far, it has led to effects which negatively impact the economy along with many areas of our personal lives. Which is why I'm convinced that serious innovation in housing and land use might do more good for all concerned, than NIMBY proponents realize.

The Freedom to Build, to Be, Yet Also Destroy

Since personal freedom includes elements of both creation and destruction, the freedoms that societies may hope to preserve are becoming more complicated. By way of example, not all innovations are the same. Some innovations which are oft described as societal improvements, nevertheless don't provide unalloyed benefits to all concerned. This particularly holds, when someone intentionally builds products specifically intended for destruction.

For that matter, in contrast with weapons meant to kill, the destructive urges of today's "cancel culture" are relatively benign by comparison. Am I wrong in suggesting that the cancel culture of the left, mostly lacks the violent tendencies of certain wannabe authoritarians on the right? While the political right is understandably frustrated with the cancel culture of the left, I doubt they are actually as afraid of extreme violence from the left (at least presently), as some pretend to be. 

Plus, when it comes to ideology, so long as mental capacity is engaged in actions which aren't overwhelmed by emotion, one at least hopes for less violence in political outcomes. Sometimes these realities are blurred though, when ideology becomes a convenient excuse for acting out, due to some form of massive grudge against various elements of society. There are additional dangers as well, should those in power actively seek support from people whose emotions clearly run counter to logical thought processes. 

Should politicians seek out future votes based on emotions rather than logic and rational thinking, we stand to lose even more of our freedoms. If politics mostly becomes a matter of besting one's perceived enemies, societies will pay the price through even more losses of personal and market based freedoms. Has Washington forgotten that markets still offer society's best potential for successful pursuits in creativity, imagination, identity, and the nature of our physical environments? Or, perhaps too many of these once free markets have already been reserved for the elite. If so, the additional result is more fuel for the fires of destruction. How many more would decide to act out in anger, should they continue to lack the legal ability to build a meaningful destiny? This is certainly a question worth asking in the U.S. given the realities of our gun culture. 

Chances are, we might still reduce the societal impulse to destroy, by restoring rights to personal identity and allowing citizens to build lives on more sustainable terms. Only consider why it has become so important to focus on careful market solutions, as Republicans now question the freedom of businesses to express their own political opinions. Imagine the good that could result, by making room in our markets for stronger production rights which focus on positive aspects of identity and freedom. 

It's time to support stronger production rights for all citizens, especially in terms of skill potential and innovative simple housing forms. Perhaps if more of our positive freedoms are restored, people will eventually become less inclined to act out their negative freedoms. When future innovation is discussed, much more is at stake than improvements at the margin. The innovations which matter most, have potential to improve the outcomes of average citizens in average places. Why not encourage the human impulse to build anew, in more positive ways.