Might Good Deflation Counter Excess Monetary Demand?

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

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

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

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

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

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

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

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

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

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.

Quality Product Isn't the Same as Rising Standards of Living

Often it appears that quality product gains and productivity gains are one and the same. However, might quality product occasionally detract from rising standards of living? Confusion about quality product as an aspect of productivity, deserves more attention than it receives. For example, recently Timothy Taylor opened a post re the productivity slowdown after 2005 with this observation: 

In the long run, a rising standard of living is all about productivity growth. When the average person in a country produces more per hour worked, then it becomes possible for the average person to consume more per hour worked.

But, how do we know when this desirable process actually occurs?  When might organizational processes to generate product quality, diminish aggregate consumer potential instead? Societies need better measuring indicators to determine how aggregate input/output requirements affect basic levels of consumption potential. Only recall how presently, many of the costs of excessive inputs for quality services are being shifted to future generations, via deferred debt and budgetary burdens. Indeed, much about our future economy, depends on the extent to which human capital contributes to exponential output gains, symmetric time coordination, or else the excessive time scarcities that today's knowledge providers have generated.

The differences in time versus exponential product designations, are vitally important for how we frame organizational capacity and the productivity which contributes to GDP representation. Nevertheless, these sectoral differences are difficult to conceptualize, because productivity is not often described in such terms. Consequently, the highly valuable yet costly product of time based services, poses undue financial societal burdens. Our lack of understanding as to the actual inputs and outputs that time scarce services involve, might consequently leave some of this future organizational capacity in doubt. 

Oddly, much of the present confusion, actually comes down to a one size fits all productivity perspective. Given the lack of more precise tradable sector and non tradable sector measures, the present combination is statistically confused as what an "average person in a country produces". Since this perspective doesn't distinguish between time centered output versus exponential forms of output, many forms of applied knowledge lack economic clarity. In particular, we still don't know approximate time increments that are expected of the average individual for the most basic aspects of non discretionary consumption. Before anyone gets sidelined by productivity factors such as leisure time or seemingly "free" consumption gains, basic non discretionary requirements are really the starting point for other productivity considerations. Plus, knowing a base level of expected consumption costs in relation to multiple income levels, provide clues how production input/output ratios matter most for consumers and producers. 

Should tradable and non tradable sectors gain more accurate forms of input/output representation, it would become simpler to think about the differences in approach these groups really need for purposes of long term productivity gains. All the more so, since when non tradable sectors focus on quality product, thus far they've inadvertently done so in ways which detract from further consumption options in the marketplace. 

Ultimately, even though quality product isn't the same as rising standards of living, that doesn't mean time based forms of product aren't important. Not only are many forms of time based product desirable, the time scarcities of production and consumption are among the most important considerations for total or multi factor productivity. Even though organizations logically seek to "save" time (via traditional productivity reductions of time/hours in relation to other inputs), there's still our personal motivation to "use" our economic time in the most significant ways possible. 

Occasionally, the best choices in this regard turn out to be experiential time spent with others. For the most part, we seek to balance the economic time we hope to gain from others, with the economic time we hope to share with them. Rather than leaving such decisions to a relative few professionals or possibly artificial intelligence, the best approach really comes down to the kinds of economic time that all citizens hope to take part in.

Could Time Arbitrage Stabilize Medium Term Growth?

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

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

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

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

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

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

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

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

Extensive Price Making is an Equilibrium Outlier

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

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

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

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

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

Economic Integration Could Help Unify Us

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

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

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

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

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

Ten Ways This Blog Differs From the Norm

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What We Can Do, What We Can't Do

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

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

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

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

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

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

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

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

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

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

But if you try sometimes you just might find

you get what you need

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

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

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

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

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

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

 

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

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

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

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

Notes on Retail as Part of a Two Sector Approach

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

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

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

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

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

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

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

The Solow Residual is on a Cultural Collision Course

Perhaps there are broader implications of mature economies which we have yet to fully explore. For instance, skills arbitrage which includes highly sought human capital, is distributed (for knowledge providers) in ways which leave little room for further inclusion. But what about intellectual activities which are sometimes more desirable for participants in work settings, than their actual (or potential) consumers? Is is logical to think of participants in the latter example as the "moochers" of economic systems? Even though others who also rely on general equilibrium redistribution are more likely to benefit from the fact their skills include high consumer demand? Or, if "moochers" were somehow disallowed in a time of stretched budgets, what would this suggest about the value - or lack thereof - for experiential services in general?

What's more, how does the Solow residual factor into these considerations? For one, redistribution for the secondary markets of knowledge provision, is also dependent on total factor productivity. Much of TFP is expressed by the Solow residual which Investopedia defines as:

The Solow residual is the portion of an economy's output growth that cannot be attributed to the accumulation of capital and labor, the factors of production. It is a measure of productivity growth that is usually referred to as total factor productivity.

Alas, progress and long term growth as defined by the Solow residual, were more reliable before the dominance of non tradable activity in services generation. Previously, when tradable sector activity comprised a greater portion of general equilibrium, societies were naturally more inclined to make room for intellectual activity - regardless of how it was applied in the marketplace.

As it turns out, more than the Solow model will be needed for wealth creation, before societies regain confidence in full market application for intellect and knowledge. Meanwhile, aggregate productivity is compromised, as high demand human capital gradually crowds out other desirable economic activities. If this weren't enough, "moocher" arguments question redistribution patterns in their entirety, on identity based terms. Arnold Kling, in "Maybe we *are* in an Atlas Shrugged" moment", responds to the recent take down of Scott Alexander's blog, and notes:

Scott Alexander, Less Wrong, and the Intellectual Dark Web occupy a sort of Galt's Gulch. They see the moochers as intellectually deficient. They are trying to uphold an old-fashioned value of scientific objectivity against the moochers' assault of oppressor-oppressed framing. 

Kling further explains his perspective:

I think of the conflict in Randian terms, as industrialists vs. moochers. The industrialists (not in the Rand sense of heavy industry but in the sense of software eating everything) take pride in having shown an ability to build something. It might be something as humble as a section of computer code that gets used. Or it might be as grand as a successful company, or two. The moochers have never built anything, and they are looking for other ways to assuage their egos and fight the zero sum game of status. The moochers have found that social justice activism is a useful weapon for lowering the status of the industrialists.

One problem with the "moocher" categorization, is that until recently, direct sources of originating wealth were easier to come by. Indeed, only a century earlier, most anyone in the U.S. could still take part! Unfortunately, as traditional forms of Solow model productivity have become ever more efficient, the places where wealth origination still takes place, continue to retreat from our personal view as a society. How many local economies are still included? Not near enough! In the aftermath of tremendous Solow model efficiency (on tradable sector terms), is it really reasonable to define millions of individuals and communities as "moocher" status? Doing so is demoralizing for average people with average intelligence, who may desire to build their lives up through physical means. It is also demoralizing for people who - on the other hand - could be happy with life as a series of meaningful experiences.

These are just a few reasons, why we need to redefine what wealth origination actually consists of, in the time based terms which all of society could still utilize for productive and meaningful lives. Until we do, we may end up pointing fingers at society's supposed "losers", while investing in "special" human capital which only continues its collision course with the global redistribution patterns of today's wealth.

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.

When Monetary Representation Becomes Fragile

Can monetary policy retain a stable and relatively constant level (near to mid term), given the uncertainties of the pandemic? Since this most recent recession began with extensive supply side disruptions - subsequently impacting aggregate demand - no one knows for certain. However, even though the Fed has yet to adopt NGDPLT, the Mercatus center has created a new measure called the NGDP Gap, which among other things will highlight nominal income stability. This new measure could help people determine how closely the Fed adheres to representing economic activity without undue gaps or changes in valuation.

Nevertheless, overall monetary representation may remain somewhat fragile in the years ahead, even if central bankers adhere to an optimal course. Only consider how prior to the pandemic, monetary policy became compromised by structurally uneven equilibrium coordination between tradable and non tradable sectors. The latter is more prone to price making than the former. Plus, they represent human capital in highly different ways which have yet to be fully accounted for. By way of example, the marginal revolution which is so important to tradable sector activity, is less a determinant of economic outcomes in non tradable sector activity. Ultimately, better defined economic roles are needed for all human capital, before non tradable sector activity ceases to detract from equilibrium balance and optimal monetary representation.

Extensive price making in non tradable sectors tends to compromise aggregate output, which in turn makes it difficult to align aggregate output with a stable nominal income trajectory. Since price taking involves better coordination of all resource capacity, it has proven simpler for monetary policy to represent tradable sector output, during long periods of relative tradable sector dominance. However, once general equilibrium is dominated by price making outcomes, assets tend to experience additional pressure as well. As asset values rise, some become convinced that monetary policy is too "loose", even though this actually may not be the case. Rather, when full economic participation is limited to subsets of given populations, the consequent output reductions impose higher prices elsewhere, thus making it appear to some that monetary policy has become too expansionary. In short, monetary policy may struggle to contribute to optimal aggregate output, once price making becomes dominant in general equilibrium.

Fortunately, this sectoral imbalance could be addressed through a broader interpretation of human potential in the marketplace - one which includes more price taking for time value in equilibrium context. By bringing greater economic value to all human capital potential, we could also do much to stabilize monetary representation. A better representation of aggregate time value, would make it simpler for a level nominal target to serve as a reliable snapshot or historical memory of economic value. Toward this end, the adaptation of time use potential as a valid economic unit, might help to restore money to its vital role in defined economic wealth and value.

Further, time use as an expression of economic value, creates more space for a wide range of maintenance functions which otherwise become limited in mature economies, as budgets are strained by competing objectives. Time arbitrage would not only preserve time value for society as a whole, it could contribute to maintenance activities involving a broad spectrum of knowledge and skill, so as to better preserve already existing wealth.

Utilitarian Capitalism (Could Be) Anti-Fragile

How sturdy will our capitalist systems prove to be, in a time of international pandemic? More specifically, are our present day organizational structures more fragile than we previously imagined?

If only it were possible to address this crisis with more utilitarian options, additional fiscal stimulus might prove worthwhile. Instead, most current fiscal stimulus - other than provisions for pressing healthcare needs - will scarcely alleviate the financial burdens which emerge during the course of this pandemic. And unfortunately, too much of our non tradable sector capacity is structured in ways that are profoundly anti-utilitarian. A lot of fiscal stimulus is going to be lost to portions of the economy which are not basic to getting things done, in the days ahead.

In recent decades, much of our supply side capacity became focused on experiential and "quality product" markets. While these markets are valuable, all too often they leave few options for lower income citizens - as consumers - to meet life's basics first. For the most part, our non tradable sectors chose anti-utilitarian routes, in that they were largely designed to create the greatest good for the least number of participants. As governments come to the aid of these now (unexpectedly?) fragile systems, policy makers will find it difficult to meet the needs of their most vulnerable citizens. Unfortunately, the sum total of fiscal stimulus in the days ahead, will create additional debt burdens which still don't address overall economic stability or a safety net for lower income levels.

Eventually, people are likely to demand more basic and utilitarian systems than we presently have, for what are largely non discretionary needs. As Arnold Kling noted in a recent post, "Normal is not an option...Expect supply chains in the future to have a lot more redundancy and to be less driven by cost minimization." An important challenge, however, is to also preserve wealth and productive economic complexity as best we can. The sooner we bring a more utilitarian and flexible approach to our non tradable sector markets, the better.

Regular readers know how much I've praised tradable sector activity in general, since much of its dynamism stems from a uniquely utilitarian impulse. How so? Tradable sectors tend to create the greatest economic good for the greatest number, via product options which represent all income categories, not just those of the middle and upper classes. This is a profound utilitarian result which underlies the prosperity of the recent era we have mostly taken for granted.

But achieving such results in our domestic settings, would mean a refusal to arbitrarily limit supply side definitions in (mostly) non discretionary markets. Until non tradable sectors gain some room to breathe freely, our economic systems are going to become increasingly fragile. Alas, it has finally become evident that strict adherence to specific definitions of quality product, costs lives. At a White House conference earlier this week, Dr. Deborah Birx defended our late start in diagnostics testing for COVID-19, and in doing so she often repeated the need for "quality" product. I must have cringed every time she did so. While the quest to allow only "quality" product is understandable, unfortunately it has led to fragile and incomplete markets, especially in housing and the use of time centered knowledge and skill.

Only recall for example, how continuous calls for quality product eventually led to losses of healthcare provision in rural areas. David McCullough wrote in The Pioneers that when Dr. Samuel Hildreth settled in Marietta, Ohio (1808), the town had "about 180 dwelling houses, and nearly 1500 inhabitants". Yet Dr. Hildreth would be sharing his new practice with five other doctors who were already there!

In all of this, there are both physical and intellectual dimensions to the kinds of utilitarian markets which are urgently needed. Once we finally open the participation of applied knowledge to all citizens, we may also gain greater chances of surviving pandemics. Likewise, should we decide to build a full range of living options representative of all income levels, utilitarian capitalism could come to the rescue of both lives and financial systems. Granted, all such efforts will take time. But it is worth pursuing them now, to make a difference for personal and economic stability in the years to come.

Does Internal Inflation Affect Market Outcomes?

How could internal inflation affect aggregate market capacity? When most participants choose price making over price taking in non tradable sectors, crowding out elsewhere becomes more likely. Plus: When price taking is not an option for time based services production, societies gradually lose their ability to fully coordinate activities that require considerable knowledge and skill.

One point of confusion regarding internal inflation, however, is whether it also occurs at the level of an entire economy. For the most part, mature economies have learned to avoid such an outcome. Consequently, even though internal inflation can negatively impact discretionary spending as a market outcome, it doesn't pose direct issues for monetary representation at a general equilibrium level.

Indeed, when it comes to inflation at macroeconomic levels, policy makers are now inclined to go too far in the opposite direction. Since central bankers have little - if any - patience for general equilibrium inflation, healthcare providers, given their dependent market status, are now responding in kind with their own supply side limits. After all, healthcare is such a substantial part of GDP, that there is little remaining political freedom for more healthcare revenue burdens, in spite of the challenges of today's aging demographics.

Perhaps recent efforts by healthcare providers to control aggregate or supply side level cost burdens, could be better appreciated, were it not for their organizational inefficiency, as recently noted by Jerome Powell. For that matter, a post from Tyler Cowen earlier this month, highlights how healthcare doesn't necessarily lead to the market outcomes one might expect. From the abstract of the Health Affairs study:

In the period 2010-17 the number of NPs in the US more than doubled from approximately 91,000 to 190,000. This growth occurred in every US regions and was driven by the rapid expansion of education programs that attracted nurses in the Millennial generation. Employment was concentrated in hospitals, physician offices and outpatient care centers, and inflation-adjusted earnings grew by 5.5 percent over this period. The pronounced growth in the number of NPs has reduced the size of the registered nurse (RN) workforce by up to 80,000 nationwide.

Cowen also questioned the relative losses in nurse capacity:

Given the growth of the health care sector, should not the number of nurses, broadly construed, be rising at a higher rate?

When organizations face revenue constraints due to dependent or secondary market status, a slowing economy can lead to hard choices regarding the most important skills sets for the medium term. Likewise, just as some believe we would benefit from more nurse capacity, others argue that more physicians are needed in rural areas. At the very least, the decision to place more nurse practitioners in rural areas makes sense, since many physicians prefer not to practice in rural regions. Still: While nurse practitioners for rural areas are a partial solution, too many left behind places nonetheless lack specialized knowledge among their own citizens.

What might be done? Eventually, time arbitrage could create long term solutions for rural communities which seek vital roles for their own citizens in a knowledge based economy. Where once it was difficult to bring knowledge specialization to limited population densities, the digital realm has the potential to change this.

While debating organizational possibilities for applied knowledge, only consider how tradable sector activity has successfully internalized knowledge and skill in small groups, for centuries. Plus, these organizational forms have often thrived in areas which otherwise lack economic complexity. Recall also, how tradable sector activity has achieved vast productivity gains via internal resource reciprocity, thereby reducing internal inflation. Fortunately, with sufficient time and effort, the good deflation of tradable sector activity which brought such progress to humankind, is possible for non tradable sectors, as well.

The Hidden Danger of a "Fully Grown" Economy

Is there cause for concern, should mature economies appear to no longer "need" additional growth?  Perhaps so. Too much non tradable sector activity - much of which is also non discretionary - does not accurately reflect the reality of wide income variance. Since the need for full economic participation (at a basic level) is not taken into account, many citizens also cannot contribute, to what would otherwise be shared responsibilities. Indeed, these hidden losses indicate that a market gap exists which is far too significant to be addressed via aggregate demand "remedies". Essentially, non tradable sector requirements now demand more long term monetary revenue (and consequent need for higher monetary growth levels) than what is actually transpiring.

These systemic burdens are also faced by individuals in their daily lives. Many who aspire to success, come into adulthood convinced they have little choice but to do so on fully monetarily compensated terms. This, in spite of what many workplaces can reasonably expect to offer their employees. And while struggles for full access may suggest illogical meritocracy, consider what is at stake. Until non tradable sector consumption options become more flexible, one's decision to forgo a college degree, will often lead to a lifetime of uncertainty and excessive personal risk.

Despite this reality, even college degrees hold diminishing rewards. For instance, 33.8 percent of college graduates now work "in jobs that don't require a college degree". Given the high costs of non discretionary consumption, societies struggle to create more fully compensated wage capacity than their institutions can actually offer. Is there any wonder our political systems are creaking under the strain?

Yet in all of this, a stronger growth trajectory would be beneficial for reasons which go well beyond mere additional monetary revenues. In a modern day knowledge based economy, it is vital to make economic room for the growth and positive challenges of the human mind. That said, we need to think about doing so in ways which are not near as socially restrictive as the ones we currently rely on.

For these and other reasons as well, I question whether long term growth issues for mature economies are essentially "settled". And economists in particular, should be careful about this assumption. In one recent example, John Cassidy in "Can We Have Prosperity Without Growth?" highlights Dietrich Vollrath's new book, "Fully Grown: Why a Stagnant Economy is a Sign of Success".

Vollrath argues that slower growth is appropriate for a society as rich and industrially developed as ours. 

Of course, services play a major structural role in this circumstance. In 1950, services were only 40 percent of GDP, today they comprise more than 70 percent:

Taken together, slower growth in the labor force and the shift to services can explain almost all the recent slowdown, according to Vollrath.  

It is probably not safe to declare all is well in a "fully grown" economy, until most communities and citizens are at least able to take part at a basic level in economic activity. When citizens lack the ability to do so, their contributions to tradable sector markets are also disrupted. Does it really make sense to declare markets as fully matured, when millions of citizens remain in holding patterns and have yet to truly take part?

What might make it simpler to determine, whether the economy is "fully grown" to an extent it becomes obvious all is well? For one, citizens would be become less inclined to seek more extensive monetary compensation than systems can actually bear. Should non tradable sector activity become more reflective of actual income levels, fewer would be compelled to use higher education as a supposedly necessary signal. Granted, meritocratic preferences will always be important for some, as means to judge and reward accordingly. But merit should not have be the sole path, by which one might create a meaningful and productive life.

3D Printing Holds Vast Economic Potential

Some of the most encouraging news in recent years, is due to advances in 3D printing and technology. Recently I came across the video "3D Printing is Changing the World", which is well worth the twelve minutes it takes to watch.

Indeed, it's surprising that the near future possibilities of 3D printing have not been more widely discussed. Instead, artificial intelligence gets much of the innovation spotlight, despite the fact that 3D printing could prove equally significant - if not more so. For that matter, emerging 3D printing technology is already evident in cutting edge research applications.

Granted, it may take some time, before 3D printing technology finally benefits local environments and improves the quality of life for millions with limited incomes. But once this finally occurs, the process could also usher in long term productivity gains. After all, 3D printing for local manufacture, would produce building components in ways which vastly reduce required time (purchase) hours for a wide array of building needs.

In the meantime, the above linked video highlights some 3D printing applications which are taking place in the here and now. For instance, healthcare researchers are taking 3D printing to a wholly new organic level, in hopes that organ donor scarcity might finally be alleviated. Plus, 3D printing is already contributing to models, parts and tools on demand, thereby assisting multiple development processes. For that matter, we have already entered a crucial period in which prototypes are evolving into mass manufacture design. From here, 3D printing processes will assume their first widespread production stages.

What directions might all these efforts take? Since there are currently many unknowns, perhaps this transitional effect helps to explain a recent manufacturing lull. While everyone's attention has mostly been on national trade disputes as disrupting global supply side patterns, there's also the reality that initial mass manufacture changes are still in progress. Doubtless, some participants wish to observe what takes place in the next few years, before broad investment options become more obvious. Some manufacture response patterns may change the extent to which global manufacture supply side patterns are configured, as well.

Another interesting aspect of the video was how advanced recycling technology could emerge, from research efforts to create sustainable site based manufacture on Mars. Should this research come to fruition, it could create impetus to produce more plastics as a permanent component of local recycle for local manufacture. I find it most encouraging, that research intended for projects far from earth, could create vast potential at home, by restoring production possibilities for millions of us - quite literally in our own backyards.

Recall that in the not so long ago past, local production in tangible goods, made it much simpler for citizens to pursue intellectual and artistic challenges without dependence on revenues from centralized national budgets. With a little luck, 3D printing could not only lead to production gains in non tradable sector activities, but also tradable sectors, thereby restoring the viability of decentralized manufacture in millions of left behind communities.

Defined Equilibrium as Defined Product Quality

There is a practical dimension for the potential of defined equilibrium: People would gain economic freedom to define products they regularly use, which are also linked to place and time. In other words, there would be more opportunities to take part in the construction of product which is part of our everyday lives. Non tradable sector product is heavily represented by the basic scarcities of time and place, hence lower income levels could greatly benefit from personal management in these areas.

Without such options, non tradable sectors impose numerous quality requirements on product with time and place connections - especially building construction and services. However, governments are poorly positioned to generate affordable non tradable sector product, in part since quality requirements for luxury product create additional governmental revenue. What's more, when governments seek to impose regulations on non tradable sectors, sometimes the only way to do so is to grant additional favours to the private interests involved.

Ultimately, more decentralization is needed, to prevent these unfortunate incentives from reducing the economic access of even more low income groups. Locally defined equilibrium settings could allow citizens to determine the extent of quality requirements they can reasonably afford. It helps to ask: Which quality gains are obviously real and possibly deemed necessary? How difficult is it, to separate these categories from what are perceived as luxuries?

Fortunately, tradable sectors have been answering such questions with extensive market choices for a long time. Indeed: In recent centuries, alongside the beautiful and exclusive, we have countless examples of inclusive and accessible no frills production. While there are of course notable exceptions, much of this tradable sector product proves capable of fulfilling the required task with minimal fuss and expense. Why has it been so difficult to gain similar options in our non tradable sectors?

Defined equilibrium settings could provide such opportunities, by bringing aggregate non tradable sector costs more in line with the (monetary) wealth potential of tradable sector revenues. These decentralized communities and areas would function in certain respects like opportunity zones, except they would provide new economic opportunities for those willing to invest with personal time commitments. This is an altogether different approach, from the opportunity zones open to investors who are primarily concerned about monetary results. By allowing time units to assume economic value, there would be considerably more breathing space, for society to fulfill its most important tasks and challenges.

Local participants would be able to contribute to non tradable sector innovation, if they can regain sufficient legal production rights in defined equilibrium settings. These locally zoned permissions would once again make it possible for individuals without college degrees, to become part of decision making processes for housing, infrastructure and time based services needs.

Nevertheless, local citizens would have plenty of prior assistance in their efforts to construct simpler functionality in services and the physical building components of their environments. Hierarchical organization remains quite rational in earlier stages of manufacturing components, for instance. These are complex processes which require precise and standardized procedures to function as intended. However, citizens need a stronger say in production management, once physical resources are configured for the "final" product forms that support living and working arrangements.

By far one of the most important aspects of defined equilibrium, would be simplified legal settings which everyone can understand. Legal complexities are problematic enough in any circumstance, but they particularly get in the way of productive lives for those with small wages. When are extensive regulations and legalities actually necessary? In the book Life Without Lawyers, Phillip K. Howard considers this issue:

Two great intellectual currents came together over the past century to bring America to this state of hyper-legalism. The first, which grew naturally out of the Industrial Revolution, is the idea of organizing to do things. Frederick Winslow Taylor, the father of scientific management, preached the idea of creating systems in order to increase productivity. Organization is undeniable essential for complex products. Henry Ford's assembly lines proved that...Today we assume unquestioningly that any activity will be more effective if we detail in advance how to get the job done.

Instead of greater effectiveness, the non tradable sector hierarchical result has led to extensive problems in societal coordination, along multiple dimensions. All too often, the rigid rules of non tradable sectors get in the way of mutual respect and mutual assistance, instead of creating efficiency. It's time to experiment with defined equilibrium settings, so as to make non tradable sector markets more accessible for all citizens.

Jobs as a Form of Societal Permission

How might artificial intelligence affect employment prospects in the near future? Answers may partly depend on how AI impacts the aggregate output of tradable and non tradable sector activity. Essentially, we may gain more societal permissions for employment, so long as we ensure that aggregate output is not compromised.

And while AI is beneficial for non tradable sectors, in certain crucial monetary respects it is better positioned to increase output in tradable sector activity. After all, tradable sectors don't face the limiting factor of time scarcity in final product. One can only hope that tradable sector potential does not become overly suppressed in the near future by the excessive market demands (price making) of today's non tradable sectors.

AI can only improve aggregate output in non tradable sector activity up to a point. Even though AI can augment time value in non tradable sector time based product, it more often does so for specific or individual efforts, rather than general worker participation. Since these (historically early) patterns of AI are occurring in restricted knowledge environments, AI tends to exacerbate income variance in non tradable sector activity, instead of contributing to greater knowledge dispersion in society.

At first glance, one might expect the professional work of knowledge providers in non tradable sectors, to be among the safest jobs in the near future. Nevertheless, market availability in these areas will still require societal permission in the form of reliable general equilibrium revenue flows. This being the case, many professionals may ultimately have less control over their management of job creation, than they would prefer. At some point, budgetary restrictions could "require" more use of AI to substitute for human capital, even though knowledge providers understandably prefer otherwise.

When considering whether AI contributes to or detracts from job creation, it helps to determine whether the relevant activity provides an initial wealth source which can utilize immediate resource reciprocity. This organizational approach doesn't require redistribution or long term debt formation, plus any budgetary restrictions it creates are mostly immediate and short term. Today's tradable sectors are the most dependable sources of initial wealth generation. Given this priority market position, they should continue to serve as reliable job creation, so long as markets maintain a steady growth trajectory.

Alas, some secondary or non tradable sector market formation is not only heavily reliant on redistribution, but also on the ability of governments to fulfill competing responsibilities without substantial disruption. Eventually, due in part to extensive price making, these forms of knowledge production could suffer losses of aggregate output, even in conditions of carefully calibrated growth trajectories. While many time based services still appear as though steady sources of employment, some of the most highly compensated employment could be disrupted by budgetary issues in the near future.

Fortunately, there are new organizational possibilities for societal permission in skilled time based services. An important difference in future capacity, however, is that full monetary compensation for the time product of knowledge providers, will not always be possible. Despite this reality, time arbitrage could make it feasible for participating groups to coordinate time based services. Advance planning towards this end, would also lessen the negative impact of income losses for all concerned.

Participating groups could especially step up quality workplace possibilities, by giving AI "permission" to assist individuals in the creation of quality time based product. One could readily imagine today's AI assistance for professionals as a starting point, since the real potential for societal gain is in raising the skills ability of all individuals in their workplaces. Even though AI can't multiply existing time scarcities, it can improve the aggregate time value of those who take part in services generation. Let's bring workplace permissions within reach of all individuals who would provide mutual assistance.

Full Employment, or Future Productivity Gains?

Indeed, why should it have to be one or the other? And why isn't automation more often acknowledged, for the long term employment problems it might ultimately pose? Basically the issue is this: Would it be necessary to give up full employment for society to realize continued progress?

Perhaps the fact many earlier Luddite arguments didn't pose long term problems, explains an inclination to disregard where automation is a factor in regional employment losses. Nevertheless, as Scott Sumner noted in a recent post, protectionist and Mercantilist trade spats between nations aren't a reasonable approach, either. Alas, more logical responses aren't as obvious as one might expect, and there are plenty of moving parts in this scenario. Even though nationalist responses for instance are inappropriate and counterproductive, there's little consensus regarding a constructive framework for long term employment potential.

Any progress in this regard would focus on domestic economic realignment, and continued productivity gains are key to this discussion. Importantly, there are no linear solution sets which include full employment and continued productivity gains in a general equilibrium scenario. That said, the good news is that tradable sector organizational capacity is as appropriate as ever, at all levels of equilibrium dynamics. It's the organizational capacity of non tradable sectors which pose such problems for long term productivity, and employment as well.

If there is a tradable sector problem in all this, it's that we can no longer expect full employment in these areas. What we also can't accomplish is full employment from non tradable sector time based services as they are currently constructed. Without a more dynamic approach to services generation, these dependent (secondary) markets would ultimately create extensive societal burdens. Hence non tradable sector activity could benefit from a non linear approach. These new institutions (new communities) would build defined equilibrium settings which create additional employment and supply side potential, via mutual time reciprocity.

Once new non tradable sector institutions address full employment, how would they contribute to future productivity gains? First, a time arbitrage defined equilibrium does not detract from total factor productivity, since it would function as a primary or direct wealth creation market, instead of as a secondary market which depends on general equilibrium wealth.

Possibly the best news, is that internal sustainability is only part of what time arbitrage could contribute to long term productivity gains. When participating groups align skills and applied knowledge internally, they create new wealth in the process. Even though each individual's economic time options are necessarily rival due to time scarcity, the applied knowledge in each setting is non rival. Consequently, knowledge and skill gradually accumulate in ways which move forward services production benefits to future generations. This, instead of mostly expecting future generations to pay for today's skilled services! Even though these particular aspects of productivity might not manifest as monetary gains, they would nevertheless accumulate as long term output gains for knowledge, skills and services markets access.

Again, tradable sector productivity is still optimal in the sense that in many respects, we mostly need to keep doing what already works. One could say that tradable sector activity as a linear reality, is relevant as ever - not just for general equilibrium dynamics but as potential for every defined equilibrium setting. Yet we need to organize differently for non tradable sector output capacity, by thinking in non linear patterns which simultaneously encourage full employment and long term productivity gains.