Don't Forget About Basic Resource Scarcities

Not long ago, some became convinced society's main problem was finding better ways to share resource abundance! But it didn't take long for a global pandemic and the vicissitudes of war, to remind everyone once again that resource scarcities are still part of the equation. For mature economies in particular, resource scarcities in the utilization of time and place are starting to impact how the Fed manages inflation. Limited markets in time based services are evident in high skill human capital, but this phenomenon is also emerging in simpler forms of (highly sought after) personal attention. Meanwhile, place based scarcity is reflected in the high costs of housing relative to actual incomes. 

Still, it's easy to forget how these imbalanced markets affect current underlying inflationary levels. Instead, macroeconomic discussions tend to alternate between employment issues or irresponsibility on the part of fiscal and monetary policy. At the very least, some of our supply side resource scarcities should resolve in 2023 via resource substitution, which can in turn help ease inflation. Unfortunately though, time and place based resources need to be framed in more understandable context, before the Fed benefits from supply side assistance towards monetary stability. In the meantime, the Fed is reduced to inadequate measures such as reducing traditional housing starts, when what is really needed is more accessible non traditional housing production!

One way to think about the natural scarcities of economic time and place, is determining how we created too many additional layers of artificial scarcity to the real scarcities we already face. It could also help to respect the rationale that existing institutions initially used for additional limits to market access, then move forward to create new beginnings from this understanding.

Respect for existing institutions which work with resources involving time and place based product, means fewer attempts to dismantle them, and more attempts to evolve production processes where these institutions are actually growing fragile. Consider for instance what it actually means when builders cannot afford to build affordable homes for low to middle income consumers! Recall as well the fragile nature of healthcare institutions which can ill afford to function in many areas which don't benefit from vast wealth holdings. Both of these are institutional fragility. New institutional efforts would do well to create alternative means of social support to address where older institutions can no longer easily function. 

Indeed, by not attacking existing institutions directly, we can still respect how they evolved to address different sets of social realities and historical contexts. For instance, Nimby based zoning allowed people to at least partially manage their personal fears around living close to others they didn't know enough to trust. Likewise, skills use limitations were a way to address people's fears about what might happen if they paid for services which turned out poorly. And enforced professional limits in human capital, also made it possible for professionals to live among others who already benefited from higher and more directly derived incomes.

Nevertheless, regulatory moves which increase artificial scarcity now mean basic non discretionary markets beyond reach of average consumers. Such markets also require a level of monetary representation which makes the job of central bankers more difficult. What's more, these domestic market income sources - not to mention their corresponding housing representation - contribute to an NGDP growth level which is currently too high to maintain economic stability. Clearly, more is now at stake than missing markets for lower income consumers, as this aspect of market dominance could compel central bankers to impose additional reductions in aggregate demand. Alas, doing so would further reduce the output potential of discretionary markets in more direct wealth origination sources as well. 

Should new institutions arise to create broader domestic market options, they would nonetheless need to acknowledge the main reason consumers tolerated earlier forms of market dominance for so long despite lack of access: trust. Many countless regulations arose in environments where social trust had been eroded at least to some extent. Hence people became willing to pay dearly (when and if they could) for specific quality promises in time based services and housing options. New institutions need to build much more than just greater economic access, for they would need to restore societal trust through time value which doesn't require the same level of monetary compensation as in decades past.

At the very least, we've been quite fortunate our current services sectors functioned as long and as well as they have. Nevertheless, we appear to have entered an era in which today's services sectors could impart undue burdens for inflation, should new domestic markets not materialize. For this reason I might add that when it comes to Fed inflation management, I would probably understand if they maintain a "hawkish" stance in response to continued supply side inaction. Especially should NGDP levels remain as high as is currently the case. 

Inflation Relief Can't Address the Missing Market Divide

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

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

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

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

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

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

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

Too Many Market Claims on Nominal Income

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

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

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

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

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

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

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

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.

Wants are Sometimes a More Relevant Form of Demand

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

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

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

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

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

Walkable Community Can't Happen Soon Enough

If only we already had more walkable communities! While they are occasionally found in high income locations, lower income groups could especially benefit from them. After all, local walkability reduces transportation costs, which in turn makes it easier to budget for local housing options. 

One wonders whether this logic is included in billionaire Marc Lore's plans which could eventually produce a walkable city. Alas, his vision is only on the drawing board at the moment. Indeed, for anyone whose life could be enhanced by walkable community in the here and now, Lore's initial starting point of 2030 must seem a long way off. According to CNN:

The former Walmart executive last week unveiled plans for Telosa, a sustainable metropolis that he hopes to create, from scratch, in the American desert. The ambitious 150,000-acre proposal promises eco-friendly architecture, sustainable energy production and a purportedly drought-resistant water system. A so-called "15 minute city design" will allow residents to access their workplaces, schools and amenities within a quarter-hour commute of their homes.

For one thing, it's not helpful to frame these efforts as cultural battles, as Tucker Carlson recently did.  In particular, petroleum production will continue to be an important part of near future market patterns for all populations. There's no need to imagine petroleum production as mostly advantageous for rural dwellers and others who embrace the low population densities associated with automotive ownership. Hopefully, petroleum production will continue to enhance a wide range of global markets, even as other energy sources gradually come to the fore. In all of this, we can encourage free markets which represent a diverse range of population densities. If national governments are willing to remain open minded re diverse market preservation, we stand a better chance of preserving market freedoms at local and state levels as well. 

Nevertheless there's some wishful thinking in this latest city building attempt, which needs to be addressed. While "human centered" communities are a reasonable desire, who really knows what that means? Fortunately, a better understanding could be gleaned via the active discovery of individual and group time preferences, through markets for time value. Time based service markets would make it easier to discern preferences that could translate into local time and space design. A free market orientation for time value, is vitally important for any "15 minute city design" to function as intended. Otherwise, participating groups would struggle to effectively coordinate times and places for getting things done.

Mutually determined individual/group needs are key for services based markets in the 21st century. In all of this, intentional markets should not mean imposing specific group preferences on other groups with different outlooks and lifestyles. Rather, intentional markets could create better defined environments that respect personal choice, so as to broaden market possibilities for everyone.

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. 

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.

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.

Reimbursed Mutual Assistance > UBI or Guaranteed Job Programs

What if some form of universal basic income were to become a reality? Alas, should traditional employment decline in the near future, UBI is not a practical long term solution, especially given the nature of present day fiscal obligations. At most, UBI might serve as a stopgap measure, should a wide array of employment sources dry up simultaneously due to technological change. 

Chances are, UBI would also prove somewhat demoralizing, since many recipients would lose valuable opportunities for economic and social connections with others. Not only is a UBI approach likely to reduce our chances of greater economic integration, it could further polarize an already divided society - especially in terms of knowledge use and meaningful participation. 

Small communities in particular need proactive solutions for economic dynamism and long term potential, instead of compensation for basically being forgotten or left behind. Toward this end, compensation in the form of monetary reimbursement for voluntary mutual assistance, would be more practical than policy choices that don't address widespread social isolation. What's more, mutual assistance could be symmetrically aligned (via matched or reciprocal time) so as to create new wealth instead of additional demands on fiscal policy. Indeed, what could be better than creating internal rewards for our natural inclination as humans, to come together in order to get things done? 

Compensated or reimbursed mutual assistance at local levels, is also a better solution for many than guaranteed job programs. Unlike government generated work which often requires participants to relocate, compensated mutual assistance would allow local communities to create new job opportunities and workplace responsibilities in their own midst. And rather than attempting to fulfill the wants and needs of governments, the time arbitrage of mutual assistance would allow people to create entirely new local markets - markets which are responsive to shared individual wants and needs. 

Reimbursed mutual assistance contains other advantages as well. For instance, it could lead to the local creation of knowledge based services - services which otherwise tend to be difficult to access via hourly wages alone. Fortunately, the supply side approach of reimbursed mutual assistance would bring additional value to our collective time, so as to make it capable of meeting a full range of basic needs. Eventually, better coordination of time value could lead to greater community trust as well. This is especially needed in the U.S. where a substantial degree of trust has been eroded away.

New patterns of mutual assistance could lead to more voluntary and spontaneous forms of association than are now common in many time based service activities. As individual groups structure their combined efforts to build a shared continuum of activity, they gradually create new wealth which approximates what is often possible through more traditional forms of employment. In a time when advancing technology makes near future work potential less certain, people can breathe easier once viable replacements create new sources of normalcy and stability for all concerned.

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.

Could Production Rights Counter the Urge to Destroy?

One of the unsettling features of this recent election cycle, has been the oft stated desire to completely demolish the opposition. There's more at stake than belonging to the "wrong" team, since extremists on both sides tend towards a zero tolerance ideological approach. Even though some relief might be had from these cultural battles in the days ahead, how much "normalcy" is still feasible? Is the tribal urge to destroy only temporarily hidden from sight? 

By way of example,  a police chief in Arkansas resigned from his job, after promoting violence against Democrats on social media. Yet this is only a specific extreme example, in a broader backdrop of growing animosity towards "neoliberalism" in general. Indeed, reactions against various capitalist institutions took place decades earlier among the political left, and have since spread to others on the right. Consequently, the urge to destroy could remain an unsettling reality which continues to disrupt the benefits of globalization and an interconnected world. Even though - here in the U.S. - the presidential outcome provides a chance to catch our collective breath, this reprieve may nonetheless be short lived.

What can be done if populism continues to pose problems for wealth creation and economic stability? I can only hope that better defined production rights would ultimately counter the urge to destroy. After all, most individuals are naturally less inclined to tear down institutions and environments which have also been shaped by their own personal and financial commitments. Yet when we hear calls for greater responsibility on the part of all citizens, it's easy to forget, how domestic protectionist impulses limit the ways in which citizens are able to be personally responsible in any group context.

Hence one major challenge is ensuring that more citizens can fully participate in a modern economy. Too many now lack the economic freedom to fully contribute to their economic circumstance, meaning their personal realities often pay the price. When people have few opportunities to define the nature of their own environments, destruction all too often becomes the preferred response. It's time to build stronger supply side production options - options which can create more equality of opportunity and hope for a more inclusive future.

No one can reasonably expect politicians and policy makers to do the heavy lifting in this regard. Plus: Both Democrats and Republicans - despite their polarized differences - have been vested in forms of domestic protectionism which remain destructive for lower income levels. Is it any wonder this protectionism finally spilled out into the international arena?

Average citizens - especially those without college degrees -  are the ones who hold the greatest stake in the markets for services and physical infrastructure which now need to be encouraged. Fortunately, these new markets could be actively supported by economists and other professionals, who are starting to realize that millions can't support the fiscal and social responsibilities of a complex economy without active roles. Nor is it a simple matter to expect monetary redistribution from professional incomes for lower income levels, as was once the case via (a more dominant) tradable sector based revenue. Fortunately, time and knowledge can provide, what money is less prepared to accomplish in a services dominant economy. Let's extend better defined production rights to average citizens. By doing so, we might begin to bridge the chasms between prosperous and struggling regions which now stand in the way of peaceful democratic processes.

Could Healthcare Providers Reduce Our Political Turmoil?

Perhaps there is a role for healthcare providers, in addressing our ever worsening political circumstance. For one thing, much of our political polarization is due to struggles between different groups for access to high skill services. Healthcare tops this list, and its present variance in job specification, is a prime example of the widening asymmetries between skills use potential for all concerned. The millions with limited skills on offer in our workplaces are finding it more difficult as time goes on, to contribute the taxes that - regardless of party - governments find necessary in a knowledge based economy. Yet the fiscal and monetary contributions of these millions are nonetheless sought, to compensate the skills of present day knowledge providers. All citizens need a chance to participate more fully, so as to maintain the viability and sustainability of coordination systems for knowledge based economies.

As societies become ever more dependent on applied knowledge for either employment potential or simply getting things done, too many find themselves limited in their ability to help themselves or assist others. How might we bring back greater employment symmetry for the skills capacity and employment potential of all citizens? Healthcare providers could be part of the answer, especially since when it comes to sought after time based services, one person's supply is another's demand. And markets for skilled time product are more scarce than they may appear, especially in communities and regions which have been left behind. 

Nevertheless, during election cycles, politicians often make promises about services generation for their constituents that they are in no position to fulfill. In the U.S. we face a constant bombardment of television ads where political candidates insist they are the ones who can best manage healthcare access. Supposedly it's all about preserving consumer demand for appropriate "in" groups, whereas if the "wrong" candidate happens to be elected, healthcare services will be reduced or even lost for one's constituents. For instance, one recently aired commercial sought to convince viewers that should the "wrong" candidate win, more rural hospitals would shut down! Seriously, could the politically "unfortunate" outcome prove responsible for that? For anyone who has closely observed healthcare realities for decades, this sort of nonsense can make one reluctant to even show up at the polls. Yet ads such as these tend to be only mildly divisive and hurtful, in contrast with other attacks.

Sometimes I wonder, what must healthcare providers think when exposed to such ridiculous goings on every two years at election time? Clearly, in many instances it is the healthcare profession which has the ability to change our supply side dilemma for services generation and the use of helpful knowledge, not pundits and politicians. This vital supply side matter should no longer be used as political fodder for division and societal turmoil. 

I continue to hope that healthcare providers will have the courage to step forward and create effective change in the years ahead. We can all do better than this as a society. It is still possible to restore hope for the future, by reaching out to one another for integrative solutions in workplace employment and collaboration with knowledge. Let's get started, and also hope there will not be further disruption and turmoil in our nation once the elections finally come to pass. For that matter, why not place the entire concept of healing into the broader societal arena where it is so desperately needed.

The Economic Freedoms We Still Need

Only in retrospect is it apparent how many economic freedoms we've lost - especially in recent decades. But how to respond, as special interests and legislators alike continue to place limits on our personal agency? 

In particular, consider how we seek to participate in the economy - not just as consumers, but as producers. As producers, we get the chance to experience economic freedom via active and meaningful roles with others. Consequently, the personal agency that derives from active use of skills potential, is more important for personal identity than is sometimes recognized. 

Our active participation in society is vital to innovation possibilities in both our physical and intellectual environments. However, realizing the potential of innovation, also requires that individuals keep a full range of production rights, so that such rights are not constantly diverted to preferred groups and associations. Not only do we need to protect permissions for personal management of physical resources, but also the necessary permissions which allow us to assist others through the use and application of knowledge. 

For that matter, our extent of personal freedom as producers and consumers, affects our ability to retain knowledge. In a recent study the authors discovered that people learn more readily when the relevant material is freely chosen. Despite the fact this education comes with a given bias, the bias framing lends greater meaning to the actions we choose. Indeed, according to the study, "the learning rates were slower in the forced-choice situation than they were in the free-choice one."

The economic freedoms that individuals need in their roles as producers and consumers, are crucial if societies expect to preserve a full range of economic access for all concerned. Production rights matter for ongoing activities which are practical and necessary, but also those which are aspirational and experiential. Perhaps one of the simplest ways to think about production rights is to consider a broader context in which economic freedom is possible. The simplest approach for me in this regard, is to envision how economic freedoms could contribute to the societal processes of maintenance, building, creating, understanding and healing. 

Maintenance is the foundation which supports all the others. From an economic standpoint, sometimes we struggle to maintain economic complexity, since maintenance activities in certain respects are the least compensated of the entire group. Yet even though some maintenance activities are basic in nature, they make it possible to sustain everything else, not only in terms of knowledge and information, but also our physical realities. When we lose crucial economic freedoms at a foundational level, our personal autonomy tends to be compromised in areas of higher levels of economic complexity as well. 

As lower level economic freedoms have been lost, so too society's ability to successfully engage in the higher activities of healing and mutual understanding. Only consider how activities in this regard could otherwise bring the actions of healing to a higher order in terms of positive societal intentions. Even our abilities to build and create are being blunted, and basic healing options are in disarray. In all of this: When people insist that intentions mostly lead to negative outcomes, only recall that intentions always begin at individual and personal levels, and they are both positive and negative in nature. It is only when positive intentions are disallowed, that the inevitable negative intentions societies also hold, come to the fore and gain the upper hand. We need to revive the positive intentions which can protect our economic freedoms, while there is still time to do so.

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.

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.

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.