Saturday, December 31, 2022

Wrap Up for December 2022

Aging boomers are just one of the problems for inflation, right now.

Has the "long twentieth century" actually ended?

Most popular business starts, by country.

Perhaps more municipalities will realize that some homelessness is simply irrational and unnecessary. 

Countries are experiencing losses in human development value

Content moderation isn't as simple as it sometimes seems.

Noah Smith explains how macroeconomics is still in its infancy. Scott Sumner isn't quite convinced. Both posts are certainly worth reading.

"Local governments have been opposed to any maps that show an increasing risk."

What makes wage distribution different in the U.S. from Europe?

Australia has been concerned about the possibility of World War 3.

A 2022 economic review in 11 charts.

Jason Furman highlights five economics books for 2022.

Inflation expectations are declining.

Shale fields in the U.S. are already starting to age.

Greg Mankiw's completed version of a recent paper for Brookings re government debt and capital.

A visual graphic for inflation by country.

Alas, when the financial system is bailed out, it becomes more fragile.

Total factor productivity isn't what it used to be.

It turns out unemployment was higher than necessary for 25 years.

Noah Smith interviews Ezra Klein.

There's plenty of mixed signals in the economic data.

What are the biggest power sources?

Innovation rankings by country.

Perhaps fragmentation makes more sense.

Highlighting Social Security "replacement rates".

Doctors and their families don't always follow the prescribed medical guidelines. My thought: some may prefer healthy food options instead, options which are occasionally out of reach for lower income patients.

Four hypothesis regarding inflation.

What macro did we learn in the 2010s that is worth keeping?

"Since the recovery began, velocity has been climbing back to its stable level."

Demand-formation as a constant adjustment process.

An indicator for recent tenants captures more recent inflation changes.

What made the recent monetary expansion different from 2009?

Core inflation and headline inflation require different Fed responses. 

End of the year reflections on recent economic trends. From Heather Long, Ryan Avent, Cardiff Garcia and David Beckworth. 

Jon Steinsson considers Fed communication and more in this interview.

Kevin Erdmann in a recent post highlights when credit essentially dried up for lower income level groups. 

Three economic indicators, visualized.

Is wage inequality starting to reverse?

Wednesday, November 30, 2022

Wrap Up for November 2022

David Beckworth explains inflation and the monetary targeting approach that could make it easier to manage.

Workplace productivity is more of an issue in times of high inflation.

"Selection, Patience and the Interest Rate"

A tiny home village now helps ease homelessness in Austin.

Peter Ganong on economic dynamism and resiliency (with David Beckworth)

First, curb inflation, then focus on other challenges.

"How quickly will wage growth slow?"

Seven monetary policy mistakes in 2021-2022.

Inflation has been particularly hard on real wages.

Short-term interest rates will likely remain high for several years. Yet monetary policy is still more loose than it may seem.

Water system management will become increasingly important in the years to come.

"Men are struggling."  Especially since the nature of work has dramatically changed.

"Debt Revenue and the Sustainability of Public Debt" (Ricardo Reis)

Texas needs to stabilize its rural communities.

Macroeconomics is still quite young.

Americans increasingly live in multigenerational households.

Some tiny homes are particularly built with flexibility in mind.

A "soft landing" remains possible.

A visual chart of healthcare spending and life expectancy by country.

Even though people in the U.S. benefit from fixed 30 year mortgages, this contributes to global monetary tightening right now. My thought: Since housing is such a strong transmission mechanism, affordable non traditional housing could actually function as a plus at a global economic level.

Silicon Valley is changing.

Despite rising nominal rates, the real interest rate is still low by comparison.

Why are there so many employment discrepancies?

Which hospitals are more transparent with their prices?

A Brad Delong draft for grand narratives.

Low income groups often need to move elsewhere once housing prices rise.

Life satisfaction changes dramatically with age.

A slowing in household formation will affect housing costs.

Somehow the Phillips Curve has reemerged as a policy guide.

How might FAIT be improved?

"Why Isn't the Whole World Rich?"

Many doctors remain unwilling to work in rural areas.

Real wage growth is down alongside productivity.

Low income students tend towards more practical forms of education.

Some charted international income distributions.

Current inflation specifics for holiday retail.

When negative supply shocks trigger output losses, how does this affect monetary policy?

More GenX and Boomers live alone, if only today's housing could reflect this.

It's encouraging to come across an argument for local community based care in mental issues. Indeed, "task-shifting" or "task-sharing are essentially examples of time arbitrage.

Some research re the city to government connection.

Land value differences in U.S. states.

Baby boomers affect general equilibrium conditions as they move through life stages.

Wednesday, November 23, 2022

Incentives Matter for Time Arbitrage Potential

An important aspect of time arbitrage is the need to secure time based services, starting with those which aren't exactly top career choices. Plus, these tend to be poorly paid, particularly services for elderly assistance. And since people who work for the elderly may struggle with their own financial responsibilities, they aren't always trustworthy and reliable for the people most dependent on their care. 

Granted, it can seem the obvious solution is to ensure adequate pay for all employees, whatever job one happens to be responsible for! Unfortunately, societies have shown time and again that the notion of "livable wages" for all, isn't feasible, despite the tremendous need. My regular readers know that the fact money will continue to be insufficient incentive for such work, serves as a starting point for my own suggestions regarding markets for time value.

If we can't create markets which specifically reward time value, there may ultimately be cultural ramifications. For instance, as the costs of traditional healthcare and nursing homes continue to rise, societal expectations would increase for individuals to make undue sacrifices for their own family members. While it's understandable that existing institutions are less willing (or able) now to pay for time intensive services, we need new institutions which can do so in their stead.

When it comes to incentives for time based markets, one thing to consider is the need for autonomy, and how it revolves around ideas of fairness associated with shared responsibilities. Still, when we purposely spend time with others, those interactions often benefit from the undivided attention of both individuals involved. Indeed, this undivided attention can often be critical to services outcomes. 

Yet attention to details with its associated time related costs, is often more costly than what existing institutions can still provide. When institutions are willing to pay well for time based services, they may expect high skill knowledge providers to commit to such a degree, that burnout becomes inevitable. Even so, excessive time commitments can be burdensome whether one engages in simple skill sets or high skill activities. In time arbitrage, a full range of skill levels would be apportioned so as not to create undue time commitment burdens. A fuller sharing for all skill levels, could also bring respect to work which is now almost treated as a form of social "punishment" for those who struggle with traditional education. 

Here are just a few of the links I've come across lately which highlight the need for a better marketplace for time value. Occasionally I find myself overwhelmed at the extent of time based services needs which simply aren't being met at any skill level. Alas, as a society we have scarcely begun to address these concerns. How could anyone claim real economic progress, if societies keep trying to move forward without better means of coordination for applied knowledge and time based endeavour in general? The sooner we face the fact that money alone cannot accomplish these vital tasks, the sooner we can begin to create new free markets in time value.

How to think about better aligned incentives in this regard? We share a number of basic time commitment priorities in our lives which warrant consideration. One way to think about the processes involved is this: What services are specific individuals willing and capable of providing, so long as doing so doesn't interfere with or somehow impose on the other important facets of our lives? Recall that what anyone might be tolerant of providing in an hours time, is not the same thing as activities one prefers on a more regular basis. Yet markets which rely solely on monetary incentives, don't distinguish well for these differences in relative time preferences.  

More specifically, time arbitrage could take place in several ways. The basic form would be agreed upon time share agreements between two individuals. These commitments would  occur as close to the same time frame as possible. That said, it would not always be possible to benefit from time arbitrage on these terms. Fortunately there are also incentives that would compel individuals to commit time, for which one would hope to benefit at some point in the future.

For one, there are moments of spontaneity, in other words those occasions when people do something for others "just because". One way to think about this is "paying it forward", only this approach tends more toward monetary gifting than services. However, the voluntary actions of time arbitrage would be recorded in the same manner as other aspects of time arbitrage into a broader framework. In so doing, the initial voluntary action functions as partial economic unit which turns into a completed exchange (and its associated full economic value) once the provider accepts a voluntary action from someone which they don't need to reciprocate.  

Another important economic incentive is the natural concern for our own well being, should we become temporarily or even permanently dependent on others in some capacity. This of course also ties back to the concerns of elderly citizens mentioned above. Toward this end, time arbitrage functions as a form of social time based insurance. It's an example of partial matches we can initiate in the here and now which might not be reciprocated for a long time. Such matches could prove especially helpful during periods when we fall short on more immediate time matches with others, for instance. What particularly distinguishes social insurance from monetary insurance is its direct nature, in terms of mirroring the kinds of attention we would seek from others should we become more dependent on them. One way to broaden the potential of time arbitrage for purposes of social insurance, is to seek matches not just for one's personal needs, but also in terms of home maintenance and/or care for family members. 

There's one more consideration as well. When it comes to personal incentives, what are our greater aspirations in life? How might those aspirations change over time? Local community coordination would not be complete, if participating groups didn't make room for everyone to discover challenging work which suits their own motivations and long term goals. Recall as well, how this is the part of time arbitrage which has the potential to contribute to applied knowledge in its more complex forms. What's different in this regard, is the time arbitrage approach to knowledge sharing. 

Sunday, October 30, 2022

Wrap Up for October 2022

Three takeaways from the UK market meltdown.

Some observations on David Ricardo's letters.

Fiscal dominance, or financial dominance?

Considering the downsides of divisions of labour.

An explanation how QE communication broke down at the BoE.

Tim Harford explains what we keep getting wrong about inflation.

Roger Farmer reflects on the life of Axel Leijonhufvud.

How can the U.S. economy be worse and better at the same time?

NGDP would be a simpler way to do monetary policy.

When it comes to cutting the costs of expensive skill sets, some cutbacks are more dangerous than others.

This year's Nobel explains why banks exist in their present form.

Edible cities are planting fruit trees and vegetable gardens in their public places.

What if the Fed hasn't even tightened yet?

Scott Sumner reflects on Slouching Towards Utopia.

Ordinary workers hold little importance in the health and progress of today's economy.

Michael Mandel discusses productivity (and more) with James Pethokoukis.

The Fed's battle with inflation is far from over.

Where Britain led the U.S. is likely to follow.

Michael Spence notes a changing global equilibrium.

"We can't afford the state we want and voters don't want the alternative."

Some takeaways from the September CPI report.

Perhaps the Fed's FAIT framework could be salvaged.

Greg Mankiw thinks the fed might be overdoing monetary tightening.

"Classical liberalism vs. the New Right"

Many medications were reclassified as OTC because of the wealth of information consumers now have at their fingertips.

American debt-ceiling standoffs may become more risky now.

Wages have risen at the bottom in the last decade.

Some economics history book ideas for the holidays.

Noah Smith feels that a "critical point has been reached." And, Chris Blattman is worried about the chances of WWIII with China.

The global natural interest rate may have fallen from 1.9 percentage points between 1985 and 2015. Plus, it's the least tangible capital that tend to the lowest productivity levels.

Hospital policies should also "do no harm".

In some respects political violence is all too familiar.

Saturday, October 22, 2022

Might Good Deflation Counter Excess Monetary Demand?

What makes good deflation so desirable? It all starts when increased output is possible with fewer resources overall. Once price reductions per unit come into play, they in turn lead to real wage gains and higher productivity levels. I believe that good deflation could become a services sector response to counteract high inflation and rising interest rates. Given the many positives of good deflation, what accounts for such resistance to its potential in housing and time based services?

Even though both areas must deal with the natural scarcities of time and place, much of the bias against good deflation potential is inadvertent and political in nature. Not only are such biases protectionist, they discourage adaptive evolution in time and place based product - evolution which could otherwise augment their capacity despite their natural limitations. While time based skill and land as real estate are certainly not exponential in nature, they could still add additional output through flexible coordination of knowledge and land use potential.

Bias characteristics also differ depending on the markets and sectors in question. For instance, progressives and conservatives increasingly prefer a restoration of local manufacturing over global free trade. Fortunately - even though this anti free market bias will increase manufacturing costs to some degree - globalized manufacture should continue benefiting nations in the foreseeable future. At the very least, it's reasonable to expect good deflation to ultimately be restored in global markets. Once tradable sector resource access is more stable and predictable, it should become more cost effective as well.  

Societies are fortunate indeed, that tradable sector activity is often managed for full production efficiencies. Still, during times of high inflation, we're reminded of the dangers of taking good deflation in tradable sectors for granted. Indeed, relying on the serendipity of long term good deflation (along with the more recent low inflation pattern) made it easy to disregard the long term inefficiencies of non tradable sectors. These inefficiencies remain in place due to countless quality requirements, many of which have been exacerbated by government subsidies. 

Recall however, that these requirements end up as ever more inputs in relation to aggregate output. Even when quality gains are worth additional costs for some, other groups suffer efficiency losses which in turn require additional personal labour for non discretionary needs. Consequently when it comes to quality of life, some income groups are actually moving backwards. Again, constant calls for higher wages occur because lower income groups need to work more hours than is sometimes feasible to meet their financial responsibilities.

Fortunately there are already better production methods which could establish disinflation in housing - methods which could eventually lead to good deflation as well. Just the same, a considerable amount of social and political bias has prevented the majority of flexible housing options. In this restrictive environment, progressives tend to focus on time based constraints for meeting financial obligations. Whereas conservatives are more concerned about place based constraints, such as immigrants who are seen as competing for already scarce housing. 

Despite the protectionism that stands in the way of production reform, housing is still a simpler issue to solve than markets based on time and personal skill. Hence countering excess monetary demand could begin with more flexible interpretations of housing for all income levels. Otherwise, many individuals will remain subject to the first mover problem of providing valuable services for others by more accessible means, only to be locked out of the housing necessary for this to happen. For that matter, one of the main reasons wages recently increased for the lowest income levels, is that employers were faced with the fact no housing existed nearby which their employees could afford. 

Societies need to focus on non tradable sector production issues, since they are at the heart of recent inflation which is proving difficult to eradicate. However, there's something else important about productivity expectations which needs to be noted here. When productivity involves final product which is independent of personal labour, these areas do have capacity for exponential output. Since our economic time is not exponential, it often demands a higher price as a fixed quantity. In these instances, people rely on investments in knowledge and skill to increase their time value. Alas, institutions then tend to respond by substituting away from time based input, in order to meet their financial obligations! Despite the obvious drawbacks of this effect, our current understanding of productivity gains makes it a rational approach, especially if institutional budgets are already in jeopardy. 

How, then, could good deflation be achieved in skills use without having to substitute away from time based input? One way is to make mutual time commitments, or time arbitrage, a valid and measurable economic unit. Skill sets would be voluntarily chosen and independent of monetary value. However, group effort would also utilize monetary compensation as a base to keep the process in motion. Time arbitrage might help societies maintain and preserve what they build and create, plus the knowledge and skills involved would be simultaneously measured as cumulative gains. Time as an economic unit of value is also one way to overcome the Baumol effect and ultimately, achieve good deflation in time based services. Again, production gains would transpire on completely different terms in these settings. Once housing production reform begins in earnest, economic validity for mutual time commitments would be the logical next step.

Sunday, October 16, 2022

Use Markets to Help the Marginalized (Before It's Too Late)

In a time of rising inflation and interest rates, governments have to come to terms not only with fiscal limitations, but also limits on their ability to assist the marginalized - at least through monetary means. As national budgets become ever more unwieldy, many protective roles for lower income groups might ultimately have to be set aside.

Some would argue, isn't this a positive, since governmental support often tends to cause more harm than good? It depends on whether the domestic markets of housing and services can evolve for a full range of income levels. In the meantime, consider the harsh realities faced by low income groups when it comes to living normal lives. These circumstance are largely due to environments which were put in place by public and private interests alike. As governments increasingly find their hands tied in terms of public assistance, will private sectors become more willing to live up to promises about free market potential? Or will private interests - along with the political left and right - instead pretend that economic and social freedoms are no longer possible?

Questions such as this are in need of valid answers, not vague posturing and excuses. In particular, when people struggle to maintain their financial responsibilities, they become ever more vulnerable to government overreach. It has seldom been difficult to correlate poorly functioning markets with authoritative and restrictive governments. Worse, it's as if societies have forgotten what market freedoms consist of. For one thing, inclusive markets are certainly not a matter of coercing lower prices from existing markets. Rather, market freedoms are about encouraging the design of new patterns and production systems which function alongside what already exists, but with simpler resource requirements and system inputs. Indeed, previously existing markets could in many instances just be recognized as market participants with preferences for serving higher income levels, for whatever reasons. 

When I think about production reform possibilities which have yet to see the light of day, sometimes I can't help but be angry such options never got the chance. If there had been good deflation in our domestic markets here in the U.S. we could have been better prepared for the extreme uncertainties of a transitioning global economy. In the past nine and a half years of this blog I've often highlighted people who've touched on these issues. Just the same, it's not easy to find individuals who are willing to commit to adaptive market evolution. Meanwhile I often find myself unable to tolerate the hypocrisy of left and right thinkers who always pretend someone else bears responsibility for what we've lost.

Instead of being cognizant of their own responsibility for free market evolution, many libertarians have stepped away from adaptive market patterns to take part in cultural battles. Small wonder that few really expect this to change anytime soon. Is it already too late to use markets to help the marginalized? Will libertarians stay focused on divisive rows and/or inconsequential details in the years to come? Why and how did we imagine libertarianism to have a ghost of a chance, if it was only about free markets for society's most powerful? As much as I wish for a better ending to this unfolding reality, alas, there are days I fear there might not be one. 

Sunday, October 9, 2022

"Political" Equilibrium is Not the Same as Natural Equilibrium

When might politically motivated budgets create too much confusion for general equilibrium conditions? Even though there's no clear answer, economic dynamism and long term growth potential may depend on how these matters are ultimately approached. It's now apparent that the fiscal dominance of today's service centered economies, could hinder progress in the near future.

Until recently, ultra-low interest rates were becoming taken for granted as inevitable. And not only did this prompt national governments to borrow in excess of earlier norms, it discouraged a rational general equilibrium framing as output driven. This loss of a quantitative understanding, has made it even more difficult to create productivity improvements in domestic markets. Instead, the fiscal "freedoms" of late are fueling the ambitions of multiple political parties. Alas, the results aren't encouraging, since fiscal policies tend to reward specific group preferences instead of positive market outcomes.

However, does fiscal irresponsibility account for a rising equilibrium rate, and might this impact equilibrium stability? Scott Sumner considers equilibrium effects, and notes: 

The "natural" or equilibrium interest rate also has multiple meanings, but generally refers to the interest rate that provides for some sort of macroeconomics equilibrium, such as stable prices. Throughout most of the world, the equilibrium interest rate has been trending lower since the early 1980s. Until now...

He continues:

A more complete model of the equilibrium interest rate might also account for the political economy of fiscal policy. Suppose that the natural interest rate falls so low that politicians become tempted to run larger budget deficits. Eventually, the deficits become so large that the equilibrium interest rate begins rising again. 

In retrospect, the new UK Prime Minister also went too far with the extensive tax cuts of her fiscal package.

All of this makes me wonder whether ultra-low interest rates are not a stable equilibrium, at least in most places. I still believe that low rates are a technically feasible equilibrium, but perhaps it is inevitable that politicians in many countries will abuse the privilege of almost costless borrowing - right up to the point where that privilege is removed.

Indeed, the Washington Post notes the new Prime Minister's predicament and adds

Across the supposedly advanced economies, the return of inflation has magnified the riskiness of extravagant political gestures. For the most part, however, politicians have not gotten the message.

How to think about all this? For one thing, I'm inclined to believe that fiscal policy (rather than monetary and supply side circumstance) would not be responsible for a rising natural interest rate, whether or not a government "crosses the line" in this regard. Especially since fiscal policy correlates with credit dominant outcomes which substantially differ from the time correlated aggregate output of natural equilibrium. 

In terms of aggregate output potential, total hours worked are an important part of the equation. Specifically, when considering equilibrium potential, one might ask: How much aggregate output is defined by exponential representation, versus the linear representation of (naturally scarce) time and place dominated output? Especially since fiscal dominance could eventually be undermined by expectations in the secondary markets of applied knowledge. And if service sector output doesn't presently appear linear, it's because areas of exponential gain are not being adequately defined in relation to the scarce resources of time and place defined product. In all of this, the fiscal dominance of political equilibrium is not well suited for the creation of a better defined and stable general equilibrium.

Friday, September 30, 2022

Wrap Up for September 2022

Technology has shaped our world in many ways.

Some reflections from Giles Wilkes on policy advice.

Just as there are missing markets in housing and healthcare, the same is true for legal assistance.

Globalization touched many things, but it skipped cleaner forms of energy.

"Basing our wealth on housing is dysfunctional."

Idea processing and total factor productivity.

What determines inflation expectations?

The world's most important values in a graphic illustration.

Intangible capital doesn't always mean productive economic complexity.

"Implications of additive growth"

Noah Smith makes the case for robots and automation.

Some top economics papers.

Congress may not do anything to repair Social Security until the trust fund actually runs dry.

Work is about more than just pay for hours worked.

Why doesn't building size contribute more to economies of scale?

Job vacancies as a key factor for core inflation.

A rising dollar will have global consequence.

Unemployment may need to rise well about 4.1 percent to sufficiently lower inflation.

There are times when solidarity really matters.

Do statistics tell us how many books have sold? It's complicated.

What if the rich world isn't open to generating the new institutional arrangements that it needs?

The untapped potential of mobile housing.

Rising crime could set back efforts to promote greater housing density.

Scott Sumner discusses his upcoming book with David Beckworth, and also his retirement from Mercatus.

An inflation update from Noah Smith.

The World Bank considers the possibility of global recession.

Our economic future has much to do with human capital.

What countries still have monarchies, and how do they function?

Even the insured tend to carry medical debt, which in turn can exacerbate poor life circumstance.

Donald Kohn reviews Scott Sumner's The Money Illusion. Scott Sumner responds.

It helps to start career planning early.

"Who are the winners and losers from inflation?"

An enlightening discussion regarding the importance of fiscal dominance, and more.

Inflation in 14 charts.

Russ Roberts talks with Raj Chetty about economic mobility.

"Long-Run Trends in Long-Maturity Real Rates 1311-2021"

Macroeconomics should be approached from multiple perspectives.

Mancur Olson on distributional coalitions.

Why aren't women better represented in central banking?

What Marxists and libertarians have in common.

Can maintenance stand on its own, outside of austerity?

A closer look at the U.S. services sector.

There's plenty of subjectivity in measuring living standards.

Sunday, September 25, 2022

Are Charter Cities a Possibility for Migrants?

What if nations sought to create new cities instead of camps for the ever growing numbers of migrant refugees? A recent article for Brookings suggests this policy option, and the authors explain:

Charter cities are new urban developments that have been granted special jurisdiction to create their own governance systems. Clearly defined legal frameworks, good governance, efficient distribution of public goods, and modern infrastructure could support well-functioning markets and attract investments to generate higher rates of economic growth in charter cities. Based on these principles, we propose to establish sustainable charter cities-in-exile (SCCEs) as a policy framework for host countries and international development organizations to promote refugees' self-reliance and facilitate their integration. The proposal supplements existing migration policies, especially in areas of identified procedural and logistical bottlenecks, and supports refugees in their freedom of choice of migration destinations.

In some ways I find this proposal impractical, given the difficulties involved. One can only imagine the political battles that would ensue in the U.S. were policy makers to suggest something similar. Yet some nations may prove more willing to address these issues, which accounts for a response from The Global Eye.

It is clear that we all want legal and regulated immigration but the issue is highly complex and is characterized by growing complexity.

Still, their response to the Brookings article considers the possibilities:

It seems to us a viable prospect for a phenomenon that, politically, has been reduced to an invasion and a threat. Without changing perspective, politics will continue to deny the structural nature of the phenomenon and only aggravates its consequences.

My biggest concern in all this, is the extent to which economic complexity is starting to limit what traditional institutions can successfully coordinate for services and infrastructure, especially in areas which lack wealth sources. Granted, a century earlier, even individual private companies (as one example) could still manage the services and infrastructure involved for company towns, but larger versions today would be no easy feat. Alas, only consider the difficulties private companies in the U.S. encounter today, if they attempt to provide affordable healthcare for their employees.

Indeed, the serendipitous interaction between primary and secondary markets in the most prosperous regions, largely accounts for the economic dynamism of our present. However many knowledge providers are reluctant to settle in regions which come up short in this regard. Considered in this light, what these charter cities need to generate could be difficult. More specifically, "sustainable cities-in-exile" (SCCE's) would 

seek to provide refugees with a place of safety, an immediately available assistance network, and an accelerated path towards professional and income opportunities. A guarantor country or group of countries would enforce the SCCE's charter while guaranteeing the safety of private sector investments and firms, including those from the country of origin with temporary headquarters-in-exile. A proper institutional architecture guaranteed and monitored by national governments and international guarantors, with direct involvement of the refugees and local communities, would help to reduce the risks of crime, human rights abuses, and sexual exploitation.

While these are worthy goals, who would fund the traditional institutions required to make it all happen? It's this same lack of funding for vital traditional institutions here, which leaves many citizens without basic amenities in rural and underdeveloped areas. For that matter, a recent Washington Post article highlights how American territories are losing population in similar ways. 

At stake in all this, are distributional scarcities and limitations in some of our most important institutions, particularly those representative of secondary markets for applied knowledge. I believe that in order for new cities to happen, people will need stronger connections with direct forms of wealth creation and applied knowledge systems. Otherwise, many newcomers would remain dependent on the assistance of institutions already unable to meet the needs of local citizens. Chances are, the problems of immigration won't be so severe, once applied knowledge institutions evolve to allow skills participation for all individuals. After all, many nations would be more open to immigration, if their own citizens could participate in applied knowledge networks as well. 

Sunday, September 18, 2022

Experiential Markets Versus Personal Management in Healthcare

Healthcare in the U.S. is a prime example of missing markets for lower income groups. Nevertheless, more than costs are at stake, since other income groups with greater access to healthcare are still dubious about its actual value. Texas ranks highest in limited healthcare access, where in recent years the uninsured are approximately 17 to 18 percent of its population. I am among them since Medicare in the U.S. (which is gradually transitioning to private insurance) is becoming more costly and less predictable for retirees - regardless of income. However, once I retired, I started setting aside money every six months in the event of future healthcare emergencies, rather than paying Medicare premiums.

For many healthcare consumers, careful budgetary responsibility means a high level of frugality regarding any kind of professional assistance. People still believe that healthcare is important, but some of what is missing now, is a matter of regretful consumer choice. How is any of this rational? Two issues in particular stand out: What have people come to expect in terms of healthcare, and how have those expectations fallen so short of the mark? Even though much healthcare dialogue is framed in terms of costs, the very nature of personal interchange in healthcare activity is crucial as well. 

Meanwhile, many individuals increasingly take a personal management approach to healthcare, in hopes of successfully addressing whatever problems might arise. While this approach can be successful, it does has good and bad aspects. The good - of course - is increased personal responsibility for one's own health prospects. The bad? Alas, there are moments in life when it's not feasible to arrive at a clear diagnosis. Worse, there are emergency situations when we are in no position to tend to ourselves without assistance from others. Yet not all nations are fully committed to this elusive ideal of mutual assistance, or even the importance of community in general. Unfortunately, both happen to be the case in the U.S. Hence we are approaching the point where there is insufficient monetary support for healthcare's existing institutions. As the reality of this starts to sink in for healthcare professionals, perhaps they will eventually try new approaches for the preservation and use of vital knowledge - at least one can hope. 

Personal healthcare management is an unalloyed plus. For one thing, consumers and patients have far more time to dedicate to preventative maintenance than do physicians. Also, there's no "one size fits all" for decision making in applied knowledge. Each individual is unique in their personal makeup and approach. Likewise, consumers can maintain personal healthcare histories, and at the very least, AI might be able to do so in the near future. After all, AI is not subject to the same time scarcity constraints as are healthcare professionals. Also, as patients age, they tend to devote much more time to healthcare self management than is generally necessary in one's younger years. In all of this however, traditional media can feel insulting when reporters and journalists stress the dangers of self diagnosis and personal care outside the attention of professional physicians.

If only personal management were enough to take care of healthcare issues. Instead, sometimes our survival depends on the help of others, even if we cannot afford it or worse, end up belittled by the processes involved. For instance, several years ago, an ambulance crew convinced my father to ride to the hospital after a bleeding episode to make sure everything was okay, only for my father to be berated by the physician who complained his time had been wasted. Instances such as this are why people think twice about help in dangerous situations, since one seldom knows whether mutual respect is feasible. People would likely feel better about mutual assistance as taxpayer obligation, had societal skill levels not become so extremely unbalanced. There will be no institutional reform, if possibilities for mutual respect aren't somehow restored. 

Finding better balance in skills levels between individuals, means finding ways to make our time value economic in markets for time based services. How do we create mutual interdependence which is also economic in nature? I get that physicians and other healthcare providers no longer have sufficient time for their patients. In all fairness to healthcare providers, healthcare today shares similar time product scarcities with other secondary markets for applied knowledge. The biggest problem in this regard, are situations which call for mutual time based interaction, yet too few groups in society are able to effectively coordinate the skills involved. Further, additional layers of management in too many instances, cannot make up for time scarcities in crucial skills. Instead, excess management often adds needless complexities and costs, not to mention lowered ability for providers and recipients to find reciprocity in their interactions.

Without direct relationships in time based assistance, societies are losing their ability to effectively manage the demand and supply of time based product in the marketplace. These losses could explain much of society's current dissatisfaction with its existing institutions. Despite this disillusionment, getting down to specifics regarding how to move forward in common purpose, is proving to be the hardest part. Neither experts or laypeople are in a suitable position to implement institutional evolution in the 21st century. 

Though this is one time when solutions are not about "appropriate" credentials, even professionals tend to be criticized when they step out of their immediate domain of expertise. In this environment, how is it even possible for outsiders to be taken seriously? As it turns out, social media gives plenty of permissions for wide ranging complaints regarding why things go wrong, whatever that may be. What social media hasn't been willing to do, and what particularly disappoints me, is its lack of online promotion for suggestions as to how problems can be addressed. We simply can't can't afford to hide anymore from the specific hows of institutional change, despite the fact they are unbelievably difficult and frustrating to confront. For a while, I'd also become reluctant to write about how. But I can't hide my head in the sand any longer.

Monday, September 12, 2022

Inflation Relief Can't Address the Missing Market Divide

Despite what investors and others have hoped for, it's possible the Fed could continue with a 75 basis point increase after September. Hence some are asking, isn't the worst inflation behind us? After all, consumers seem to be fairly confident. And what of potential "fallout" from additional employment losses the Fed would impose?

Admittedly, personal perspective affects the framing of these circumstance. Even though low income groups can't readily contribute to monetary debates, many (such as myself) are even more affected by market gaps now, than was the case a year and a half earlier. Doubtless, others like me would argue for continued tightening on the part of the Fed, if they could. 

The Fed's job has become more difficult than before, since nominal income expectations started getting out of hand last fall. There's even some partiality towards higher than normal nominal income levels, but chances are these advocates don't have to worry about being priced of home ownership. Yet home ownership possibilities continue to slip away for low income groups. Unfortunately, thus far, few communities are reaching out with more forgiving accommodations in land use for manufactured housing and modular homes.

Even so, there's more at stake than missing housing markets. The higher transportation costs of missing auto production, doubtless contributes to rising income demands from low income groups. Both these in turn lead to employers paying more for the staff they are still able to hire. If these issue weren't enough, protectionism remains a structural problem for use of applied knowledge in lower income groups.

Missing markets particularly lead to losses in economic freedom for millions of individuals. It's this lack of participation in what are basic forms of production and consumption, which makes it difficult for low income groups to (productively) make their voices heard. Is it any wonder when supply side reform proves intimidating, how attempts for economic inclusion and participation get rerouted into cultural battles instead? Unfortunately, some free market proponents are migrating to these cultural battles, whenever supply side innovation for basic markets seems too daunting to pursue.

Missing markets leave unaddressed supply side issues which force the Fed to walk a fine line for appropriate monetary representation. Clearly, citizens need the inflation relief which central bankers strive to provide. Nevertheless, even the best that can be done seems hardly enough, for the Fed catches blame and undue expectations for problems that aren't their responsibility. I find it frustrating when market observers take this route as an excuse to shirk their own responsibilities. In particular, even the most appropriate inflation measures and relief can't address the missing market divide for low income groups. Only supply side production reform for domestic markets in housing and services can accomplish this! Alas, Fed responsibility for price stability does not equate to stability in basic market access. For this reason, there is only so much the Fed can do about political stability as well.

What does the Fed need to accomplish for nominal income (including hours worked) and output to maintain stable levels over time? Adhering to a stable nominal level in the present, will gradually mean less insistence and reliance on price making, beyond what originating wealth sources can fully support. In other words, societies need to practice applied knowledge in ways that no longer distort general equilibrium or lead to further income imbalances. A more rational approach is needed for knowledge based services, which provides more economic participation, not to mention economic freedoms. Granted, the Fed can't make full monetary representation possible for all comers in our dependent secondary markets. But there are ways to overcome this problem and it's time to get started.

Wednesday, August 31, 2022

Wrap Up for August 2022

Computers are very powerful, but only up to a point. "If the future is not like the past, then Big Data doesn't help you."

This visual of the necessary income to buy a home in cities across the U.S. really puts things into perspective.

What if the housing shortage is even more extensive than it appears?

Most U.S. natural gas goes to domestic consumption.

Disasters have become much more costly.

Mexico did a lot of things right. So why isn't it faring better?

David McCullough was an exceptional storyteller.

The recent JEP issue includes papers on both intangible and human capital.

Do people feel they have enough money for their purposes? Inflation can destroy how this gets framed in our minds.

How long do mined metals circulate in the economy before they are lost?

Can job creation be encouraged in distressed places?

"The Macroeconomic Consequences of Natural Rate Shocks"

Core services inflation is once again becoming dominant.

He wants to produce electric vehicles which do not require rare earth magnets.

Despite all that has come to pass, the dollar remains resilient.

Even the stagnation of the seventies wasn't as substantial as it may have seemed.

A review of Gender and the Dismal Science.

Societies haven't really had time to adjust to an age of abundance.

High inflation brings considerable emotional costs.

How the Fed uses monetary policy tools.

Noah Smith contemplates the linear nature of total factor productivity (and more).

Some rational thinking from Tim Harford on abortion.

Encouraging stronger energy markets is about eventual inflation reduction. 

"Four reasons why GDP is a useful number."

What does Trumpism really tell us about today's U.S. citizens? 

Making homes from recycled plastics.

Carola Binder discusses the importance of inflation expectations.

Plenty of uncertainties regarding the Texas power grid.

England's non-Covid excess mortality.

What does real estate investment actually consist of?

England's emergency healthcare response is stretched far too thin.

What actually accounts for the majority of household debt? 

Why have GDP and GDI diverged? Some possibilities.

"We need better models of aggregate supply." Also, her presentation for Jackson Hole. 

Living with climate change when moving isn't an option.

The U.S. isn't known for soft landings or mini-recessions.

"A new era of volatility"

Medicare is increasingly provided via private insurance.

Additional friction to Russia's war machine was the main point.

Saturday, August 27, 2022

Incentives Matter for Continuous Procedural Maintenance

As economies gradually become more complex, basic structural maintenance grows more complicated also. Yet the maintenance of our lives, physical environments and knowledge structures is perceived as economic burden, and societies now lack sustainable market structure in crucial areas. During cycles of primary market dominance, societies come to rely on continuous procedural maintenance through monetary and non monetary means. Now however, some of what we've relied on for full maintenance capacity, has been lost. This is particularly true for the use of knowledge in society. 

Just the same, maintenance needs don't go away, and we need new thought processes which can recreate reliable continuance. Doing so means the transformation of our dependent (or secondary) markets, as these areas especially lack incentive to maintain societal stability through monetary compensation alone. In all this, governments are increasingly pressured to minimize fiscal burdens in the use of applied knowledge and skill. We have already seen how procedural maintenance is perceived as taxpayer burden, as political groups now seek to undo the institutions of knowledge and action with nothing sustainable to take their place.

Private enterprise also lacks incentive to make full use of applied knowledge, especially if doing so is perceived as a problem for profit maximization. This isn't good news for societies in the years ahead, since more effective use of knowledge is needed to overcome numerous obstacles to continued progress. These are just some of the reasons I've advocated for time arbitrage commitment as an economic unit of value, to supplement crucial maintenance where monetary compensation so often falls short.

Nevertheless, some reluctance on the part of governments and private enterprise, is understandable. After all, various interest groups have been notorious for creating maintenance "requirements" which are basically about profit making opportunities, instead of true systemic support. Despite the fact faux maintenance isn't often immediately obvious, it occurs routinely in the knowledge based demands of healthcare, education, finance and legal professions. As these additional costs accrue across the spectrum, it only gets more difficult for people, governments and businesses alike to preserve their efforts in society. 

Unproductive forms of economic complexity increasingly dominate our redistribution flows. If this weren't enough, the recent cultural battles leave more productive forms of economic complexity on shaky ground. Clearly, too many economic incentives haven't been well aligned for basic maintenance needs. Indeed, a major part of what makes it difficult to maintain productive economic complexity over long periods, is that societies tend to downplay the very activities which conserve valuable patterns of production. How might this be changed?

Thursday, August 4, 2022

The Fragility of Economic Momentum

Why do societies tend to label certain activities as "unproductive"? Or perhaps said another way, what's so special about "productive" endeavour? These questions matter in part, because they closely relate to sectors of the economy specific to equilibrium balance.

Activities considered most productive, are those which encourage further momentum and additional monetary gains. Whereas activities labeled "unproductive", regularly require other existing wealth sources for social continuity on economic terms. While some aren't convinced regarding this causation, ultimately it matters for the ability of mature economies to maintain productive economic complexity. When too many things go wrong, even the strongest economies can start to become fragile. And how can anyone really know where such tipping points exist? I believe it can't be stressed enough, how right Adam Smith was centuries earlier, to worry about the fragile nature of economic momentum. Otherwise, he might not have felt the need to describe "unproductive" activities in ways which can still offend readers of Wealth of Nations today.

Nations have always experienced political struggles regarding fiscal activity, so whatever is viewed as productive or unproductive, depends on cultural framing as well. Still: When it comes to wealth creation, "low productivity" maintenance services are necessary to preserve what people, businesses and nations build in the first place. Importantly, Adam Smith believed in the value of "unproductive" labour. For that matter he noted its worthiness in what was also a description of economic momentum: 

A man grows rich by employing a multitude of manufacturers: he grows poor, by maintaining a multitude of menial servants. The labour of the latter, however, has its value, and deserves its reward as well as the former. But the labour of the manufacturer fixes and realizes itself in some particular subject or vendible commodity, which lasts for some time at least after that labour is past. It is, as it were, a certain quantity of labour stocked and stored up to be employed, if necessary, upon some other occasion. That subject, or what is the same thing, the price of that subject, can afterwards, if necessary, put in motion a quantity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity. His services generally perish in the very instant of their performance, and seldom leaves any trace or value behind them, for which an equal quantity of service could afterwards be procured.

Productivity is a macroeconomic concern, because excess resource aggregation in areas which are not direct wealth creation, can eventually pull down areas which most contribute to economic momentum. Despite the fact societies aren't directly aware of such tipping points, much depends on how populations feel in this regard. When economic momentum slows, citizens begin to feel the difficulty of getting ahead and making the most of their lives. Plus, when free markets are held back for too long, people begin to assume it is also okay to take away the freedoms of their neighbors. 

Adam Smith lived when expanding economic momentum and free markets contributed to the hopeful expectations of citizens in his time. He observed that when people felt better about their own life options, they were more willing to give consideration and respect to other citizens. 

In other words, economic dynamism made people more civilized. Whether or not our own economic times have become more fragile, we already see how people have lost some of this consideration for one another. Perhaps we could give more credit where credit is due, for the earlier freedoms we've lost in full market representation. In particular, where some forms of work are deemed "unproductive", we can assign more economic value to our own time use potential, so that ultimately, less money is necessary for those activities to take place. If we work to regain free markets for all income levels, citizens might hope again for continued progress, prosperity, and personal freedoms.

Saturday, July 30, 2022

Wrap Up for July 2022

What is really meant by the idea of "banning cars"?

Disinflation is finally getting started.

Jason Furman explains the subtleties of rising wages. Perhaps "wage-price persistence" is a better framing.

What might the future look like with energy superabundance?

Three miscalculations which sent NGDP too high. "Team transitory" certainly got it wrong.

Even if recession is avoided we could be in for a period of stagnation. Still, much depends on whether the Fed can keep NGDP on a "stable trend path".

The problem of conformity in medical practice.

Trepidation on the eve of the 4th.

What happens if globalization goes into reverse?

Horizontal alignment can create exponential gain in applied knowledge.

BIS takes a closer look at inflation.

"The era of sustainable construction has arrived."

It might be "now or never" for the supply side

Chris Blattman considers war options for Ukraine and Russia.

The immigration shortfall has already impacted labour. Plus, an interview with Leah Boustan on immigration.

Scott Sumner highlights the importance of monetarism.

"The Energy Crisis Will Deepen."

A new approach is needed for Canada's healthcare.

Sri Lanka is a textbook example how things can go wrong.

Politics is a lot of things but it it isn't very serious.

Mobile homes have been unpopular for a long time. Also, Part II.

Joseph Politano reviews sectoral shifts since the start of the pandemic. 

Few remember when coal was the "newfangled power source" that no one wanted.

Which countries consume the most energy per capita? Plus, a visual of energy transitions.

"How do you know if AD is too high?"

Randal Quarles discusses his time at the Federal Reserve.

Switzerland is moving ahead with a plan for underground freight.

What if bicyclists could reclaim the roads?

U.S. counties which have seen the most growth and decline.

Maintenance is a major part of our stories.

Can the ECB convince markets it is serious about closing spreads? 

"A year ago, Chevy dealer Paul Zimmermann had about 700 new cars for sale on his lot just outside of Detroit. Today he has about 25."

Is this a turning point in "the conservative age"?

How has manufacturing changed?

A simple definition of monetary policy.

Litigation is all too frequent in the nursing home industry.

Government regulation which limits ESG policies is distorting financial market outcomes.

Growth potential is more complicated than it may appear.

When Samuel Rumph made peaches market worthy, that was just the beginning.

Q & A for Branko Milanovic with James Pethokoukis.

"When the Levee Breaks" there'll be no place to stay.

Tuesday, July 19, 2022

Ownership and Output in Excess Nominal Claims

Excess nominal income claims are too common in local service markets which are not discretionary. Governments and special interests alike tend to limit these options, thereby reducing effective management for both our personal obligations and physical environments. If this unfortunate circumstance weren't enough, excess claims in these areas are starting to impact monetary policy as well.

Our potential for ownership and personal responsibility are sorely compromised, when too many markets for basic life needs are narrowly defined. The markets most affected are those involving human capital, skill potential and housing. Alas, these are now mostly intended for the use of higher income groups. What's left for ownership potential, includes traditional housing (with its legal benefits of family inheritance), financial markets for the traditional capital of wealth building, and the formal institutions which now link human capital to status and monetary gain. All of these are associated with equilibrium imbalance and excess nominal claims. 

How might one think about this? What's most affected includes the framing of artificial scarcity. Recently a gap has opened between aggregate nominal income and the output of GDP. Might this gap have been induced by purposeful reduced output (artificial scarcity), while maintaining similar levels of income expectations? And how does artificial scarcity contrast with natural scarcity for such correlations? After all, when income is derived from production via natural scarcities, existing output is more likely close to what is feasible and consistent with equilibrium or GDP potential. Perhaps due in part to the contributions of production via natural scarcities, nominal income has closely mirrored aggregate output for quite some time.

I'd like to think that production reform for non traditional housing and applied human capital, could help diminish the unexpected gap between aggregate income and GDP output. Non traditional housing options and horizontal alignment for services coordination, could lead to good deflation. Eventually such reform could lead to better equilibrium balance with other sources of wealth.

Indeed we've been fortunate that equilibrium imbalance can take centuries to become a macroeconomic problem. It's interesting how Adam Smith worried about equilibrium imbalance in his framing of"productive" and "unproductive" workers (Wealth of Nations), before the closely related Baumol effect became a legitimate concern. Perhaps the fact this process took so long to evolve, is what makes it difficult to relate to in the present.

Just the same, much is at stake. We need to recognize and respond to the burdens imposed by the expectations of our domestic services markets. Should we instead elect not to change anything, even the best NGDP monetary policy scenario would eventually lead to less applied knowledge for societies in the decades to come. Excess nominal claims with no other market options, would mean a gradual loss of our capacity to fulfill the challenges of a modern economy. It's time to consider building a future on more viable and sustainable terms.

Friday, July 8, 2022

Upstream Nominal Claims Matter for Equilibrium Balance

Will the Fed successfully curtail inflation in the near future? Fortunately there have been encouraging signs of disinflation, even if the causes aren't obvious yet. However, while the Fed uses monetary policy to tame inflation, in certain respects this is a technical result. In other words, "pulling back" won't address supply side shortcomings such as the perennial inflation contributors in our secondary markets. Unfortunately, these local markets are woefully incomplete in basic respects, with housing and skilled services as the most egregious examples. Consequently, were the Fed were to pursue nominal stability and a stable growth level (as a market monetarist "best case" scenario), this would only be a partial answer - albeit the monetary one - for optimal equilibrium balance. 

Indeed, the Fed has often emphasized how its hands are tied in terms of supply side reform possibilities. Despite the recent pullback on traditional housing loan activity, Fed members must be wondering now, who in a decision making capacity is really paying attention and ready to take action? After all, we need incremental ownership options for flexible housing and land use, before many citizens can lead more productive lives. Without such options, millions still function in their own "recessionary" economy, even as others move on. For that matter, tiny homes, manufactured homes, and modular homes are already available, but few communities remain willing to make room for lower income options. Alas, there's a relative few sad exceptions for flood prone areas which are often long distances from employment opportunities. 

While there's a growing understanding of supply side issues, supply side reform means different things to different people. Consequently we aren't ready to address how local secondary market deficiencies contribute to equilibrium imbalance. In all this, upstream nominal claims tend to define production and consumption landscapes, plus such claims are more locally supported than it appears at first glance. Upstream nominal claims come not only from profit and non profit decision makers, for the Nimby impulses of local citizens lead to surging property taxes as well - taxes for rising asset values rather than local service gains! How can the Fed keep a decent reputation indefinitely, if the constraints of artificial housing scarcity remain enforced? Yet since these claims matter for skilled services, communities often refuse newcomers who lack discretionary income for additional service costs.

In a recent post I noted the structural shift of additional nominal claims from originating wealth sources. Fortunately, some of these pressures are starting to let up, which should make the Fed's job a little easier. That said, problems of excessive expectations will remain with us. Only consider how some of those expectations might have come about in the first place. Part of the high inflation of the sixties and seventies was due to the introduction of higher costs for healthcare in general across the board - costs which could have been rationalized by increased fossil fuel wealth in the U.S. during that period. Now, imagine what might happen to those expectations should that fossil fuel wealth shift into reverse! For that matter, once the Fed finally reduced those earlier high inflation levels, recall how our healthcare institutions enforced hard limits on physician supply. Chances are this nominal structural shift was more than a coincidence. 

It's hard to imagine secondary markets giving up much ground to primary markets in terms of monetary representation, or for that matter acknowledging their dependence on originating wealth sources. But that doesn't mean new market institutions aren't possible - markets that are more free yet don't present direct challenges to the old. New sets of expectations would not include the same excessive nominal demands as the old. Instead, new institutions would make room for flexible ownership and time value as wealth. Good deflation and skilled knowledge use in local markets, could be our best chance for greater market freedom and equilibrium balance in the near future.

Thursday, June 30, 2022

Wrap Up for June 2022

Does fiscal policy create better distributional effects?

Poor life prospects as a contributor to political violence.

Colorado sets an example for housing reform.

"Solving the Housing Crisis will Require Fighting Monopolies in Construction." Alex Tabarrok provides additional references and comments.

Shinzo Abe was good for Japan.

What happens when low income men lose their health insurance coverage?

"Friend-Shoring" isn't as desirable as it may seem.

Low income groups are more vulnerable to climate change.

The land rent associated with mobile home ownership, has destabilized. Even as the cost of mobile homes on these properties has skyrocketed. I would add that until better land use options are available, traditional housing (with its extensive maintenance costs) is still the only real ownership choice for the majority of us. Which in turn limits many lifestyle and social mobility options.

A visual representation of U.S. exports.

Land based aquaculture is now producing healthier fish.

College enrollment is still down.

More job openings than unemployed as the new normal.

David Beckworth reflects on the Fed's recent obstacles.

Some basic patterns for human capital.

Cancer research makes a big step forward.

At least now, societies have a better idea what inflation is.

A visual chart for renewable energies. Also, a portable nuclear reactor is in the works. Nuclear power is changing.

The hardest thing to reshore is tacit knowledge for production line specifics.

3D printers are being utilized for Ukraine's war efforts.

How long will the Fed continue to be the "only game in town?"

When it comes to inflation, energy is just part of the problem.

Which countries beckon to millionaires, and which countries are they leaving?

How does wealth just "disappear"?

Is state capacity still a viable option with higher interest rates?

Both sides could be getting it wrong, when it comes to global warming.

Supply factors continue to dominate contributors to inflation.

Four inflation mistakes made by the Fed.

Europe turns to new sources for natural gas.

Measurement has practical purposes, yet also underlies societal expectations.

Chances are, no new refineries will be built.

Adam Tooze details the "polycrisis" with help from the BIS.

Is a fast growing economy inflationary?

Divisions between red and blue states only continue to grow.

Noah Smith interviews Olivier Blanchard.

Which inflation expectations really count?

Healthcare companies outspent everyone else on lobbying. I would note they may have the most to lose in governmental support, once crowding out effects from additional oil costs start to set in. Especially since OPEC may not actually be capable of increased production.

"Job cuts are rolling in."

"33 Problems With Media in One Chart"

Sunday, June 26, 2022

Too Many Market Claims on Nominal Income

I've been anxious to start writing again regularly. However, much has come to pass since posts here were frequent, and not all of it has been good. Unfortunately, our political and social circumstance have continued to deteriorate. How will I proceed? How might others proceed? 

For now I'll need to focus less on how I feel things could be improved, and more on structural explanations why our unfortunate economic reality has come about. At the very least, a better understanding what led to this impasse, might encourage warring factions to lighten up on the destructive cultural wars. Nevertheless I've lost confidence that a cultural/political peace can be achieved during the course of my own lifetime. We simply waited too long to make supply side improvements at local levels, and the consequent fighting over scarce resources - even though many were artificially induced - won't be easily eradicated.

Meanwhile, we are in danger of losing more personal, market, and political freedoms in the years to come. While a relative few still defend free markets, the majority of these seek solutions along the margins. Alas, this approach mostly accrues to those who already benefited from recent sources of prosperity. Yet societies struggle to remain free, when economic progress doesn't occur in ways which lead to gains for all of society - not just those who have already won. 

In particular, the winners have all but cancelled the game for many participants, by making too many claims on nominal income. One reason this matters, is that the Fed learned the hard way decades earlier, what would happen once it allowed too many winners to insist on their excess claims! Yet the Fed monetary policy tool is a blunt tool. Meaning, the Fed can't choose who wins and loses once the monetary limits are drawn. For that matter, governments shouldn't have to choose, either. Instead, economic inclusion and the good deflation which encourages it, should be the responsibility of millions who participate in supply side activities. Yet many supply side decision makers have instead stood by, while societies lay blame - or excess expectations - in places where they really don't belong. 

Both the pandemic and the unexpected circumstance of primary market (originating wealth) turmoil, has meant hard lessons for this writer. Like many, I had taken "efficiency" aspects of primary markets for granted. What I never realized, was the fact such efficiency can take decades to achieve, in times of general equilibrium change. Plus, oil production is so central to how our most recent equilibrium became defined, in the first place. I should have understood well before now, that primary markets would need more nominal income space as absolute necessity, for wealth origin activity to continue as before. This, in contrast to the nominal income which secondary market participants demanded, in some instances for no better reason than knowledge providers were morally worthy of the sacrifice populations "should" make. 

As it turns out, our most direct sources of wealth have little choice but to make additional claims on nominal income, instead. Until now I'd believed secondary markets would try to keep pushing originating wealth sources out of their way, for Fed handouts. Instead, cutbacks in applied knowledge as it is currently utilized, are already underway. What recently happened to some of our most important markets, is also a reminder how peak oil finally arrived, despite recent fracking gains. Yep, we worried about peak oil decades too soon. 

Going forward, I will continue to focus on the lack of overall balance in general equilibrium conditions. For now, the Fed needs to make space for primary market evolution, but that doesn't mean citizens can't find ways to further evolve the human capital of secondary markets. Recall also that housing is a bridge between primary and secondary markets, for its monetary value represents both originating wealth and services generation. The paradox of traditional housing is that too many claims on nominal income now exist, while millions continue to need housing. Yet the Fed had little choice but to pull back early, well before existing need could be met. It's time for housing to further evolve. Due to its very nature as a bridge between primary and secondary markets, housing is paramount in equilibrium balance. Housing and its associated ownership frameworks must change into more realistic forms, or societies will continue to suffer.