Is Time Arbitrage Feasible For Post Covid Economies?

Even though time arbitrage would be a complex undertaking (particularly for large scale versions), today's time based services are nevertheless being called into question, as post Covid realities gradually emerge. Plus there's plenty of unknowns in time based service markets which represent a wide range of knowledge, skill, and yes, physical activities as well. How will societies ultimately respond?

While problems were already evident in secondary markets such as healthcare before the pandemic, there's also recent troubles for time based services that are directly linked to originating (primary market) wealth. For instance, both manufacturers and home improvement retailers have limited incentive to compensate the time based labour involved in installations and repairs at private residences. Worse, these resulting service labour shortages are amplified by resistance among service workers who were never really keen on commuting to outlying areas in the first place! Indeed, a CEO for Whirlpool expressed concern that labour shortages may in fact be structural. Likewise, Zillow, recently had to stop purchasing homes when it struggled to secure sufficient timely labour in order to resell at a profit.

More specifically, what can be done at local levels, should time centered services become increasingly difficult to procure from a distance? Just as time arbitrage could function as a primary market substitute for some of today's secondary markets in knowledge and skill, it could also shore up missing services associated with traditional primary markets. In many instances, time arbitrage could benefit coordination patterns in local services where strength and physical stamina may be just as important as knowledge and skill. Since many manufacturers and retailers have become compromised in terms of services employment potential, they could shift towards establishing commodity and goods specific educational support for their product to local community levels. Doing so would also allow local citizens to more meaningfully incorporate home renovation and appliance maintenance needs in their (time symmetric) educational settings Even though local citizens would not be employed by home improvement manufacturers and retailers, they still have incentive to work with these firms for an outcome that would help both groups. Best, a hub and spoke (or city to country) educational approach could help recreate formal services economies where they are most needed. 

Better use of coordinated time symmetry could eventually help restore structural balance to economic conditions in general. Chances are, efforts to bring time value to the table for market outcomes, would result in greater general equilibrium representation for direct forms of wealth creation than is presently the case. After all, there's a good chance that 80 percent monetary representation for services was too much to begin with, to maintain long term economic stability. Only consider the prominent example of structural imbalance in our healthcare knowledge use patterns. Even Noah Smith recently challenged "shoveling money at overpriced service industries", hence has become one of many who wonder why governments continue to subsidize vital services purposely made scarce in the twentieth century.

Long term economic stability may well depend on whether societies are able to make time value a more important component of formal economic activity. All the more so, since many communities already struggle to provide the kinds of local services which are so beneficial for citizen outcomes. When it comes to general equilibrium dynamics, time arbitrage might at least be able to reduce the discrepancy between monetary representation for services versus traditional wealth sources, to 70 percent versus 30 percent. 

A more reasonable sectoral balance could improve the long term odds of good economic complexity in our formal activities. One way to think about the processes involved, is how such efforts might ensure reliable forms of societal coordination to transfer knowledge and skill which can be understood by most citizens. Otherwise - if and when service markets become distorted - people understandably react with DIY measures instead of - for example - benefiting from healthcare services provided by others. Granted, DIY is often the most practical strategy. But done in excess, extreme self reliance might put the long term preservation and transfer of knowledge use through society, in doubt. And should too many of us end up resorting to DIY, when might the process eventually evolve into a tipping point of informal economic activity, even in places where it was never expected? Alas, informal economies have their problems (such as oppressive amounts of gang activity) and often prove difficult to change once entrenched. If we can avoid it, let's just not go there. Hopefully, societies will learn to better coordinate services so that knowledge and skill can be preserved, hence remain part of our formal economies in the foreseeable future.

The Role of Formal Education in Cultural Divides

What makes our formal educational institutions such a problem when it comes to long term economic stability? Unfortunately, they contribute to our cultural battles by dividing people into haves and have nots, when it comes to skill sets and access to vital information. While this is obviously a problem for citizens in mature economies, these educational divides impact lesser developed nations as well. 

For instance, when emerging economies lack sufficient wealth sources to fund high level human skill, formal education can become associated with "brain drains" or possibly even the need to escape one's country to achieve success. Hence such circumstance pose a threat to many in underdeveloped countries (alas, such as Afghanistan), where knowledge based skills are not yet a dominant factor for local economic activity. Indeed, how could "nation building" ever substitute for the economic pursuits which local citizens need to generate for themselves?

In advanced economies, cultural divides play out differently. All too often, the asymmetrical financial obligations of today's human capital, can crowd more direct wealth sources. Not surprisingly, battles over who even "deserves" access to high skill human capital, lead to social instability and polarization. This lack of long term monetary sustainability for high skill human capital, is already undermining national economies regardless of their level of economic complexity. Hopefully it is not too late to embrace a wide range of valuable human capital formation which doesn't require college degrees, familial wealth, or extensive monetary compensation for that matter. I believe it is still possible to make time use an integral source of wealth in its own right. With a little luck, our formal educational institutions may eventually recognize the need for such an approach as well. 

At the very least, nations now sense that nation building is not a reasonable option. What's more, top down "solutions" leave little room for the true potential of local knowledge and skill alongside tradable sector wealth sources. In order to bridge our cultural divides, new communities are needed, where local participants can generate sustainable sources for human capital formation. Such communities could actually function as knowledge priors, since participating group time could be coordinated symmetrically. Reciprocal time value would in turn allow new wealth to be built via knowledge and skill, without need of compensation from other forms of wealth. 

The monetary flows which exist between primary and secondary markets, affect our structural economic realities in ways that aren't always easy to understood. Let's observe more closely, the nature of existing originating wealth sources. Why do they already exist, and how might they be further augmented? Applied knowledge via coordinated time could serve as a more direct form of wealth creation, so that primary markets eventually come into better balance with dependent or secondary markets. Best, more efficient patterns for human capital formation, would make it possible to address the limitations of formal education which exacerbate our cultural divides.

Don't Blame the Fed for Supply Side Recalcitrance

While there's a common refrain re "easy money" in a recent AEI article, this one comes with a twist. According to Tobias Peter and Edward Pinto, the Fed is also at fault for a growing divide in terms of inequality:  

The Fed's easy credit policies are widening wealth inequality as they fuel persistent home price inflation.

That's a serious charge. But how true is it? And does Chairman Powell - or the Fed for that matter - really not understand "how price inflation differs from inflation for commodities and services"? Granted, the authors have a point about current home price instability. But I believe these particular assertions against the Fed to be unsubstantiated and a convenient diversion from what's at stake. There's been plenty of times when it was appropriate to accuse the Fed of wrongheaded moves, but this isn't one of them. Rather, I'm encouraged by the Fed's recent maintenance of monetary velocity, especially given the difficult transitions of a post pandemic recovery. 

And insofar as the supply side is concerned re housing, technological innovation need not be as insurmountable as the authors imply. Of course builders struggle to meet demand due to high prices for labour and materials - not to mention NIMBY considerations! But when has this not been the case? Fortunately for all of us, a great deal of private sector activity has adapted and evolved, when faced with resource constraints. It's time for building sectors to do likewise, in shifting to manufacturing strategies which include more flexible means of ownership and land utilization. So we are within reason by asking at this historical juncture: if not now, when?

Also, consider the awkward policy expectations which Tobias Peter and Edward Pinto contribute to (re Fed obligations), by asserting:

The Fed's easy credit continues to drive housing demand higher, but has done little to boost supply.

Does this mean the Fed should somehow become more responsible for supply side circumstance? If so, in what capacity? The last time I checked, the Fed's primary responsibility was nominal in nature. Indeed, should they assume market activities currently neglected by other private interests, who is going to be comfortable with such an outcome? Hence even though this is an illogical assertion, it must seem occasionally "useful" anyway, since it implies private interests need not lose sleep over damaged markets. 

Another sad aspect regarding inappropriate blame, is that many in the Fed do take such criticisms quite seriously. Indeed, how often does Fed "meddling" actually mean members of the Fed are losing sleep on behalf of others less concerned? This is no minor matter, given the nature of present day structural shifts in the economy.

Just the same, one must be careful in assigning blame to today's non tradable sectors, despite their exacerbation of social inequality via quality requirements and lack of innovation. All the more so, since structural fault lines and their resulting disequilibrium, aren't easy to understood. What's at stake however, is that we start making up for lost time. Ultimately, it's real economy conditions instead of the nominal realm, which cause such social and political unrest. 

What about high house prices, then? Don't get me wrong, I dislike today's high house prices as much as the next person. But I'm not fool enough to imagine that tight money - let alone the possibility of bad deflation - would somehow make me more "equal" to anyone else. I don't want everyone to lose in this scenario, via the money illusion that would make it appear I was somehow getting ahead. Consequently, I'd rather not sacrifice the nominal stability that does more than anything else right now, to prevent an unraveling of mutual financial obligations and societal trust.

Sure, it would be great if I could find retirement housing that was more in line with my actual Social Security. But I'd still rather not witness millions of citizens facing a world of financial hurt, in the event of bad deflation and seriously falling house prices. Deflation simply isn't a good thing, unless it positively impacts output so as to make life better for all concerned. So, let's get serious about building homes and workplaces which take advantage of centuries of innovation. We've absolutely run out of excuses, and only further the damage all around by pretending it's not feasible to do so.

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.

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.

Might Macroeconomic Theory Be Incomplete?

Surprisingly, given the structural changes which have taken place in recent decades, macro theory still takes a back seat to other factors in our economic debates. Even if theoretical issues are highlighted, they generally lack the depth of theoretical discussion which took place during the Great Recession. 

While this is unfortunate, perhaps it also indicates that something more is needed in terms of stories and explanations. In particular, some believe that macro theory should further evolve in order in to remain fully useful. However, mainstream economists are reluctant to advance the horizons of economic theory, indeed some have also noted that economists are the only ones with "rights" to do so. Inexplicably, this approach means economists are becoming more inclined to follow the lead of policy makers. And since the latter have become quite polarized, economist are also less inclined to agree among themselves about theoretical constructs.

In particular, the lack of attention to general equilibrium dynamics in a time of non tradable sector dominance, makes it difficult for economists to productively respond to long term fiscal budgetary burdens. For instance, excess fiscal policy means more taxation later on. Scott Sumner recently mused on what this means:

I don't think the fiscal stimulus is a good idea, but not because I expect much inflation. The inflation rate will be determined by the Fed. Rather, it's a reckless policy because it will lead to higher tax rates in the future and won't do much to generate growth beyond Q3. (Deficits do cause higher interest rates, but only slightly higher in a country like the US.)

And continued: 

For 250 years of American history politicians have held the peacetime budget deficit in check because of fears of either inflation or higher interest rates (or perhaps a loss of confidence in the gold standard). What would happen if they began to sniff out that the actual risk is not inflation or much higher interest rates next year, rather the risk is higher taxes in 20 years, after they've safely retired. How would they respond to this information? I fear that we are about to find out.

Meanwhile, many policy makers are drifting towards an MMT rationale, despite its lack of theoretical validity. Noah Smith notes the lack of academic depth in current discussions, and suggests: 

it seems fairly clear to me that the reason is that everyone quietly stopped believing in the usefulness of academic theory.

Tyler Cowen in turn responds to Noah Smith:

His whole Substack post is very good, though I give the entire matter a different interpretation. I do not view contemporary macroeconomics as wonderfully predictive, but it does put constraints on what you can advocate for or for that matter on what you can predict. I saw the Republicans go down this path some time ago, and now the Democrats are following them - it ain't pretty. I think what we are seeing now is that (some, not all) Democrat economists want Democrats to be popular, and to win, and so they will rearrange macroeconomic thinking accordingly.

Some also appear to believe that revision of macroeconomic theory is needed, so that economists might feel better about their profession. But is that really enough? I suggest that a better understanding of macro theory could provide more insight, how 20th century general equilibrium dynamics allowed nations to introduce knowledge based endeavour for citizens. Alas, this was only an introduction! As it turns out, these methods are insufficient for more complete levels of economic integration in the 21st century. Will we, can we, meet the challenge?

In short, macroeconomic theory may not prove truly useful, until it creates potential for all communities, not just the economic prospects of governments and prosperous regions. Part of getting to a better place in this regard, is understanding how no level of fiscal policy is going to address the aggregate demand realities of regions which were left behind. No economic theory is going to be complete, if it does not take today's built in supply side limitations into account. All the more so, since many future attempts to pour fiscal policy into the bottomless buckets of supply side constraints, will be doomed to fail. It's time to bring supply side considerations to what have become the general equilibrium equations of the 21st century.

The Decentralization Which Matters Most

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

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

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

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

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

I've Been Disappointed in Myself. But What Does That Mean?

After the recent storming of our nation's Capitol, I've experienced some regret and dismay, regarding my own meager contributions toward more positive circumstances in the U.S. But I've also wondered: how could societies do a better job of preventing such calamities in the first place? It's one thing to express frustration when governments don't function well, and I believe we should. But attempts to destroy them is altogether another matter. It's certainly something I never expected to witness in my lifetime, here in my own country.  

Yet I've managed to shift from this generalized disappointment, to one more specific in nature. Why haven't I been more effective in the last 7+ years of blogging? Do seemingly lackluster results suggest I quit blogging and just call it a day? In spite of these concerns, I'd like to think the answer is no. While I'm occasionally tempted to disengage from it all, I hope to remain committed, involved, even stubborn if necessary. 

Still, it helps to remember that my main limitations are mostly age related. When I was young, I would hardly have confined myself indoors to write about supply side structural reform potential. I'd like to think that had I been aware of these issues decades earlier, my response would have included traveling across the country, while knocking on doors of those willing to listen to my ideas. At the very least, there's consolation in knowing I'm hardly alone in my age induced limitations. Many such as myself have gleaned practical tidbits of wisdom mostly in retrospect, after long slogs which occasionally included learning about life the hard way.

So how to proceed, given our most recent political impasse? For one, all citizens need a better understanding, how severe structural problems have contributed to our political reality. As a nation, we are increasingly constrained by land (place) and time scarcities which governments and inexplicably, even private citizens have yet to address. Today's fiscal policies in particular have been impacted. Unfortunately, neither Democrats or Republicans support fiscal policies which take existing land and time scarcities into consideration. Since both parties instead promote the most costly market options possible, Washington faces severe limits in its ability to function effectively for our knowledge centered economy. Is it any wonder that - due largely to lack of market integration for all income levels - both parties are now inclined to engage in mutual destruction?

Those of us who have not given up on humanity, will continue to seek means for stronger free markets and organizational systems which work well for all citizens. Granted, it won't always be easy, since there are few clear paths by which either individuals or groups can create positive change. Fortunately, there are individuals who will remain stubborn in their efforts to build a better world. Even though it's not easy for all of us to directly participate, we will stay engaged from the sidelines of our desks, while cheering on those who are willing to stay with the good fight.

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.

Some Thoughts on the Political Transition

Despite temptations to remain focused on Trump's cultural divisiveness, we can't afford to lose sight of what has become a substantial economic divide. Is it possible to shift toward a more productive dialogue - one that addresses our long neglected structural dilemma? 

And consider how economic divisions have only grown since Trump's time in office. These issues will continue to impact our political differences if they aren't brought out into the open. Indeed, we need to explore broader perspectives for future wealth creation, while it remains fully possible to do so. From a recent Brookings article re the economic divide:

The data confirms that the election sharpened the striking geographic divide between red and blue America, instead of dispelling it.

Democrats and Republicans disagree on policy approaches, but they both tend to come up empty handed on action based structural approaches. Consequently, the passive aggressiveness of political gridlock rules the day. Even though political gridlock seems the safest option to some, it is a poor substitute for non tradable sector innovation, long term growth potential and economic dynamism. Worse, political gridlock means additional cultural battles, as Democrats and Republicans compete over high income work- especially for careers which include governmental redistribution. 

In all of this, it doesn't help that Republicans increasingly take a protectionist or zero sum approach towards wealth creation. For that matter, many Democrats are doing the same. Plus, some Republicans tend to discount the importance of knowledge based services which are structured as secondary or dependent markets. We recently witnessed evidence of this in Trump's disregard of physicians, due to their need to treat Covid-19 as an income generating source. Once we create organizational patterns for healthcare as originating wealth sources (via time reciprocity), these important activities will finally be independent of endless governmental posturing and the ticking time bombs of budgetary crisis.

Both Democrats and Republicans will need to recognize that in healing the economic divide, left behind regions (urban, rural and suburban alike) will need to approach resource utilization differently. Once supply side solutions are embraced which address the reality of small incomes, millions of citizens can start building more secure futures for themselves and their families. We can all breathe a sigh of collective relief, once broader sources of wealth creation and prosperity become possible. 

Even though we seek common ground with Democrats and Republicans, we still should not rely on their political backing to achieve better economic and social outcomes. It's time to get started on free market templates for new communities, so that political polarization and societal divisions might finally be eased. 

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. 

An Economic Alternative for the Baumol Effect

There are ways to counter the Baumol effect. But how badly do we want to? Indeed, to what extent are we aware that other options exist, in terms of productivity?  An article from Noah Millman, "How a productivity phenomenon explains the unraveling of America", highlights the seeming inevitability of the present conundrum which inhibits long term growth and prosperity. Perhaps it is not surprising that he frames the Baumol effect as a "chronic illness" which everyone will simply have to live with. Still, I am encouraged that a mainstream publication such as The Week, was willing to explore a concept which till recently was relatively obscure outside academic circles. 

In his article, Noah Millman is understandably concerned about the Baumol constraints of time based activity on education, healthcare and public safety, given the importance of "hands-on person to person interaction". He explains:

We can - and should - look for ways to make all three sectors more efficient. But we should also rationally expect them to get more expensive, and to consume an ever-increasing share of the national income, unless we're willing to let their quality deteriorate or put them out of reach for an increasing share of the population. 

Regular readers know how I feel about time based services consuming more national income than is already the case. We need local patterns of economic time reciprocity, so that broader services access becomes possible without additional budgetary obligations. Nevertheless, Millman continues:

If Baumol's Cost Disease is an important driver of costs in these sectors, then we should expect them to consume an ever-increasing share of the national income - but not only that. If we socialize those functions so as to provide equal services to the citizenry, taxes will have to increase every year just to keep quality steady. And if we don't raise taxes enough, then inequality will increase even as costs rise, leaving more and more of the population poorly provided for. And in either case in a world of tight budgets, these sectors will increasingly be competing with each other for the marginal public dollar, and devaluing competing sectors' contributions to the public good.

Ultimately, individuals who care about inequality, could utilize time arbitrage in participating groups so as to coordinate supply and demand of services, thereby making them more affordable for all concerned. Importantly, this decentralized economic option means a willingness to adjust one's own income expectations accordingly! However, accepting less income also means confronting the present necessity of monetary sacrifice for the human capital expenditure now required, for what is often simple mutual assistance. Even though it is no longer feasible to increase time based services via today's general equilibrium revenue, what impressed me about Millman's article was his recognition how the struggle for time based services affects today's political environment:

It's a recipe for perpetual revolt by both those who pay more into the system, who feel - rightly - like they're paying more and more for less and less, as well as by those who pay less into the system who feel - rightly - like services are getting less and less equitable even as they are getting economically squeezed harder and harder. And if "perpetual revolt" sounds a lot like America today - and it should - then sadly, because of Baumol's Cost Disease, satisfying the demands that fuel that revolt may not be possible.

He sums up: "Sadly, Baumol's Cost Disease is incurable. All we can do is learn to live with it as a chronic condition". If only we could! Alas, this structural issue can't be neglected any longer, for the level of political discord has already ratcheted up to an extreme level. We can no longer assume or hope for a benign outcome, if our political turmoil is not addressed via specific and decentralized economic means. Without a productive response, not only is our nation increasingly likely to deteriorate from within, it might also lose its ability to positively influence other nations. Sadly, many nations are not presently well positioned to address existing inequalities. But individuals still could, so long as they are able to secure and maintain the production rights which make it possible to do so.

Millman thought through his arguments carefully, and for good reason I agree with his summation in certain respects. In a similar vein, already existing debt and budgetary burdens should not be used as excuses for austerity, especially if the relevant supply side chains allow service markets to collapse, or the "wrong" party happens to be in power. However, expectations for the supply and demand of skill and knowledge provision will continue to exacerbate cultural battles, should economic access be sought solely through this form of organizational capacity. Stated another way, my disagreements with Millman are not based on moral grounds, but on what I believe overall monetary revenue to be capable of in the foreseeable future.

We can build supply side alternatives which better align supply and demand for time based services, before modern economies are completely undone by financial repression and/or unwanted austerity. However, we need to get started now, if we are to build a structural response to the Baumol effect. Fortunately, when our economic time commitments are symmetrically aligned, we gain the ability to create services based wealth which is not subject to total factor productivity losses. Even though nations will still need the economic option of paying for applied knowledge on asymmetric terms, symmetric time alignment allows us to productively respond to the Baumol effect.

When We Forget How to Live and Let Live

Some resources are truly scarce. Nevertheless, other forms of resource capacity have become artificially scarce. Indeed, one reason capitalism is occasionally called into question, is that special interests too often maintain artificial scarcities in what are basically non discretionary markets. Unfortunately, when societies limit their own economic potential by doing so, the political centers which lend both economic and social stability, gradually lose their hold. Even though various groups and individuals continue seeking solutions for pressing issues, political polarization tends to drown out their voices. In other words, economic conditions may lead to circumstance in which people gradually forget how to live and let live. 

What can be done? Might the underlying structural factors which now get in the way of mutual understanding and civility, still be addressed? How could we make amends for the artificial scarcities which undermine economic stability, long term growth, and even human empathy? Hopefully we have not waited too long, for our present cultural impasse also stands in the way of possibilities for innovation. In a discussion with James Pethokoukis, Caleb Watney describes innovation as an engine and further elaborates:

one of the main things I try to stress...is that the components of the engine have been under considerable stress for decades. We really have not been supporting them through policy at all. In fact, we've been very actively working against them in some ways. But COVID might represent a breaking point of sorts. Sometimes, you can have so much bad policy going on for so long, and then you just need the final straw or a big enough disruption that can really make things start spiraling.

Watney also notes how people no longer feel the world is a positive sum place.

How can we make sure that economic growth does feel positive sum, that everyone's benefiting, that it doesn't have to be one person benefiting at the expense of someone else.

Alas, economists, policy makers and even most citizens grew weary of discussions regarding structural issues, once the economy rebounded from the Great Recession. Hence there was no real response insofar as reforms or other adjustments in organizational capacity. What few predicted, however, was the extent to which neglected structural issues would cause additional problems in short order, with the onset of the pandemic. Had those discussions a decade earlier not been abandoned so quickly after the Great Recession, perhaps we would not have reached the extremes which have surfaced in today's identity politics. Now, it is no simple matter to back up and begin anew. 

In the future, whatever happens, let's hope that representative democracies become more cautious about resorting to cultural battles as a smokescreen for unaddressed issues of economic access and participation. Even though it can be tempting for policy makers to do so, citizens suffer once their governments play the blame game so extensively that little else gets done. Meanwhile, precious energy is being lost in fomented hatreds, even as citizens continue to lose economic access in basic areas of their lives. 

Just the same, if we can once again become willing to live and let live, we need economic context which does not force people to adhere to the same set of structural requirements. The income levels of today's societies are simply too diverse for such unreasonable expectations. Decentralized settings are only worthwhile when they are built so as to encourage a full range of human ability, aspiration, and personal motivation. Even though the gains of some groups would doubtless appear minuscule in relation to other groups, who cares and why should it matter! Just do it! These decentralized settings could still nurture human capital improvement and the preservation of applied knowledge, to the fullest extent possible for all concerned. 

Otherwise, the one size fits all requirements of today's general equilibrium settings, will continue discarding human capital seemingly "unfit" for purpose in relation to the best and the brightest. Fortunately, we have the ability to create a more positive approach to human capital potential. But the time to begin building more hopeful and sustainable settings, is now. We need to productively respond to extreme structural imbalance, before we completely forget how to live and let live.

Notes on Trade Offs in Systems Design

Even though governmental gridlock is often frustrating, in some respects it can be more practical than the alternative. Among other things, gridlock acknowledges extensive competing demands on government budgets. And due in part to changes in lifestyle and individual priorities, some budgetary commitments no longer contribute to economic dynamism as ably as before, such as traditional physical infrastructure. Unfortunately, an undue focus on traditional infrastructure tends to detract from systems design options which more accurately mirror a fundamentally changed economy.

Systems maintenance trade offs are important as well. When we can't decipher how our time commitments translate into societal obligations, it only gets more difficult from there, to apportion remaining time for our own needs. We've gradually tossed much of our redistribution potential, via taxation, into a vast chasm of societal responsibilities. Could some of these processes take place on more productive terms? Even highly skilled knowledge is in certain respects a mundane maintenance function, yet we have few settings where it can be readily applied as such. In the future, as budgets become more constrained, what monetary values might public goods and services continue to hold? We need to create new market options while we can still think clearly about what will be involved. In other words, well before budgetary shortfalls make it necessary to do so on more stringent terms.

Each of us has a limited amount of money, time and resource capacity, for what societies wish to implement and hopefully, maintain. Alas, it is becoming less practical over time, to further add to environment maintenance costs (whether local, state or national) without clear specification of the trade offs, not to mention which income groups are actually expected to be responsible for costs. Much of what currently transpires is no longer realistic for societal coordination, given the wide variance in today's income levels. All the more so, when money mostly serves as a stand in for personal time or resource commitments.

Despite the importance of systems design on multiple levels, the broader trade offs that impact societal well being are not being accurately debated. Future systems design will have a greater chance of success, if and when it takes our broad income diversity into full account. Whenever income levels prove insufficient for systems maintenance, we can build respectable and desirable alternatives in the form of new environments, for those who lack the full monetary rewards of meritocracy. I would be remiss if I didn't add: When it comes to trade offs in general, this part of the public discussion has scarcely begun. Plus, when trade offs are discussed from a public choice perspective, it's not helpful when they are framed as "we would be better off without", if no market alternatives are being actively prepared for implementation. The rise and fall of Obamacare is just one egregious example.

A lack of systems design which could take different lifestyles and income levels into account, has also led to struggles whereby various groups attempt to impose their lifestyle preferences on other groups. In many instances it would be simpler to start from scratch, especially for the creation of walkable communities. New beginnings in systems design could ultimately lead to less political polarization, and more hope for the future. Restored hope in decentralized prosperity, could likely mean less struggle over opposing visions of the "good life". No one has ever successfully imposed their version of "best life" on any one else. People are far too stubborn for that to happen. So why do centralized governments keep trying to impose either/or lifestyle scenarios, which they inexplicably expect all citizens to live by?

However, the cronyism of special interests, has inadvertently contributed to today's either/or scenarios as well. Now, consider the consequences: When governments give in to the protectionism impulses of private interests, where is the logic in belittling citizens for responding by demanding similar protections? Despite the fact that protectionism has come full circle, and of course the global implications, there may yet be time to back away from this precipice. Why not work to reduce centralized and protectionist impulses while we still can. Why not build upon systems design which makes room for everyone, not just whichever fortunate individuals happen to be in power at any given moment. Ultimately, the best way to achieve sustainable trade offs, is to create ample economic options - options which allow all income levels to contribute and participate in society.

For Progress, Basic Innovation Remains Necessary

When it comes to societal progress, inventions that improve basic aspects of living are as crucial as they ever were. In considering why this is so, one also hopes future progress studies will encourage participants to envision basic innovation as much more, than past historical records. Innovation is not solely about creating new economic options, to further tempt those who already have plenty to spare! Indeed, with concerted efforts to innovate local environments, productive transformation could come to non tradable sector activity where it is most needed: time based services, building components, and physical infrastructure.

Oftentimes, achieving more supply side output means getting more people involved in the entire process. Alas, societies tend to lose this perspective, and they end up traveling paths in which ever fewer citizens are able to go. And while a more inclusive economy is often discussed in terms of greater monetary redistribution, basic forms of real economy activity are actually more important, so that all citizens can remain fully engaged. Much about societal progress relies not only on our active participation, but our personal ability to contribute to system maintenance as well. However, without ongoing production reform which lowers basic systems costs, they eventually become unsustainable, as growing majorities of citizens find themselves unable to contribute to systems upkeep.

Another way to think about supply side possibilities: How can we create more good deflation in these basic areas of our lives? What the supply side makes possible in terms of production and consumption, often matters much more than our actual income differences. Only recall, how the benefits of good deflation in tradable sectors have led to greater economic access and centuries of progress. Production reform in non tradable sectors would ultimately translate into additional economic activity, allowing millions more to build meaningful lives.

In certain respects, good deflation functions as other forms of productivity gains, in that it achieves more output via the resource capacity already at our disposal. This is why we also tend to observe lower costs in areas where good deflation does occur. That said, quality product gains also affect this relationship. In particular, preserving good deflation potential in non tradable sectors, means being careful not to allow perceptions of quality product to determine the extent of our personal economic time commitments. Especially given required costs for personal environments which are already non negotiable! Many businesses already have ample incentive to increase productivity, so why hasn't a similar approach been applied to the resource potential which communities actively share? After all, there are plenty of means for doing so, which can preserve the freedom and autonomy of all involved.

Without the possibilities of good deflation, too much non tradable sector activity would remain a financial burden for limited income communities. It's time for real change in these basic systems. Even though existing inequalities will always be with us to some extent, we could still bring vast progress to non discretionary goods, services and environment structure which involves asset ownership. Whether or not societies prosper in the future, may well depend on how our non tradable supply side capacity is organized and conceptualized. There's plenty of work to be done, to improve these vital areas of our lives.

Monetary Stabilization Needs Real Economy Stabilizers

When recessions call for extensive monetary stabilization and fiscal stimulus, also consider how real economy factors tend to either support or undermine the process. Or, more specifically: Given the importance of reliable long term financial flows, a flexible real economy approach could help to ensure they are maintained.

The current recession is somewhat different from many earlier recessions, since extensive supply side disruptions have also come into play. If this weren't problematic enough, without NGDPLT as a guide, the Fed lacks sufficient rationale for the temporary inflation levels that could smooth and maintain the current monetary trajectory.

Despite the initial stimulus, additional fiscal and monetary assistance are being called into question. Some are now asking, who is really going to benefit? Likewise as Scott Sumner recently noted, the Fed is beginning to falter in what recently appeared a strong commitment to a level trajectory. And unfortunately, increased public skepticism could derail what is still needed for sufficient monetary stabilization. It doesn't help that losses in the current trajectory could mean more extensive business losses than otherwise would have been the case.

Even though monetary policy can't do the entire job of economic stabilization, it is still the primary consideration for what is needed in macroeconomic terms. A level nominal trajectory ensures that real economy efforts have the greatest chance of overall success. What contributions from the real economy, then, might contribute most to continued stability?

The real economy particularly suffers from a lack of structural flexibility. It lacks the ability to respond to what are also rapidly changing events. Consequently, too much economic participation ends up undermined by excessively rigid rules of engagement. Since these rules also result in limited economic options, recessions invariably leave millions of participants on the sidelines, afterward. All too often, many individuals never fully gain the economic and social connections they once enjoyed.

Structural change - in order to be truly effective - would make room for more flexible forms of ownership and financial obligation. One way to think about such processes, is that each example of non tradable sector good deflation, would also function as a real economy stabilizer in times of recession. In other words, good deflation would mean greater stability for business formation and employment in general. Production reform could make it easier not only for businesses to stay afloat, but also for employees to remain gainfully employed.

Recessions are difficult enough, without the structural rigidities that make it difficult for societies to carry a full load of financial obligations. Fortunately, there are ample opportunities for making real economy circumstance more resistant to recession. Greater structural flexibility, especially for building and time based services options, could give investors and average citizens alike more confidence in continued economic dynamism. Let's not forget, how basic aspects of supply side potential could be configured in ways that restore hope for a better future. Such options are especially needed now, to help recover confidence not only in monetary policy, but in real economy potential as well.

Economic Flourishing: Make it Personal

Struggles of identify have once again come to the fore, particularly those of race and gender. One consequence of course, is that sometimes it's difficult to turn on the news without getting depressed. Yet I'd be lying if I suggested that class or gender based discrimination have never been problems for me. All the more so, whenever difficulties in maintaining steady work meant corresponding limits in personal freedom and autonomy.

Just the same: Despite how issues of inequality and social justice are often framed by politicians, activists, and others, I believe in practical solutions for complex social problems. Specifically, a strong supply side approach for production reform, could change lives for the better in ways people get to experience, rather than having to be convinced of. Let's strive for economic flourishing on real economy terms that go well beyond what money alone can accomplish. Why not create new free markets, to supplement countless local markets which have long been restrained and will continue to be so. Fortunately, it is within our ability to make economics personal in ways which matter for all citizens, not just the elite or perhaps well to do.

Don't get me wrong! Arguments for social justice are important, and perhaps some positive change may finally come from recent struggles. Nevertheless, these discussions and activities are somewhat different, from what is needed to generate positive change at a real economy level.

In particular, economists might come to recognize supply side approaches which directly benefit all citizens. While economists have studied the economy in great detail, they mostly utilize impersonal means which are consequently lacking in real economy results. Worse, the inclination of academics and pundits to emphasize what doesn't work - such as one's ideological opponent - means too few economists who are fully vested in contributing to real economy outcomes. Sadly in all this, economics is now mostly "personal" only insofar as people are angry at economic outcomes.

Make it personal by creating more positives, instead of focusing on existing negatives. This is all the more important, since social justice hardly comes down to moving existing revenues around, or some other temporary form of "inclusion". Real economic justice means ongoing economic inclusion, in terms of what human capital potential might still accomplish. We have already seen many times over, for instance, how making more revenues available for governments, is scarcely the same thing as creating real economic access for citizens from all walks of life.

We could make economics personal in ways which help to defuse identity struggles. This is particularly possible, when we refuse to constantly demean what has come before in terms of supply side structure. The real issue isn't about dismantling special interest advantages, but of creating and cultivating new markets where special interests lack incentive to tread. It's not necessary to put non tradable sector special interests on the defensive. And if we don't, we gain more chances to create new wealth and prosperity on more personal and meaningful terms.

Only recall, how much identity struggle exists because our present equilibrium needs new and stronger definitions of wealth. We can make economics personal again, by inviting all citizens to take part in wealth creation. How might individuals share their personal definitions with others? How might others respond? Each offering can better align the ones that follow. Let's get started. Why not focus on the commonalities of what we all want and hope for? We could still break free of the chains that emphasize our differences, with the unity of a productive economic response.

Fiat Money as a Framework for Human Capital

Why hasn't fiat money turned out to be a better suited tool for complete levels of economic coordination?

Much of the problem in this regard, is that skills arbitrage emerged in the 20th century as a partial equilibrium component of human capital potential. As circular economic activity became more closely aligned with time based services generation, intangible forms of wealth created additional demands on money, which had previously had been associated with originating sources of wealth. Once fiat money expanded the range of monetary representation possibilities, sectoral imbalances became more prominent. A wide range of knowledge providers used skills arbitrage for extensive price making in markets, which gradually reduced general equilibrium revenues for additional coordination in these vital areas. Alas, this process has finally reduced the aspirations of millions who once hoped to participate in the economy on similar terms. For reasons such as this, I continue to advocate for time arbitrage as means to further promote a fuller use of knowledge and skill, for all citizens.

Nevertheless, there are fairly obvious and pragmatic reasons, why social coordination patterns for the use of knowledge emerged through such limited terms of engagement. How else might societies have readily brought together widely divergent market participants, so as to live among one another and combine revenues for common public goods? By way of example, commonalities in local real estate value made it simpler for high skill service providers to maintain integrated economic relationships, with those who were directly involved in wealth generation.

Only now is it apparent these earlier processes are not enough, to fully sustain a modern day knowledge based economy. How might we address the fact that fiat monetary systems - in and of themselves - aren't sufficient to maintain widespread integration of skills and services for all concerned? Even though skills arbitrage never was a long term solution for complete economic integration, it could still function far more effectively if time arbitrage could function alongside it, without unduly expanding what general equilibrium revenue is capable of. Time arbitrage could create a new measure of economic value which in turn would lead to more horizontally aligned workplaces. New patterns such as these could effectively disperse applied knowledge beyond what price making and skills arbitrage has achieved in a system where money is the sole determinant of economic value.

Also, time arbitrage as a horizontally aligned system, would not demand so much monetarily as to further compromise what central bankers can reasonably accomplish. Time as a valid unit of measure, could compel us to more closely examine how intangible wealth sometimes distorts monetary roles, particularly when money is expected to function as the sole source of economic value.

Time value as directly generated wealth, could allow a majority of human capital to eventually flourish. Economic time options are all the more important, now that fiat monetary systems face too many competing demands for citizens to fully take part in the economy. By allowing time to function as a more precise form of economic value, fiat systems might eventually benefit from greater economic stability, as well. Ultimately, we can have higher hopes for a brighter future, by defining wealth creation in economic terms which go beyond what money can buy.

Intentional Market Design and Economic Freedom

Of late, many libertarians have been understandably concerned about temporary losses of freedom to congregate with others, due to the pandemic. However, this is no time to neglect the additional burdens we face due to excess regulatory environments, for over regulation could also affect society's ability to fully recover in the long term.

Only recall, how limits to personal freedom extend well beyond the social and the political. When essential product is defined so as to incur unnecessary costs, many of us lose the chance to make the best use of our time priorities. In other words, some aspects of market design include hidden intentions which in turn reduce our level of economic freedom. Indeed, some of today's regulatory burdens could limit our ability to live meaningful lives, if they are not addressed soon enough to help us meet our financial obligations to others in the near term.

As jobs continue to be lost and societies struggle to maintain their financial obligations, we need a response which takes both short and long term structural issues into account. Ultimately, the best way to reduce near future financial obligations, is to set about reducing the costs of the structural burdens they were based upon. Production reform would make doing so a distinct possibility. As things currently stand, structural burdens now create excessive financial obligations for public and private interests alike, and pandemic circumstance exacerbates this reality.

We know that many problems which seemingly emerged overnight, nevertheless aren't going away any time soon. Importantly, a longer term approach is needed - one which also expands ownership potential and economic participation by simplifying a wide range of supply side structural issues. That said, how to determine what kinds of regulations stand in the way? Clearly, some forms of regulations are benign and often beneficial, especially when standardization procedures also encourage exponential growth in supply side output. Commodification which results in broad economic access and reasonably well met demand, is an example of positive procedural standardization.

However, many procedural regulations aren't intended to bolster supply side capacity, especially when exponential growth in output is not an option due to natural scarcities of time and place. Too many non tradable sector regulations impose limits on (already scarce) time and space linked product, instead. Some public and private institutions intentionally hide what supply side limits are actually intended to accomplish on their behalf. These forms of intentional market design often disallow basic product such as housing or time based service options. Hence producers and consumers alike end up with excessive time commitments when no other choices are available - scarce time which otherwise might have been put to more productive ends.

Even though hidden intentions in market design aren't the most obvious feature of existing inequalities, they tend to result in more debilitating circumstance for lower income levels than other forms of inequality. Consider for example, how neither basic income (as generally promoted) or Social Security income is truly capable of addressing today's non tradable sector requirements for basic needs. Yet if basic income were eventually enacted alongside Social Security, millions more individuals would have little else in the way of resources to meet their obligations. It's time to bring more of the hidden intentions for market design out into the open, so that markets can become simpler and more accessible for producers and consumers alike.

Fortunately, it is quite feasible to create more flexible patterns for personal ownership and economic participation. It is also possible to reclaim the value of our time, so we can pursue more of what makes life meaningful and productive. Only yesterday, some were arguing how society had become too complacent for productive change to materialize. Yet we no longer have the luxury of remaining complacent. Perhaps we can respond to crisis by turning it to a better future for all concerned. Why not reorient intentional market design toward more benign forms, so that all can benefit from greater economic freedom.

Three Basic Ingredients for Economic Stability

While there are many ways to envision what contributes to economic stability, the current pandemic suggests a closer look at basic ingredients. Should it prove difficult to maintain current wealth levels, a focus on the essentials could also lead to sturdier safety net options. I find it useful to think about three elements in particular: First, the importance of stabilizing what is nominal. Then, building a simpler framing for physical and non physical aspects of the real economy which the nominal represents.

As a market monetarist, I also believe it is vital to maintain a level nominal target, so that general equilibrium will (hopefully) remain stabilized. And even though level NGDP targeting is not the stated approach of the Fed, central bankers have more closely adhered to nominal stability since the mistakes of the Great Recession. The greater danger now, however, is that monetary stabilization could be threatened by extensive supply side disruptions. Adjusting for optimal aggregate demand will be quite the challenge, since present supply side uncertainties - unlike many previous shocks to the real economy - are due to factors too numerous to understand.

Consequently, despite what it can accomplish in the near future, monetary policy still needs to adjust to lost general equilibrium capacity, at some point. In other words, accurate nominal representation also depends on what the real economy is able to accomplish. Clearly, there is a great deal of interdependence between the nominal realm, the physical realm, and human oriented aspects of our economic lives.

Again, consider what present uncertainty consists of, insofar as many chains of financial obligation are being disrupted. How will society respond? Understandably, fiscal policy also seeks to stabilize general equilibrium conditions. Nevertheless, doing so is only feasible up to a point. All the more so, when fiscal stabilization attempts to include many activities that are not essential to getting things done.

In all of this, many small businesses won't survive, and some Main Streets could end up even less dynamic than before. For instance, one third of Americans missed their rent payments in April. This means problems for renters and landlords alike. Stephen Cecchetti and Kermit Schoenholtz explain what financial institutions also face:

Banks will not be able to dodge the financial fallout. Many borrowers are likely to suspend repayment soon, presaging widespread default. We will not know the extent of the damage or who will ultimately bear the costs, for some time.

Yet this time really is different, as they further note:

Rather than the financial system undermining the real economy, it is very much the other way around. With few exceptions (like Sweden), advanced economies have entered a form of suspended animation. As a result, households and business are losing income that they can never replace. The hope is that the COVID-19 crisis does not trigger a full-fledged financial crisis, exacerbating what is already destined to be the most severe global downturn since the 1930s. 

Many households and businesses are going to need financial options in the foreseeable future, which rely on lower monthly expense levels. Hence when considering basic ingredients for economic stability, simplification of everyday living circumstance is key to making this possible. By way of example, in my most recent post , I suggested flexible building and infrastructure options as a way to address structural physical aspects of the real economy.

Likewise, broader options for economic participation and use of human capital, are needed for non physical aspects of our environments. We need locally applied time arbitrage, to rescue what are increasingly endangered knowledge chains. Two recent articles offer unsettling examples. From NPR:

According to a report released this month by the Chartis Center for Rural Health, nearly half of rural hospitals were already operating in the red before the COVID-19 crisis.

Further, Dylan Scott writes for Vox that hospitals are cutting staff "just when America needs them most". Even though the initial healthcare losses took place largely outside of hospitals, staff cuts are beginning to spread inside of these institutions. Only recall that much of this problem stems from the fact today's healthcare is heavily dependent on existing wealth - much of which is in jeopardy at least in the short term.

Let's create simpler procedures and settings for ownership and economic participation, so that individuals and businesses aren't jeopardized every time a month's revenues fall short. Ultimately, we could end up struggling to maintain general equilibrium in its present configuration. But even if existing wealth is somehow diminished, imagine what could still be done, to strengthen and preserve its core.

Why not make our physical and non physical environments easier to access for all concerned. If we can shake loose structural rigidities how productive activities are "supposed" to occur, oppressive financial burdens could be lightened as well. A direct structural approach today, would be better than the indirect response of a debt jubilee later on. Perhaps debt jubilees of the past also reflected the unwillingness of societies to relax their own expectations for working and living requirements. Debt jubilees may have been no real panacea, if they left in place the same rigid requirements that negated the economic participation of millions - even in good times. Let's work on reducing unnecessary barriers to ownership and economic participation, so that a better new normal might eventually emerge.