"Medium Term" Concerns are Becoming Short Term Realities

Fitch recently downgraded the United States' long term ratings to AA+, but why? For many economists and policy makers, their recent report is both confusing and seemingly, untimely. Others however, such as John Cochrane and Olivier Blanchard, argued that the downgrade makes sense, and I agree. 

Indeed, there are good reasons for immediate concern. Among those but certainly not limited to, are higher interest rates on government debt, the rising debt stock, and rising healthcare costs. Unfortunately, in the 12+ years I've paid close attention to such matters online, these fiscal issues have often been scarcely noticed, other than occasional warnings to take heed and "do something". 

Consequently, the general lack of seriousness about the matter, made the the medium term seem as though something which would never arrive. In short, there's a broad based unwillingness to face fiscal burdens head on, which has left us with a government no longer fully committed to its debts. Alas, it is futile to insist "This is about Republicans" because - after all - Republican representation is part and parcel of our institutional makeup. Perhaps that explains why Olivier Blanchard declared our budgetary process is no longer reliable. 

There's little denying as well, how the world has changed after recent domestic market inflation which is far trickier to eradicate than tradable sector inflation. In his support of the Fitch decision, Adam Ozimek explains how excessive inflation made the world economy a heavier burden for many consumers. I get that for younger workers with good incomes, non tradable sector inflation is more of an irritation than anything. However, for many who have recently retired, such as myself, there's still a higher price level for housing and vital time based services which may be permanent, even if it no longer increases. This reality has dramatically changed the life expectations and trajectory of retirees who are mostly dependent on Social Security.

Again, much of what transpired relates to the secondary or non tradable sectors I've written about over the years. I still believe a lot of fiscally induced austerity could have been avoided in the near future, had proactive measures been taken for building manufacture and knowledge maintenance in domestic markets. Yet governments now focus instead on industrial policy which largely involves tradable sector activity. While some of this could turn out well, still recall how many of these institutions eventually find their way back to good deflation via internal means. Whereas we could have realized clear benefits from innovation in domestic non tradable sectors. Indeed, careful attention to the creation of good deflation in these markets, might have kept our government from becoming so unstable in the first place. 

In all of this, what if Fitch wasn't an "appropriate" institution to raise a fuss about government fiscal shortcomings? Axios wrote: 

There is no doubt that U.S. policymaking can be a messy affair and that the current deficit trajectory is problematic. But it's not as if credit analysts have special insight into the scale of those challenges or how likely they are to spill over into some kind of default or crisis.

Well, who else should have suggested taking action, in their stead? For that matter, what institutions have we created, that are specifically positioned to address such concerns? Perhaps one reason such warnings went unheeded, is that no such institution exists. What we have isn't designed for these tasks in the first place. It seemed every time institutional "onlookers" referred to the medium term problems of fiscal burdens - even onlookers with extremely important responsibilities - people reasoned how they should not concern themselves with such things. 

The result? We inadvertently destroyed much of the impetus that might have existed, to address "medium term" concerns regarding fiscal burdens. Nevertheless, kudos to those who continued to sound the alarm just the same. That said, talking about it was only a starting point. The real challenge in all this, was to start doing things, and often just simplifying things, so as to actually reduce daily living costs for consumers on a regular basis. Then, and only then, a real chance to reduce government fiscal burdens as well, in a way that likely doesn't necessitate punishing austerity. Is there still a chance of doing so? I have grown tired and weary, and I'm hardly the only one.

Low Income Wage Pressures in General Equilibrium

As the Fed's efforts regarding wage deceleration continue, the good news is unprecedented job growth which now holds greater responsibility than nominal wage gains. However, while nominal wages were rising, low income groups actually benefited the most. As Joseph Politano earlier noted:

Arguably, the only group to see real wage gains since the pandemic has been low-income workers, with workers in the bottom 10% seeing very strong real gains. The labor shortage has also enabled rapid wage gains for young, non-white, non-college-educated, and part time workers to a degree that is nearly historically unprecedented, and was helping break America out of the cycle of labor market underperformance it suffered throughout the 2010s.

How might one think about this phenomenon at a general equilibrium level? For one, even as the earlier low wage pressures affected nominal stability, the fact remains this group needed its real wage gains the most, since there's been too little supply side effort to generate housing and time based services for a full income spectrum. Just the same, the Fed was slow to react - and nominally adjust for - the fact many employers ended up "paying the price" to retain low income workers who otherwise would have gone elsewhere, or possibly exited the workplace.

Given this relatively brief but substantive rise in low income levels, why weren't there also real wage gains for higher income level groups? Indeed they've mostly missed out on this latest inflation cycle. One reason could be micro level pressures haven't been as strong as for lower income groups. Perhaps the lack of such pressures is due to (most) middle to upper income groups having sufficient economic options to remain gainfully employed.  

Alas, while lower income levels still have fewer economic options for workplace participation, their employers can only offer additional monetary reimbursement up to a point. Consequently, some time based services which people find valuable will gradually become more difficult to offer on monetary terms, which is one reason I've argued for time arbitrage. Unfortunately, many municipalities don't yet understand this general equilibrium reality, which especially matters in terms of housing options. Consider also that as many Baby Boomers retire, housing and time based services limitations affect them in crucial ways. Not only do fixed income retirees struggle to find affordable low maintenance housing, retirees of all income levels struggle to obtain home services, since many of these workers have understandably departed for more rewarding employment options.

There's another important aspect of secondary market domination in time based services for higher income levels. While employment options are plentiful now for these groups, this unprecedented scenario still obscures the fact aggregate price making in time based services is only feasible up to a point, given general equilibrium revenue needs for redistribution. Granted, such revenues were expanding alongside originating wealth gains in primary markets during the Great Inflation, and more recently, via redistribution which accompanied global dollar dominance during the Great Moderation. However now, aggregate revenue potential for secondary markets in time based services is plateauing in mature economies, which is why high income wage growth is more likely to result in inflation. Indeed, this helps explain a recent healthcare paradox in Britain, which was noted by Marginal Revolution:

Universities have been told they must limit the numbers of medical school places this year or risk fines, a move attacked as "extraordinary" when the NHS is struggling with staff shortages.

Lest this seem ridiculous, only recall how the conundrum is more evident for Britain due to the straightforward nature of its healthcare system. Less obvious are similar sets of supply side problems in the U.S., which are more difficult to discern due to numerous intermediaries between healthcare practitioners and patients. 

Nevertheless, underneath it all, the evolving general equilibrium dynamic is the same. Even though secondary market higher income levels have become relatively less likely to benefit from wage gains, lower income levels must deal with the reality of partial and incomplete non discretionary markets. It's these incomplete markets which can create financial obligations that are higher than wage realities. So much so, there will likely be more instances in the foreseeable future, the Fed needs to adjust monetary representation downward once again, should low income citizens need additional wages just to participate in work activities which citizens and businesses alike, continue to find important enough to maintain.

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. 

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.

Our Meritocratic Knowledge Systems Are Quite Fragile

War can create many problems, and this time it includes difficulties for supply side circumstance, central bankers, and monetary policy. Some are also debating (although they are divided) how Putin's actions will ultimately affect global currency patterns. I'd suggest that while no one knows how long global dollar dominance could last, this is still an opportune moment for special interest groups to dial back on their dependence of global financial flows for monetary compensation. Especially since this decades long global positioning has added to income inequalities, many of which stem from administrative privilege. In particular, inequality in the U.S. is largely due to tax dependent secondary markets (and their associated housing valuations) where knowledge and skill are essential. 

Meritocratic organizational patterns in dependent markets have become like an endangered species, by aligning too closely with other aspects of elite tendencies (both left and right leaning) in advanced economies. Consider how this matters, for political opponents are now so opposed to each another that both sides are losing the ability to effectively function. This really matters for merit based organization, once profit becomes defined as the strongest limits possible to total applied knowledge participation. Even though the patterns we observe are more often knowledge use losses in rural areas, this is nevertheless symptomatic of continued losses for valuable skills in general, in all of society.

For decades we have taken administrative dominance for granted in the compensation of meritocratic time based knowledge. But unfortunately, administrative capture of monetary value for time based skill sets, creates extensive participation limits in terms of both supply and demand. When price making is used in excess of price taking in equilibrium conditions, the result is inevitably reduced societal coordination patterns (hence loss of mutual trust) for knowledge use. Indeed, our housing asset markets closely represent the pinnacle of what people hope to achieve in monetary compensation for knowledge and skill, instead of the compensation many citizens actually receive. 

The supply side conditions which allowed this circumstance have only been exacerbated since the turn of the 21st century. Small wonder that our educational and healthcare institutions now experience problems at systemic levels with few solutions on offer. Yet applied skill losses tend to occur in ways that aren't necessarily evident, such as in U.S. justice scenarios which greatly impact both lower and middle income levels. For that matter, much of the cultural resistance to vaccines took place in "red" states where rural areas have already long since lost their hospitals and other local healthcare settings.

Should we finally reform knowledge centered citizen participation, recall as well, how closely linked these time based services are with housing. States such as Texas (where I live) have been heavily dependent on property taxes to fund the services citizens rely on, for instance. There are other important economic connections between housing and services as well. A prime example is how the Fed frames housing as a transmission mechanism for monetary policy, which in turn affects the money available for services in given time periods. 

Hence when we highlight possibilities for greater housing affordability, it helps to remember that services access and participation would be closely connected to these efforts. Since services values are reflective of housing, only recall that good deflation in housing would require good deflation in time based services costs. This time based adaptation of local property taxes would only work for citizens if they can actually count on lower mutual time costs for group coordination. In many earlier posts I advocated for time as a formal economic unit. Fortunately, we could design means to connect economic time value to originating wealth or monetary value, via local building patterns for participating groups. I continue to hope that production and ownership reform efforts such as these, might be considered in the near future.

Is Social Mobility Not as Beneficial as Equality?

Like many - especially those of us with limited means - I believe social mobility is important for personal aspirations and economic access. Of late, the Olympics has been providing some inspiring examples. However, a recent post from Chris Dillow reminds how some on the left are quick to dismiss social mobility as a real positive. Their dislike of the societal need for social mobility, is something I've never quite understood. 

In his post, Chris Dillow presents a more nuanced perspective. He's also realistic in asserting that class issues will never be completely eradicated. For that matter, despite our occasional frustrations with meritocracy, at least it functions better than earlier aristocratic norms. Dillow sums up:

The point of all this is not to say that young working class people should not be ambitious. Instead, it is to suggest that social mobility is no substitute for genuine equality.

Perhaps more discussions along these lines would be worthwhile, especially if it could reduce our constant culture wars. It would be great if class perspectives and framing, could help reduce the excessive focus on identity politics. Nevertheless, people have different images in mind, when they conceptualize "genuine equality". For one thing, I believe that income redistribution should not be a primary focus in these matters. Even if societies could somehow wave a magic wand to reduce existing inequalities via monetary means, what would we get? Especially since our most pressing inequalities tend to involve resources which are aligned with time and space. Chances are, these are the areas we need to focus on the most.

When money is envisioned as sole solution for existing inequalities, too many intangibles and unknowns are left in the picture. How much income would ever be "enough" to pay ones basic bills, for instance? For one thing, societies are often inclined to raise prices for our most basic needs whenever local income levels rise. In other words everyone gets higher prices chasing higher incomes and we're essentially in the same position as before. 

Chances are, market solutions which lead to good deflation in non tradable sectors, might prove a more tangible and practical approach. In particular, good deflation in time based services would allow a wide range of other market prices to benefit from lower operational costs as well. Like the circumstantial nature of social mobility, market solutions could create tangible rewards that give small income levels more discretionary freedom. Supply side production reforms, much as social mobility benefits, would focus on what can be accomplished in the here and now, instead of getting lost in wishful thinking.

Production reform would be incremental and specific in nature, yet it holds considerable potential to create more positive outcomes. The long struggle to make various groups responsible for the welfare of other groups, is no longer working as well as it once did. We might accomplish much more, by creating better market opportunities for aspects of life which simply haven't responded well to income redistribution. In all of this, an important path to greater equality, is the creation of viable market options for everything we connect to specific time and place.

Let's make peace with the fact that money simply can't accomplish everyone that societies might hope for. Indeed, the sooner we make that peace, the sooner we could build markets in time value which surpass the monetary limitations of present knowledge providers. Plus, the sooner we make room for housing which is not imagined as "permanence", the less expensive it will be to maintain and reconfigure these structures once the need arises to do so. Why not build a better, more agile economy where everyone benefits from good deflation in non tradable sectors? Chances are, existing inequalities would also be eased. It's time to get started. 

The Natural Equity of Tradable Sector Dominance

Was the post war period a golden age? In an article for CapX, Tim Worstall argues that it was not: 

It's terribly fashionable to want to return to that post-war consensus but as with all too many intellectualisms there's remarkably little evidence that it's actually a good idea. 

While I'm not quite on board with some of Worstall's conclusions, I agree that neoliberalism certainly hasn't been a "failure" in all this. Plus, despite what was so beneficial about those post war years, there's no turning back the clock, to regain the previous structural alignments which made life easier for lower income levels than is the case today. Despite the current hardships of those with limited incomes, nations would be ill advised to reengage in industrial management as a policy strategy. 

Why so? Granted, we could benefit from greater monetary and GDP representation for tradable sector share, but it needs to be achieved through a return to basic market options in non tradable sectors. Good deflation in these areas would - in turn - mean additional discretionary income for tradable sector activity, hence more positive outcomes for lower income groups. New organizational alignments in non tradable sectors has become the logical response. All the more so, since tradable sector activity is now so technologically evolved, it can no longer provide the extensive employment options which were feasible for so long. 

Nevertheless, both sides of the political aisle remain tempted to interfere with tradable sector markets. In part this is due to growing concerns regarding shifting demographics. Unfortunately, aging populations only exacerbate the already excessive non tradable sector dominance and its fiscal burdens. In particular, price making in healthcare worsens cultural divides in large nations (such as the U.S.) where applied knowledge redistribution is no simple matter, since millions of citizens are involved.

Alas, there is also good reason for the growing frustration with widespread inequality, since no simple solutions present themselves. As it turns out, nations were able to rely for long periods of time, on the relatively natural equity of tradable sector abundance. Indeed, a quick perusal of Adam Smith's Wealth of Nations highlights the extent to which that abundance was already being taken for granted, centuries earlier. What's more, the residual effects of exponential output could be readily shared with most citizens in these fortunate nations. 

More recently however, since non tradable sector activity lacks this exponential quality, there are fewer opportunities to share national resources on the same equitable terms as before. Since much of non tradable sector activity derives from the time based scarcity of human capital, it is presently organized on hierarchical terms so as to fully function alongside the originating wealth patterns of tradable sector participants. In other words, due to its time and place based scarcities, non tradable sector dominance has resulted in a less equitable society. Whereas the earlier revenue enhancing tradable sector model, often meant "living" wages for workers and healthcare access as well.

How might we change this unfortunate circumstance for the better? For one, time value can be aligned so the time scarcity of human capital isn't continuously lost to input, relative to services output. What's more, local groups could symmetrically align mutual services activities, so more wealth gets created in the here and now. Even though non tradable sector dominance makes it difficult to redistribute money equitably in society, we can still find more fruitful ways to utilize the time we actually have at our disposal. Let's get started now, to create a new version of that lost "golden age" - a new version which holds incredible hope for the future, not unlike the twentieth century version some of us still fondly recall.

Supply and Demand is Vital for Economic Time Use

Despite the fact we often try to disassociate our private lives from economic activity in general, much of our identity - not to mention self respect - results from how effectively we manage our time with others. And let's face it: much of this time management tends to occur on market based terms. Equally important, is that we live in an era when economic time factors into countless personal interactions in the circumstance in our lives. 

How might one think about this? Since people routinely seek to take part in supply and demand for mutual time priorities, life becomes difficult for those who essentially find themselves excluded from the process. Nevertheless, many institutions have reduced the degree to which most individuals are able to effectively manage competing time demands. Even though higher income levels can still hire others for time based services, most income groups lack this luxury. What's needed now is innovation which leads to freer markets, for the supply and demand of mutual time based services preferences. 

Markets for time value would benefit from a focus on local time/space coordination, in the provision of services both basic and experiential in nature. For instance, how might greater autonomy be preserved for all participants? Only consider the preferences often expressed by senior citizens who occasionally need personalized attention, but otherwise would benefit from simpler physical environments so as to remain responsible for other aspects of their lives. Indeed, elder citizens sometimes opt to choose assistance from strangers (or even robots) over family, if they are concerned about loss of autonomy and consequently, self respect.

During the twentieth century, many institutions "professionalized" to such a extent that societies could scarcely tap into the potential which all citizens hold for mutual assistance. Alas, formal schooling became the main setting where students deemed to be "responsible" enough for future meaningful employment, were separated from everyone else. How can societies maintain viability for the long term, if a core of 25 percent (core employment with benefits) is expected to somehow "take care" of the near 75 percent who end up on the short end of the social equation? Small wonder that many citizens have taken to daydreaming about somehow returning to a previous "golden age" of manufacturing work with ample pay and benefits.

In all of this, we've also lost perspective as to the kinds of mutual time preferences individuals would prefer, if given the chance. Indeed, the present dearth of settings where personal priorities are expressed and taken into account, has impacted our personal relationships as well. Clearly, people are happiest when they have real choices in the the nature and frequency of their personal interactions. This is true not only for people of normal working age, but also for young and old. Without those choices, many of us gradually forget how to even interact "normally" with others. Perhaps in the near future, we can better adapt market freedoms toward the supply and demand of personal preferences and priorities in our lives. It's certainly not too late to get started.

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.

Could Time Arbitrage Stabilize Medium Term Growth?

Many have spoken of the need to build new growth and employment strategies, for even our medium term economic reality is somewhat uncertain. I remain convinced that time arbitrage could ultimately contribute to economic stability, in part due to its advantages as a continuum for local services generation.

Symmetric alignment for the time based coordination of local communities, could add to wealth in the here and now. What's more, locally generated time arbitrage would gradually reduce the need for the future fiscal obligations so many services now require. Since decentralized markets for time value would evolve as direct sources of wealth, they could create positive long term effects in terms of total factor productivity gains. 

In particular, time arbitrage may prove advantageous for medium term gains by stabilizing workplace participation for those who engage in person to person service offerings. As things currently stand, technology is beginning to replace the digital tasks which many came to rely on during the pandemic. And while pandemic circumstance initially led to losses in lower income employment (due to social distancing), continuing technology gains will ultimately result in losses of higher wage work, also. Recently, Bryan Walsh of Axios noted that software bots are "learning" to perform tasks previously assigned to office workers. He adds: 

Bots can make digital work more efficient by taking on onerous and repetitive white-collar tasks, but the better they get, the more competition they pose to skilled workers who might have thought themselves exempt from the job-disrupting effects of automation.

What's at stake in this development are continued efficiency gains, and why they are often deemed not just desirable but necessary. Granted, the efficiencies of earlier automation tended to be more closely associated with tradable sector activity. Over the decades - as these processes unfolded - the wealth gains of automation meant that "excess" tradable sector workers could subsequently find work in areas of non tradable sector activity. All the more so, due to additional wealth in circulation via exponential levels of tradable sector output.  

Nevertheless, eventually there would be no escape from the sectoral wealth shifts which eventually transpired. As the overall balance of GDP representation shifted from tradable sectors to non tradable sectors, it gradually became more difficult for tradable sector redistribution to support non tradable activity, given the compensatory claims the latter tended to require - especially when its organizational patterns were hierarchical in nature. 

Even so, much of today's non tradable sector endeavour is just as important for productive economic complexity, as what occurs in tradable sector activity. Unfortunately, many nations no longer have the full range of monetary flexibility they once had, for preserving the applied knowledge which modern economies need. Consequently, the challenge is to recreate more of this vital work on direct and reciprocal terms which are less hierarchical or costly to sustain. Time arbitrage is one way in which we might eventually make this possible. 

Increased efficiencies will always be a necessary component of getting things effectively done. And there is much efficiency to be gained through symmetric alignment which balances human capital inputs and outputs for time based service product. With symmetric time alignment, societies will eventually face fewer financial burdens which stem from the excess input requirements of human capital, in relation to time based services output. Time will always be our most scarce and precious resource. We can all realize productivity gains, by aligning our time with others in ways which make it simpler to meet markets for supply and demand in time based services generation.

Extensive Price Making is an Equilibrium Outlier

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

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

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

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

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

Economic Integration Could Help Unify Us

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

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

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

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

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

Ten Ways This Blog Differs From the Norm

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What We Can Do, What We Can't Do

New years are a good time to reflect on life's possibilities, especially when it comes to societal progress. Nevertheless, how do we distinguish between realistic potential, versus what is essentially wishful thinking? For example, even though the world needs a lot more mutual respect and civility, desired outcomes such as these cannot be coerced. 

And while Adam Smith and many others celebrated the free markets which so contributed to civility in recent centuries, much of this fortuitous societal coordination takes place in tradable sector activity. Still, it's not unreasonable to ask: Could our non tradable sector markets also contribute to greater civility? How might they gain their own newfound freedoms? In particular, is it feasible for the resource of our scarce time, to garner more economic and societal value in the near future? Or will vital markets for time value, remain outside our realm of direct influence?

In the twentieth century, housing and time based services were regulated in ways which reduced the degree of autonomy and control individuals held over their own destinies - particularly those with substantial income limits. If millions were to regain control via new production and consumption potential, how much civility might we all regain in the process? At the very least, we still benefit from the civility which goes hand in hand with high levels of tradable sector resource coordination. And while we will never put a stop to what's bad in the world, we could still create more good, by allowing symmetrical (hence reciprocal) coordination of time via market tested means. Time arbitrage is one entry to this realm of possibility. It is a broad spectrum approach for improving personal autonomy and self worth, with potential to bring new hope to people from all walks of life.

With additional economic value for mutually coordinated time, millions more citizens would derive a greater sense of self worth. Consider one important reason why this matters. So much in the world which is unfortunate and destructive, includes the reality of poorly defined self worth. How can we expect people to be trustworthy or unfailingly good to others, when their time use potential lacks sufficient economic value to build a normal life? Granted, not everyone would personally benefit from stronger markets for time value. Just the same, millions more would finally learn to effectively negotiate with others for their wants and needs. I believe that gaining the chance to do so, would result in fortuitous circumstance whereby people are more inclined to be kind and civil. 

Even though the passing years have given me cause to excessively dwell on what can't be done, I still believe we are not helpless to act in positive ways. Clearly, we have reason to do so, when the evening news also dwells on what we seemingly cannot remedy. While there will always be instances when no one can decipher personal motivations for violence and hatred, there will still be positive ways to respond. Sure, some market efforts are going to fail, sometimes even miserably. But I continue to believe that viable and carefully representative market platforms are the best means we have, to build a better, more inclusive future. Plus, as Ricardo Hausmann recently noted in "The Missing Link in Economic Development":

If someone is not doing something that we as a society value it might be because they can't, not because they don't want to. This weakness in economics has far-reaching implications for our understanding of economic growth and development, which is fundamentally about the social accumulation of productive capabilities.

Markets should not be so willing to devolve, into a twisted rational of what societies supposedly can't do. When they become rigid and inflexible, does anyone really wonder why capitalism gets disparaged? Why not work to ensure greater freedom for our vital domestic markets, so they might better contribute to human civility and hope for the future? Why not 2021 as the perfect place to begin? Lets turn our non tradable sectors into realms where we regain hope for what we can do as a society, instead of remaining hopelessly divided over what we can't do.

When We Can't Always Get What We Want...

Somehow I find it fitting that Mick Jagger of Rolling Stones fame, studied economics before joining the group. Indeed, the song "You Can't Always Get What You Want", is an apt reminder how we seemingly forget to build vital need based markets. Yet if our domestic non tradable sector providers paid more attention to these areas, perhaps people would be less inclined to question the integrity of today's economic and political systems.

Granted, many producers face the temptation of raising the bar on product definitions where possible, so that product and services reflect consumer wants more closely than actual need. After all it can be quite profitable to do so. Unfortunately however, if too many non tradable sector producers choose this route, markets gradually become destabilized. What might be done? Again, cue what Mick Jagger and Keith Richards wrote:

But if you try sometimes you just might find

you get what you need

It's time to get serious about creating more accessible free markets in our non tradable sectors. We are confusing too many experiential wants with what is essentially necessary in order for citizens to thrive. For one thing, taxpayers face additional burdens, due to negative externalities caused by low income workers who lack sufficient income for even limited sets of non tradable sector costs. One indicator we have procrastinated too long in this regard, is that middle class citizens are beginning to seek "living" wages for non discretionary needs as well. Domestic protectionism might be out of control for instance, when a general lack of basic markets encourages politicians to mandate wage floors. And higher mandated wages only make it more difficult for employers to realize profits. We need to focus on production reform in markets where it matters most, to stop this destructive cycle.

Alas, even with fewer profits and businesses in operation, we can't always get what we want when it comes to "livable" wages for all employees. Yet today's workplace offerings are thought of as "meaningful" mostly when when abundant wages are part of the package. Perhaps it's not surprising that the most negative responses to my work thus far, have been due to my advocacy for good deflation in time based services income.

However, good deflation in time based services might be the only way to increase the use of workplace knowledge in more meaningful and accessible ways. Let's just admit it: Great wages are one of those societal wants which is impossible to fulfill for all citizens, via either fiscal means or private sector mandates. The sooner we face this reality, the sooner we can move towards a future of restored hope, as millions gain the right to inclusion in more productive organizational settings. For one thing, good deflation in time based services would do much more than simply address consumer "affordability". Good deflation in income and building requirements, would give us the legal and social grounds to share the work which people find most meaningful in life. 

One reason citizens expect so much from fiscal policy, is that governments are expected to be responsible for meeting many societal needs. The problem in this regard, is how governments and private interests raised regulatory and price bars on basic needs too many times. Each time these bars were raised, governments incrementally gave up their ability to influence or fiscally support citizens and economies, one unfortunate rule and regulation at a time. Now, many basic needs go unmet, as regulatory rules mostly accrue to the societal benefits (wants) of higher income levels. Among the sacrifices in this regard are the one time effectiveness of fiscal policy. Where once it held a valid role in addressing societal needs, now it is closely bound with specific political aims. 

Consider why this matters for inequality and applied knowledge preservation, as well. Fiscal policy now only holds a minor role in smoothing income differences. But more importantly, it is losing its ability to fulfill the role of spreading and supporting knowledge for the use of all citizens. To a large extent, these roles are diminished by the fact redistribution mostly augments the wants of specific high income groups. 

Which is also why I find it difficult to understand, the high hopes attached to fiscal policy "remedies" such as MMT. Even if political support for Modern Monetary Theory should turn into a policy option constant, what might its adherents hope to accomplish in any concrete sense? And that's not even considering the disparaging attacks MMT advocates tend to make on monetarist views. To me at least, Modern Monetary Theory advocates appear mostly concerned with middle class wants, rather than any need based structural issues faced by lower income levels. Granted, there is some good which can still be achieved via fiscal policy. However, we should let go of believing fiscal policy can actually address existing inequalities, let alone the productive use and preservation of knowledge in society. 

 

Hopefully, my readers won't get the impression I view wants as a societal negative. I absolutely believe that wants can be positive as well. However, let's be careful to ensure basic needs are actually met, first. What's more, do so without changing the goalposts so as to obscure basic needs once again. For instance, don't insist that smartphones or credit use are absolute necessities. I don't need either in order to thrive, plus opting for these things would reduce my spending capacity in other crucial respects. Indeed, once basic needs are met, and one finally gets to breathe easier, the occasional wants of a tradable sector (retail) splurge need not break the bank at all.

When societies forget what it actually takes for lower income levels to survive, they also lose track of the extent to which progress actually takes place for societies as a whole. At the very least, tradable sectors have given us excellent examples for full needs based markets, especially when luxury adaptations come from basic commodification structures. Whereas non tradable sector activity, due to the existing scarcities of time and space, tends to leapfrog need based offerings for what may appear as societal progress, but in certain respects is instead luxury mandates for low income levels which can ill afford such requirements. 

Profit is integral to businesses and sustainable economies in general, but profits should not be sought by needlessly obscuring the differences between want and need. Too much of society is presently paying the price for this approach. For one thing, it is a simpler matter to determine basic survival needs than some imagine. Once we become willing to highlight the real differences, innovations for our physical environments in particular, could proceed from this understanding.

Until we realize good deflation in time based services and building requirements, these areas of our lives will remain structurally fragile. As things currently stand, the domestic markets of our non tradable sectors demand too much in terms of debt levels and redistribution, for governments and citizens to successfully shoulder these burdens in the near future. Let's commit to innovation in need based markets. Even though societies can't fulfill every thing their hearts desire, we could still do a much better job of market creation which addresses actual needs.

Are There Really Too Many PhD's?

Some have come to believe the talent pool for PhDs is diluted in ways that result in diminishing returns to the marketplace. Might this actually be true? Even though the argument carries a certain logic, it hardly means that societies should shift toward workplaces where knowledge is deemed less important! In particular, a majority of citizens now rely extensively on knowledge and skill, to lead meaningful and successful lives. How might society respond to a perception of "too many" advanced college graduates, given this reality? 

Alas, the "too many PhDs" argument also presents thorny issues for many who seek well compensated workplace opportunities. Recall that much of the rationale for seeking advanced degrees, is due to non tradable sector expectations of degree enhanced incomes. Even though high income levels should not be a prerequisite for basic non discretionary spending, this structural circumstance has yet to be addressed. Consequently, it's not a good idea to argue that millions shouldn't even pursue advanced degrees, so long as there are inadequate supply side mechanisms in place making it feasible to maintain financial responsibilities with anything less than advanced degrees. 

Nevertheless, I have to admit that present day general equilibrium revenue is woefully insufficient, for millions who still seek to enter well compensated workplaces. So much of this revenue is already claimed by price making in secondary markets, that the wealth creation of primary markets has also been compromised to some extent. However, what frustrated me to the point of writing this post, are group identity arguments which question intellectual aptitude and even the supposed cultural limitations of various groups. How exactly are millions of citizens expected to bear financial responsibility, if they are deemed incapable of full participation at the outset? What this essentially boils down to, is the suppression of human capital (with general equilibrium limits as excuse), in a historical moment when human capital is vital for getting things done. And too much valuable human capital output is essentially time based in nature, for anyone to logically deny entry which boosts aggregate time based output.

If there is any supposed "excessive dilution" in the provision of ideas or intellectual strategies, it is only due to the inefficiencies of a general equilibrium structure - one which never accounted for the possibility of full citizen participation in the first place. For this and of course other reasons, I continue to promote time value as a more inclusive source of wealth building, so that all citizens gain a chance to contribute to positive economic outcomes. Time arbitrage could create a durable free market context, so that personal ability and aspiration can be more fully represented. 

Again, the 21st century - in order to have real meaning - is about raising the value of all human capital - not just the opportunities of the best and the brightest. If we neglect to create time based wealth options for left behind communities, these recent rounds of anti-intellectualism and political division are likely to worsen. And anti-intellectualism is a poor substitute, for the kinds of useful and experiential knowledge which may not continue to flourish, should it remain mostly the province of experts and prosperous regions. We can make knowledge valuable in the eyes of all citizens once again, if we allow it to become part of the economic potential of all communities.

Until now, part of what has made it difficult to take definitive action, is the understandable frustration surrounding near future income limitations. While the fact we cannot raise all incomes is of course bad news, the good news is we can innovate our way to good deflation in non tradable sector activity, so that high income levels aren't necessary to live a good life. Fortunately it is within our ability as a society, to create the non tradable sector innovation which brings new spending power to small incomes. In the future, whenever money falls short of hopes and expectations, time value could be tapped as well, for the creation of durable economic outcomes. And best, we can ultimately change our perceptions, as to who is eligible for full participation in a knowledge based society. 

Notes on Retail as Part of a Two Sector Approach

Retail is somewhat different from other economic endeavour. Is it mostly about the provision of services or goods? Since both are involved in varying degrees, retail also functions as a vital bridge between tradable and non tradable sector activity. And even though services are involved, many aspects of retail still function as direct sources of wealth, so long as basic functions are internally reciprocated with no need for governmental redistribution or insurance reimbursements. 

Regular readers are familiar with my preference for a general equilibrium two sector approach, instead of the three sector model described by Wikipedia. Chances are the three sector model was especially helpful prior to the dominance of services activity in modern economies. However, by combining their primary (raw materials such as mining and agriculture) with their secondary (manufacture) sectors, I am able to keep both tradable sector areas in a logical position as traditional forms of originating wealth. Not only do these groups continue to create a traditional base for new community formation, they comprise the majority of tradable sector activity as a whole. 

On the other hand, services of all kinds have proven most likely to flourish once tradable sector activity (in the form of a traditional monetary prior) is established. For me, this is what made it seem so natural to frame non tradable sector services (along with some tradable services) as the secondary market activity which so contributes to today's economic complexity. Even though I advocate introducing services complexity as a knowledge prior for new community, this organizational capacity would still need to follow the tradable sector example of immediate resource reciprocity. 

A two sector general equilibrium approach is one of active wealth initiation and active wealth response. For example, the non tradable sector of real estate functions as a response, to local income origination. Another response is the extent to which a sustained level of infrastructure maintenance can be generated. In a two sector approach, services can be more readily observed insofar as their contributions to general equilibrium, and also how general equilibrium is ultimately affected by their demands. Consider also, how time as an economic input becomes a common thread for defining and categorizing services complexity. The recognition of time as economic unit is important, since its function as a services common denominator affects productivity aggregates at general equilibrium level. When we measure an entirety of time based services input in relation to output, and contrast this with the input to output ratios of other services capacity, we also gain real economy equivalence to quantitative aspects of monetary representation.

Tradable sectors as primary and non tradable sectors as secondary, is an easier way to conceptualize sectoral relations in quantitative and comparative terms. For non tradable sector activity in particular: What matters most for aggregate productivity potential, is the extent to which time based organizational capacity of final product, makes additional demands on general equilibrium capacity. To what extent is it feasible to create additional immediate reciprocity, to offset the delayed obligations of governmental budgets and other forms of financial product? Consider as well, however, that even though dependent (secondary) services rely on tax redistribution, this is still a relatively direct form of resource reciprocity by comparison with budgets which delay payment obligations for services until well into the future.

How does retail factor into these considerations? For one, the time requirements for retail services can be quite minimal, in relation to the final product of delivered goods and indeed services which require limited amounts of time commitment for final product. Even though some retail includes a considerable amount of focused attention or personal time commitment, it still functions as a growth multiplier in a monetary context, since the majority of its final product is not dependent on time. Indeed, this revenue generating capacity places retail in a broader services category which is also capable of multiplier activity, hence some economists have begun to categorize services according to their capacity for additional growth. 

While retail still includes time and place specific components, it is no longer as bound to these earlier requirements as is traditional housing, healthcare, and place based education. Consequently, retail has proven more amenable to extensive innovation, which in turn allows it to reflect supply and demand more effectively than housing, healthcare and education. Nevertheless, brick and mortar traditional retail - until recently - was still an extensive revenue source for municipalities. Alas, in a post pandemic economy, many municipalities will need to rethink their budgetary revenue strategies in the years ahead, in order to continue meeting their services and infrastructure maintenance needs.

Design Markets That Let Basic Incomes Meet Basic Needs

Might formal versions of basic income become part of our future? While I believe an open ended or non reciprocal approach would be counterproductive, I do advocate for "basic" income levels which can support new forms of mutual employment - especially those which take place via non hierarchical means. Indeed, we are entering a historical moment when many individuals could benefit from new paths of economic experimentation such as this. All the more so, since many citizens and communities now lack many production options which prevailed when more labour was still necessary in our tradable sectors. Non hierarchical services formation would mean good deflation in income expectations as well, for the low income groups which need services access the most.

Just the same, basic levels of income have been with us all along - even though low income groups are all but ignored in the costly market requirements of our non tradable sectors. Why haven't these groups received more respect or acknowledgment from the providers of (largely) non discretionary markets? Chances are, one of the best ways to preserve economic stability and long term growth, is by making market design more receptive to what many businesses enterprises and individuals have been able to pay their workers and employees, all along.

By no means is the issue of small income representation, one of just younger workers or else older employees who lose stable employment with benefits. Future contributors to market design also need to take retirees into account, especially those in the U.S. which rely mostly on Social Security. Not only do many present and future retirees lack private pensions, their savings also don't go far enough in a low interest rate environment. If this weren't enough, new retirees (such as myself) need to take into account the expected losses in revenue for Social Security in the next 15 years. How will we adjust our lifestyles in the meantime? What should many individuals expect to forego in the years ahead? Will we as a country be prepared for future Social Security losses? It's time for our supply side to step up to these challenges.

I continue to hope for a concerted market response for the millions who live much of their lives with limited income realities. Even though governments are not well positioned to tend to these issues, fortunately there are many others who could craft productive responses. Often, the best way to do so is simply start from a clean slate via new and flexible communities. When it comes to housing and other building needs in particular, start with interchangeable building materials which are not only water resistant and easy to put together, but also relatively impervious to insect infestations. Such options are especially important for people as they age, since traditional housing materials become less reliable in the very years when aging homeowners already dedicate more time, energy and money to the care of their own bodies.

At first glance, tiny homes or RV living appear to provide affordability options. However, both are - even when only indirectly - too dependent on the same traditional infrastructure settings which pose problems for community maintenance in general. Consequently, many existing communities are not comfortable in making room for either option, especially since low income groups can't sufficiently contribute to existing tax bases. Only consider this added wrinkle for retiree budgets, especially given what they can now expect in terms of average healthcare costs. Not only do we need extensive production reform in services generation, we also need substantial innovation in physical infrastructure, so that new communities need not depend on high income level groups to create and maintain local physical infrastructure.

As an aside in all this: When it comes to building more flexible forms of new community, shared goals, aspirations and intellectual challenges are also basic needs for individuals and families alike. What we have yet to explore in current versions of property ownership, are platforms which make it possible to better align common interests and aspirations among neighbors. All too often, when neighbors lack any commonality other than physical proximity to one another, they aren't necessarily happy in having to live so closely together, possibly for a majority of their lives! Indeed, what does this example of limited commonality suggest for the larger picture of segregationist impulses if - unfortunately - a substantial fraction of white neighbors scarcely get along with or trust one another?  Granted, this personal observation on my part (as a white person) is no excuse for any extreme expression of racism. Still, we might get better societal results, by making the future ownership of group association less about monetary income or privilege, and more about where common aspirations and goals find economic platforms in which to flourish. I believe time arbitrage and flexible ownership are ways we could make this happen.