Wrap Up for January 2022

Don't reason from a change in profit margins.

"are traditions that no one cares about worth preserving?"

Prices for used vehicles are no longer rational.

Alan Cole questions the logic of 95 year copyright protection.

Paul Krugman and David Beckworth on inflation.

The pandemic will leave long term behavioral effects.

Timothy Taylor highlights some points from an online draft of Olivier Blanchard's upcoming book on low interest rates and fiscal policy.

Perhaps the Fed isn't sufficiently worried about the labour force participation trend line.

Some basic elements for 1000 year structures.

"These places can recover." Edward Abbey would be relieved.

The labour shortage is real. And, the Fed is drifting away from what market monetarists had hoped for in terms of accurate NGDP targeting.

The deep state as a tool for redistribution.

Reflections from Adam Tooze on The Mushroom at the End of the World.

Scott Sumner explains his preferences to fiscal policy.

Solving the "duck curve" of renewables. And Noah Smith is optimistic about renewable electricity.

Noah Smith interviews Tyler Cowen.

It was once more difficult to determine whether a car might be a lemon.

Will NGDP stay close to the 4% growth trend that stabilized in 2010?

Why has book reading declined?

Builders are reaching a point where they can no longer pass cost increases on to consumers. My thought: Is it still possible to explain the ways we might reconfigure the nature of housing definition and composition? 

"the real estate market in the U.S. now resembles the car market in Cuba: A stagnant supply of junkers is being forced into service long after its intended life span."

The recent increase in goods demand is unprecedented.

"When should international boundary lines change?"

Cutting through the noise of inflation.

How to think about excess savings?

Some recommendations on books about GDP from Fivebooks.

18 charts that illustrate the U.S. economy.

Batch versus flow in production methods.

"Crypto and the politics of money" 

So, what is left? "Dreams and kindness are all we have."

"holding AD constant, eliminating shortages with higher prices means reducing output."

In the UK, demand for healthcare has been outstripping resources even prior to COVID.

Housing is too important, for societies to leave its present market framing in such stagnant circumstance. I tried to write another post about housing this month. But after my Blogger format "swallowed" several days of efforts, I fortunately recalled this Works in Progress article which is definitely worth reading.

What is meant when we say something is inflationary? Part one and part two.

We are not experiencing inflation in a conventional macroeconomic sense.

Might a 2024 coup actually happen? Some weaknesses in our election system.

Old style monetarism was marginally successful in 2021.

How are stablecoins different from other cryptocurrency? 

Some thoughts on The Tyranny of Merit.

Polarization is a Problem for Progress in General

Today's lack of political good will is worrying enough, but it also comes with plenty of economic ramifications. For that matter, both NIMBYism and culture wars tend to reduce economic dynamism. Just as the "not in my backyard" mentality turned housing markets into major headaches, it even affects technological change such as transitioning to electric vehicular transportation. Many aspects of our lives and environments come down to what people of all political stripes don't want us to successfully engage in, as opposed to what could be accomplished.

In all of this, whatever happened to the hopes and dreams of centrist politicians and citizens? After all - even a decade earlier - moderates were still a meaningful part of public dialogue. While centrists occasionally held alternative views, they were often able to bring opposing parties to the table to get things done. 

Indeed, moderates have been important for societal progress up until recently. A relative few remain who still highlight economic progress and the benefits of growth. Unfortunately however, the majority of such gains became associated with prosperous citizens and regions rather than average citizens - let alone those with limited incomes.

If polarized landscapes weren't already dangerous enough, what might that mean for younger generations? Indeed, will they eventually become receptive to the idea of civil war? Don't forget also that younger generations aren't convinced of the future viability of Social Security in the U.S. Even though I hope Social Security continues to function as a glue for economic stability and common purpose, one can't be too certain. Should Social Security benefits be reduced in the near future, that might further destabilize political desires to remain united.

Polarization also represents a loss of what was once known as Third Way political thought. For instance, when I was much younger, Bill Clinton's presidency was associated with this line of reasoning. Alas, other than environmental protection, who still believes such rationale is relevant? From Wikipedia:

The Third Way supports the pursuit of greater egalitarianism in society through action to increase the distribution of skills, capabilities and productive endowments while rejecting income redistribution as the means to achieve this. It emphasises commitment to balanced budgets, providing equal opportunity which is combined with an emphasis on personal responsibility, the decentralisation of government power to the lowest level possible, encouragement and promotion of public-private partnerships, improving labour supply, investment in human development, preservation of social capital and protection of the environment.

Why was much of this abandoned? Part of the problem is how advanced education became a place for elite dialogue at the expense of economic dynamism. Meanwhile, active knowledge use - since it lacks any grassroots equivalency - is being confused with information and flawed logic mostly meant to circumvent action. Formal education is certainly not the place for increased distribution of skills and capabilities! Instead, the "gateway to the good life" hoards its limited slots according to what monetary compensation might amply reward. Worse, few policymakers remain willing to balance budgets, since abandoning financial restraint means squeezing a few more lucky participants onto the gravy train of human relevance. And decentralisation? The only decentralisation my state government is interested in, is the powers it can remove from both Washington and cities which might otherwise function better if they were allowed rights to do so. 

I continue to believe the best way to overcome polarization, is to create a knowledge based economy that can bypass the culture wars of educational access. However, while I remain guardedly optimistic, my hopes have radically diverged from what many once considered optimal paths for abundance and success. Is it still possible to use knowledge in more practical ways, instead of wielding it as the ultimate weapon for income divisions and urban rural divides? Perhaps we will find out soon enough. 

Wants are Sometimes a More Relevant Form of Demand

When it comes to market design for low income consumption potential, perceived needs are often a logical starting point. Certainly I've emphasized needs focused design for lower income groups over the years. But what about circumstance when consumer wants are the more relevant factor? 

It's a consideration which matters when resources are not only scarce but also include experiential characteristics. Economic time commitments are a great example. Not every individual is going to seek out the kinds of knowledge and skills from people that others might happen to deem most practical. 

However, the importance of consumer choice especially holds true for energy resource options. In particular, both consumer needs and wants will determine aggregate energy demand (not to mention supply) in coming decades. Consequently, both should be factored into market and community design, so that resource scarcities can be fully accounted for. Even though we are beginning the shift from fossil fuels to electrically generated transportation, the processes involved won't always go smoothly. No one really knows yet who will remain able to travel as frequently via electric vehicles, as was possible with gas powered vehicles. What's more, energy use patterns and their fluctuations will remain important for central bankers when it comes to inflation management and economic stability. How might potential energy consumption for low income groups contribute to greater economic stability via supply side innovation? 

Community design in the near future could address such concerns. In all of this, our routine transportation offers a straightforward example. The natural consumer preference for vehicular transportation as a special activity, could contribute to positive energy use outcomes. Most everyone, regardless of income level, prefers driving for fun (such as vacations and weekend trips) over the hassles of driving to and from work. Even though it's presently difficult to translate this reality into walkable communities for higher income levels, there's been a dearth of low income community design in recent decades. Hence the good news: these missing design elements make it easier to create new communities from scratch for lower income groups. In the process, we would be able to reduce needs based (work related) automotive transportation in favour of walkable communities. Yet low income groups could strive for energy based transportation options specifically designed for the wants of experiential travel.

At an aggregate level, community design for energy wants with reduced energy needs, leaves more room for all citizens to benefit from transportation, despite impending energy scarcities. Creating walkable communities could make it feasible to better manage overall energy demand. Walkable communities can also make it easier for low income groups to maintain more efficient control over their (already) scarce time. We are fortunate indeed that it is easy to discern what holds greater personal value, in terms of energy resources for transportation. Let's follow through on that knowing, to ensure more meaningful energy consumption for all concerned in the decades to come.