Supply and Demand is Vital for Economic Time Use

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

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

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

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

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

Associative Time Value as a Source of Continuity

Associative time value in the context of this post, refers to value in use functions which have naturally occurred in the past, particularly among groups which share similar identities and common interests. Some of these settings have fostered divisions of labour which hold cultural meaning, as well. Of course, much of this activity has been largely displaced by value in exchange functions - especially in developed nations.

Value in exchange activities provide considerable societal coordination and knowledge use continuity, but not to the extent one would expect. What's more, governments often aren't well situated to coordinate vital services - particularly those out of reach of lower income levels. Which is just one important reason why - ultimately - production rights for knowledge based services shouldn't be limited, as they are today.

Nevertheless, present day institutions are too siloed, to provide continuity in the form of value in use settings for the preservation of knowledge. Unfortunately, value in exchange activity lacks some of the "glue" which binds a civilization, if and when systematic burdens become pronounced. For one, extensive knowledge use now occurs in rival context, especially when it is directly aligned with the value of knowledge intensive time based product.

Today's schools are a prime example, of institutions which hold only limited associative group time value for lifelong continuity and knowledge preservation. Formal educational roles - in spite of their appearance of local community continuity, are mostly extended to those who are not yet adults. And while formal religion is one of the few remaining local institutions which still encourages multi generational participation, its value in use societal functions are by no means as extensive, as they were in the past.

It would be difficult to radically change the definition of formal schooling for the better, without a recognition of the need for lifelong knowledge use continuity, and the voluntary mutual assistance which makes it possible. Any learning institution worthy of the designation, needs to preserve spontaneous associative time value to the greatest degree possible. Without the continuity in knowledge preservation that spans generations, communities end up supporting young students time and again, only to watch them go elsewhere in search of horizons where economic prospects appear more promising.

Knowledge use exclusivity now contributes to losses in economic stability as well; since supposedly, only those with the "best" skills sets need apply for an increasing degree of economic participation. However, this "perfection" imperative could make our institutions more fragile, as it becomes difficult for ever more citizens to take part in their active support. We need new ways to tap the tremendous amount of wealth creating capacity, which largely exists in a medium skill range. After all, there's no logic in assuming that the bulk of future prosperity could - or should - derive from workplaces which utilize mostly extremes in skills use potential.

So long as individuals hold sufficient production rights, they have a real chance to contribute to societal continuity and economic stability in their own environments. Much of today's institutional fragility is due to the fact that governments and special interests alike have excessively benefited by reducing the production rights of the average individual. Hopefully, many of these lost production possibilities will ultimately be restored, so that average citizens will - once again - be able to resume their own unique roles in the continuity of knowledge preservation.

Employment vs Staked Claims on a "Material" World

Now that the Walmart effect is also "forcing prices down" in India, Tim Worstall reminds us how this process is ultimately for the good. However, in "The Benefit of Killing Jobs" he asks:

But who should we be supporting here? Clearly, our innate prejudices are in favor of the small operator, that struggling family business, as opposed to some monster of late stage capitalism. We could further believe that a thriving community of sturdy independents is more valuable to us than some mere reduction in the prices of diapers or milk. 

But that's not the point here, nor is it what makes us richer. Economics advance is about using less labor to do any one task. This is why we obsess over productivity. It's not so that we can gain more from the same amount of labor either. It's so that some labor is freed up to go and do something else, which is the important matter.

Nevertheless, too many of our productivity gains continue to break down, at the level of total factor productivity. As some individuals continue to lose jobs, others are increasingly tempted to enhance their income through the revenue gains of more recent productivity advances. Carried too far, it's a process which could eventually undermine our structural mechanisms for societal coordination.

When local jobs are lost, this often translates into diminishing local service capacity as well. Much of the obsessing over productivity accomplishes little, when price makers (many of whom function beyond the Solow growth model) reduce aggregate productivity gains which could have contributed to a higher standard of living. Chris Dillow also responds to Tim Worstall's article, and he sums up:

...technical progress and destroying jobs are not sufficient to achieve good economic growth, even where markets are functioning well.

While I agree with Dillow insofar as this sentiment is concerned, how does it relate to his broader perspective, re future employment potential? For example, in what context do we express concern about "losers", if the world has supposedly experienced "enough" material growth? Who still gets a "living" wage, if growth ceases in its tracks and other revenue has already been claimed? In his post, Dillow references Daniel Cohen, the recent author of "The Infinite Desire for Growth", where materialism is questioned in the Amazon review for the book:

a future less dependent on material gain might be considered and how, in a culture of competition, individual desires might be better attuned to the greater needs of society.

What exactly is being implied, by pining for a "less material world"? Who is actually getting a chance to compete for life's wants and needs? Indeed, all is not quite as it appears in this regard. Materialism, like so much present day conceptualization, suffers from a moralistic framing which makes it difficult to approach the issue rationally.

After all, many forms of valuable knowledge are also essentially being hoarded, so that citizens lack the ability to compete in terms of skills production and presentation. How is knowledge hoarding any different from material hoarding, especially if material hoarding proceeds are used to compensate knowledge hoarders? Individuals whose time value seems off the charts in relation to others, are still being compensated via the revenue potential of countless material things. One of the best examples I've come across, is the extreme volume of sales necessary in a hospital thrift store, before sufficient revenue is collected to pay for a mere fraction of human capital value in hospital procedures.

For that matter, material hoarding can be likened to the "lesser" challenges of our natural inclinations for personal arbitrage. Alas, much of what we bring home, can seem more valuable than the extent to which our time may be perceived by others. Yet when we are confident regarding our time value in the workplace, our discretionary time is more often spent in the pursuit of collecting the memories of experiential product. But what about those whose time value has been prejudged and deemed not necessary for 21st century intellectual challenges? Will we further suggest that their junk collecting challenges should be tossed as well, in a less material world?

Is it possible to be a little less hypocritical? When anyone demeans an "infinite" desire for growth, is this imaginary cap expected to extend to the growth possibilities of the human spirit? Why not promote a world that actually needs less materialism to pay its intellectual bills? And above all, let's not assume society should determine the nature of desire and the greater good of all concerned, on specific one size fits all terms. Instead of attempting to hand out consolation prizes to the excluded, find ways to include them, through value in use means. It's one thing to take advantage of a material world for one's own extensive value in exchange benefits, but altogether another, to assume that is the only kind of world that is feasible.

Economic Perspectives: What's Still Missing?

If our present economic framework is "too narrow", where might the fault actually lie? The real measure of economic value, perhaps? Scott Sumner takes issue with a recent article from The Economist, "Economists focus too little on what people really care about", and highlights this quote:

The measuring rod itself often causes trouble. Not every dollar is of equal value, for instance. You might think that if two economists were forced to bid on an apple, the winner would desire the apple more and the auction would thereby have found the best, welfare-maximising use for the apple. But the evidence suggests that money has diminishing marginal value: The more you have, the less you value an extra dollar. The winner might therefore end up with the apple not because it will bring him more joy, but because his greater wealth means that his bid is less of a sacrifice. Economists are aware of this problem. It features, for example, in debates about the link between income and happiness across countries. But the profession is surprisingly casual about its potential implications: for example, that as inequality rises, the price mechanism may do a worse job of allocating resources.

Scott Sumner responds:

This is quite misleading, as it implies that the effectiveness of the price system depends on each person placing equal value on a dollar...That's not to say the price system is perfect; there are issues such as externalities and monopoly to consider. But the specific issue of diminishing marginal utility of income is not really a problem of the price system. A better argument would have been that the distribution of income that results from the price system might not be optimal. Then you could have an intelligent discussion of the pros and cons of redistribution of wealth.

Nevertheless, "optimal" in what sense? Part of the problem for pricing, is that discretionary income and non discretionary income are utilized for very different purposes at the outset. In particular, non tradable sector pricing has not only been more closely aligned with non discretionary price making, but also the time scarcity circumstance that result. If price making requirements leave little discretionary income, some individuals may view money as the only relevant measuring rod that matters for their decision making processes.

Perhaps a broader economic perspective would consider the dichotomy between non tradable sector activity and tradable sector activity, given how these sectors affect general equilibrium conditions. What makes the differences between tradable and non tradable sector activity, so important for price outcomes? While price aggregates may be more relevant for economic stability than monetary aggregates, the long term trajectory of a price level still needs to reflect whether the relationship between actual output and aggregate consumption capacity, might actually be shifting. These changing patterns are important, given how nominal income levels also reflect the degree of economic participation in both production and consumption processes. Importantly, non tradable sectors and tradable sectors continue to travel a very different trajectory, given the differences in their approach to output levels. This variance distorts the relationship between price aggregates and marketplace capacity.

Here's another way to think about price relationships as a measure of value: In recent centuries, the good deflation of tradable sector activity during this time has greatly increased the value of a given dollar for disposable income in general. Indeed, the good deflation of tradable sector production processes, has made some less inclined to view money as a measure of value. Consider George Selgin's response to Scott's post for instance: "Going somewhat further, I would say that the whole idea of money as a "measure of value" is a throwback to pre-subjective thinking that we'd be better off without."

However, the bad (internal) inflation of non tradable activity over time, has made these pricing aggregates less responsive to subjective valuations - especially for lower income levels. Hence the apple in the above discussion was a confusing example, as it is representative of good deflation processes and subjective value.

Interestingly enough, George Selgin's earlier emphasis on a production norm is relevant, here. How so? Locally defined production norms for non tradable sector activity, could generate decentralized environments that encourage good deflation in services, housing and physical infrastructure. These new consumption options would gradually increase the marketplace value of time, so that a larger portion of monetary representation could become discretionary. By bringing subjectivity and discretionary choice to non tradable sector activity, price levels could become a more reliable tool for monetary stability, and provide a better measuring rod for economic activity, as well.

The Economic Potential of Time Value

Could one's time preferences assume the value in use functions that apply for commodities, in contrast with concentrated forms of value of exchange that contribute to final product? Skills arbitrage - along with its extensive human capital investment requirements and risks for instance - belong to the latter category. This, even though the institutional application of high skill arbitrage is sometimes described as intangible product.

Only recall how resource based commodities serve as a beginning point for all kinds of production cycles. By way of example, recent tariff issues for steel and aluminum remind us how commodity designations affect a wide range of ultimate production possibilities. Time arbitrage as a formal economic commodity, would allow personal time value to be envisioned as a resource which serves as an integral beginning point for other components of economic exchange. Such a conceptualization is all the more important, so that personal time options might form a reliable framework for the production cycles of knowledge based product in the 21st century.

How could time value as a formally defined economic commodity, contribute to societal gains? Among other benefits, it would provide opportunities for all participants in learning processes to generate measurable value in use, via their own personal participation. Most individuals would be able to take part in knowledge focused marketplaces and workplaces from a young age, thereby reducing the high risks and long wait periods for human capital investments to pay off as value in exchange.

Consider how basic commodities provide essential value in use functions, which greatly contrast with what high skill products and services are often designed to provide. Nevertheless, human capital investment intended to sell skills as value in exchange, now has a smaller window of opportunity in the workplace, than was the case in the twentieth century. One always invests in human capital with a certain degree of risk, given the evolving institutional needs for skills arbitrage in many workplaces.

One reason it's important to have time arbitrage as a basic commodity option: Rural areas particularly rely on commodity production for wealth creation, rather than the value in exchange which prosperous regions contribute to value added goods and services. Nevertheless, the technological gains of the 20th century meant fewer employment options for basic commodity production in rural areas. Meanwhile, it is only becoming more difficult for governments to redistribute wealth from other sources to rural areas, hence the latter need new options to create new wealth via their own means. Local services generation - via the basic commodity role of time arbitrage - should be an obvious choice.

Skills arbitrage - desirable though it is - remains mostly available to individuals who live in prosperous regions, since these forms of economic complexity are generally required before local institutions can fully compensate extensive human capital investment. Today's educational institutions in rural areas contribute to this problem, for they mostly prepare motivated students to relocate to more prosperous regions, rather than provide vital skills locally after high school graduation. If time value were designated on formal terms as a useful and basic commodity, rural citizens could finally engage in ongoing education which also enriches the lives of neighbors in their own communities.

Even though meritocratic skills arbitrage became the preferred goal of human capital investment, its potential for widespread use in the 21st century is diminishing, especially as present day corporations revert to an organizational core which minimizes full time employment. By structuring more time use as a basic commodity, it would be feasible to restore the level of employment that most individuals desire. And from here, it would finally be possible for all concerned to seek out new cultural frameworks, in terms of freely shared responsibility.

Notes for Time as (Formalized) Value in Use

This summer I've been enjoying "The Growth of Economic Thought", by Henry William Spiegel. The text begins in biblical times, and covers some basics for history of economic thought, up to the latter part of the 20th century. Surprisingly, I was nearly 200 pages in, before coming across an interesting passage which compelled me to follow through with my own thoughts.

John Law lived from 1671 to 1729. While he is oft remembered for his financial misadventures, his contributions to economic thought, weren't quite so controversial. Spiegel explains John Law's analysis of economic value:

Aristotle had distinguished between the use and the exchange of a good. This distinction Law expands, and like the classical economists later, he distinguishes between value in use and value in exchange. The classics, however, who adhered to a labor theory of value, developed only the theory of exchange value and discarded the concept of use value as soon as they had mentioned it. Law, on the other hand, combined both use and exchange value in a subjective theory that explains the exchange value of a good in terms of its usefulness and scarcity. Goods have value because they are useful, but how much value they have is determined by "the greater or lesser quantity [supply] of them in proportion to the demand of them. " In the same manner, changes in demand and supply account for changes in the value of goods...To Law, all economic values are subjective and in this sense imaginary, derived as they are from use.

Of course, today we live in a value in exchange world, in which knowledge/time based product is presented to the public via costs that aren't subjective or imaginary! Since time based service product has been indirectly coordinated thus far (price coordination initially takes place between total monetary representation, not finite time aggregates) utility for time based product remains externally defined. Whereas "staying in the game" for tradable goods manufacture, includes - at minimum - a response to subjective opinions.

Firm pricing for time based product, while understandable - given the broader spontaneous coordination it makes possible - leaves little room for subjective appraisals to contribute to economic outcomes. Yet this is not just a problem for one's pragmatic or experiential preferences. After all, the present tight money circumstance of general equilibrium conditions, can only extend "concrete" exchange valuations, so far. How does all of society commit to a value in exchange framework, if its asset formation and terms of participation are limited at the outset?

Fortunately, time arbitrage could provide as a value in use option, for those who need a more subjective approach to time value. Just as the productive value of work has become more subjective than the labour expectations of recent centuries, so too, the preferences of time commitments in the workplace.

A new institution is needed, which can restore and formalize the value in use function for personal and group time priorities. By allowing time to function in a recognizable supply and demand framework (for dispersal of knowledge and skill), all concerned could make more realistic appraisals of their time preferences in all areas of life. Time arbitrage could allow a different focus on time preferences, than what skills arbitrage often makes possible. In order to function as a true price (true supply and demand) for services , time would serve as a unit of measure, exchange, and account for the participating groups. Money also represents this time value, as a basic commodity and source of new wealth.

There are also legal contractual considerations, for knowledge, time and skill as a formalized value in use designation. Since time is the coordination point instead of money, these services would not have a recognizable market price. Consequently, this form of arbitrage would not be confused as "being on offer" for populations in general. After all, these services are not value in exchange, but instead represent an option to maintain a wider range of human capital potential, via sustainable means.

Again, what is being arbitraged in these instances is not skill, but time. This approach could also preserve the integrity and monetary value, of the "value in exchange" professionals who might choose to assist these groups - especially in their startup efforts. Last but certainly not least: it's important to have time arbitrage as an option - not something to be imposed on anyone who does not find this a well suited approach for their preferred work habits and aspirations.

Some Thoughts on Labour: Then and Now

Why has labour been considered integral to all economic activity - at least until recently? If labour matters because of the consumption it makes possible, one's time input matters, in part because of what it allows us to experience. Even more than labour, time provides a human component which is also expressed in nominal terms. Adam Smith notes that labour is "the real measure of the exchangeable value of all commodities". From book one of "The Wealth of Nations":

The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it...What is bought with money or with goods is purchased by labour, as much as what we acquire by the toil of our own body...Labour was the first price, the original purchase-money that was paid for all things.

But though labour be the real measure of the exchangeable value of all commodities, it is not by that which their value is commonly estimated. It is often difficult to ascertain the proportion between two different quantities of labour. The time spent in two different sorts of work will not always alone determine this proportion. The different degrees of hardship endured, and of ingenuity exercised must likewise be taken into account. There may be more labour in an hours hard work than in two hours easy business; or in an hours application to a trade which it cost ten years labour to learn, than in a month's industry at an ordinary and obvious employment. But it is not easy to find any accurate measure either of hardship or ingenuity. In exchanging indeed the different productions of different sorts of labour for one another, some allowance is commonly made for both.

Every commodity besides, is more frequently exchanged for, and thereby compared with, other commodities than with labour. It is more natural therefore, to estimate its exchangeable value by the quantity of some other commodity than by the labour which it can purchase. The greater part of people too understand better what is meant by a quantity of a particular commodity, than by a quantity of labour. The one is a plain palpable object, the other an abstract notion, which though it can be made sufficiently intelligible, is not altogether so natural and obvious...Hence it comes to pass, that the exchangeable value of every commodity is more frequently estimated by the quantity of money, than by the quantity either of labour or of any other commodity which can be had in exchange of it.

Smith stressed that while equal quantities of labour are always the same to the worker (one's time is fixed), potential employees will value our work somewhat differently or randomly. Nevertheless: what's important for the individual, is the real or marketplace component of one's production/consumption transactions. The real component of our time engagement, buys a certain amount of life's necessities and conveniences. Whereas the nominal component of a labour/time transaction is the money involved, which does not designate a certain amount of purchasing opportunity.

Consider the nominal aspect of labour (or time) value in general equilibrium terms. Even more than in Adam Smith's time, labour value is difficult to discern in relation to other resource capacity; particularly as the gap between aggregate output in relation to actual labour output, only continues to grow. Still, nominal labour value needs a constant monetary relationship with total resource capacity, despite the fact these vital components are at variance across the spectrum of resource potential.

As Smith noted, it is what labour can purchase that is important, not the money that is involved. Unfortunately, it appears the labour theory of value could have been partly responsible, for a diminished focus on wealth as accruing from reductions in product costs. Little doubt, rationale re time investment as "necessary nominal value" for labour's contribution to product, carried over to educational requirements for a wide range of professional time based services. Consequently, many time based services have yet to benefit, from the real economy factor which makes mutual wealth gains possible.

One danger of perceiving consumption in mostly aggregate demand terms, is forgetting that consumption gains re real economy factors are crucial to wealth. As Adam Smith stressed, "The labourer is rich or poor, is well or ill rewarded, in proportion to the real, not the nominal price of his labour." In closing, this quote from Smith reminds me of present day arguments for nominal stability via a level target:

Labour, therefore, it appears evidently is the only universal, as well as the only accurate measure of value, or the only standard by which we can compare the values of different commodities at all times and at all places.

Social Capital as Value in Exchange vs. Value in Use

Human capital - as a sought after value in exchange component - has evolved in ways which go well beyond what were once normal routines for economic participation. Indeed, the most important social capital which comprises today's institutions, has the potential to substitute for a broader range of employment positions. Often, the more important the personal engagement that remains, the more expensive the real estate in which that engagement occurs, as well. But what happens when a growing number of people can no longer take part in economic activity with others?

Unfortunately, a political climate with little remaining logic or common sense, is one answer. Somehow, more of us need to become actively involved in negotiation processes and knowledge sharing, once again. While value in exchange "social capital" (skills arbitrage) roles are important, they need to be supplemented by value in use roles which are economically authenticated. In recent years, I have suggested time arbitrage, as a way to provide this additional capacity.

Ryan Avent has also been concerned about a growing lack of economic engagement. In "The Wealth of Humans" (p. 120), he discusses social capital, via its evolution as the most sought after skills capacity of the present:

Across societies, in fact, it is the depth of social capital - the social capital per worker, if we could quantify it - that matters most in determining the level, growth and distribution of income. Social capital is unlike industrial capital in many ways. It cannot be seen or traded. It cannot easily be measured, except perhaps as a residual - that which is left after accounting for the measurable stuff. Yet in the way it has transformed relative bargaining power, and in so doing concentrated the benefits of growth in the hands of the few, social capital is very much like its physical counterpart; it is playing an economic role that is analogous to the role of industrial capital two centuries ago. Just as worker's ability to reap significant benefits from the deployment of industrial capital was in doubt for decades, so we should worry that social capital will not, without significant alternations to the current economic system, generate better economic circumstances for most people.

He also notes, "Social capital is individual knowledge that only has value in particular social contexts." While this is could be said of any form of employment, it is all the more so, for the skills arbitrage which is necessary in many workplaces. What's increasingly at issue, however, are the natural limitations for skill sets being sought on present day institutional terms. It's a template which leaves too little room for populations as a whole to exercise their economic "muscles", so to speak. And without the utilization of skills capacity in a broader range of settings, society's ability to function well in social contexts, would atrophy as well.

Like others, I believe more overall time value should remain within an economic framework. While skills arbitrage as value in exchange is highly specific, time arbitrage as a value in use function, need not be so specific for knowledge use. Essentially, people would be granting permission to one another, to create economic environments which make better use of one's time value on more general terms.

Even though it's not easy at this historical moment to imagine economies as holding potential for internal generation, this is precisely how individuals coordinated mutual responsibilities for millennia. The 20th century brought about more wealth creation by upping the ante on economic participation - especially through formal education. In the 21st century, wealth can be generated and maintained, by a concerted effort to bring more people back into the economic fold.

When are Value in Use Gains Not Enough?

Brad Delong is encouraged by the growth trend for the long run, despite recent political issues that have emerged. In "The Economic Trend Is Our Friend", he wrote:

More people are gaining access to new, productivity enhancing technologies, more people are engaging in mutually beneficial trade, and fewer people are being born, thus allaying any continued fears of a so-called population bomb.

Here's the part that concerned me:

The way we measure real GDP accounts for all the goods and services being produced, but it doesn't properly account for value that exists but can't be measured - such as the immense social benefits that accrue to social media users from services that cost them nothing...More than ever, we are producing commodities that contribute to social welfare through use value rather than market value.

However, this particular form of technological access has yet to provide good deflation where it matters most: our ongoing financial responsibilities for non tradable sectors. These obligations are still in place and we need to make sure GDP measures continue to count them whatever their cost, so that collectively we will all have the money to pay them.

Consumption gains can contribute to well being on monetary terms, but those are gains that free up our time for further production potential, instead of making further demands on the limited time we still have. Why have economists and policy makers alike confused the leisure gains of social media, with the kinds of productivity which in the past have actually reduced the costs of living, working and doing business?

Even though social media can add quality to time value, this gain does not matter at a monetary level. Value in use gains - important though they are - will continue to need other resource reinforcements, in order for individuals to use them effectively in the marketplace at a value in exchange level. Facebook doesn't make it easier to pay our bills. The aggregate spending capacity of mutual monetary obligations is the defining feature of GDP measure, whether or not central bankers and policy makers may wish it to be otherwise.

"JEC" of Mean Squared Errors has a good response to Brad Delong in "'No, social media is not 'undervalued' in GDP":

...let's keep in mind that, when we talk about GDP, we're talking about the market value of goods and services, not their value value...It's no objection to say that the market value of social media differs from its "real" value--that's true of literally everything that composes GDP. It's perfectly valid to argue that GDP is a meaningless construct...But it's an entirely different matter to claim that a particular component is being mismeasured.

Note as well that "value value" could also be attributed to personal time value. Yet consumption or leisure can't be confused with the productive components of time value which make it possible to fulfill one's own monetary or financial obligations. While time aggregate representation would greatly benefit from more compensated personal value, the main difficulty in this regard is a lack of personal production representation, in terms of a value in use structure.

Consumption gains should not be confused with the gains that free up time use potential. Should GDP measure change to reflect "hidden" consumption gains, poor reasoning such as this would likely lead to further monetary tightening by the Fed. And money has been too tight for too long, already.

Regular readers know that I believe value in use settings could be a part of GDP representation, so long as the time value of mutual assistance is in fact monetarily compensated. Indeed, this approach would include time value on more personal or "value value" terms. It would have the additional support of linked asset structure, which would create a local equilibrium that reflects local wage and income capacity. The value gains which matter for GDP are those which are readily measured on monetary terms, and value in use time structure is no different in this regard.

Is Time Based Product Amenable to Value in Exchange?

It's difficult to know for certain. All the more so, during periods of economic stagnation, when time based product - as a secondary component of market formation - distorts the tradable sectors which directly coordinate prices, supply and demand, and output. When a slow growth economy is services dominated, and merit based compensation is the only means to provide time based product, this can limit all output in aggregate, as services gradually become limited in their turn as well. As this process continues, populations become less able to support the tradable sectors which generate the initial revenue for non tradable sector formation.

Fortunately, the time arbitrage of knowledge use systems would make time based product more amenable to value in exchange capacity. Presently, the growth limitations of asymmetrically compensated time based product, remain hidden in ongoing struggles which often appear as though austerity, versus the roles of fiscal and monetary policy for long term growth. I was reminded of the validity of the post title question, after reading this from David Ricardo:

In speaking, then, of commodities, of their exchangeable value, and of the laws which regulate their relative prices we mean always such commodities only as can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint.

What is problematic about time based product in its present formation? Unlike the time value associated with tradable goods, when high quality investment is a central component of time based product, the investment does not increase the quantity of time based product available to the marketplace. Human exertion increases the value of time based product, but not the quantity of product as in tradable sectors which would otherwise generate further revenue to compensate additional resources utilized in relation to time value.

Lacking a sufficient quantity of time based product, multiple institutions end up paying for increased investment in skills capacity, as indeed as occurred for the array of institutions which now pay for healthcare, in addition to the consumer. Growing budgetary restraints in this regard, also account for the fact that automation will gradually begin to substitute even for skills at the highest levels, as it becomes more difficult for budgets to meet sufficient asymmetric compensation for vital skills sets.

Marketplace representation of time based product exists solely in relation to itself (i.e. the potential reciprocity of time aggregates), which is why time based services are not amenable to the same direct coordination that money provides for other forms of resources. While money can partially coordinate prices for time based product, it cannot do so as a first order process, given the secondary nature of time based services in the marketplace. Other resource relationships are more capable of providing clear price signals for large scale coordination processes. So long as finished product exists separately from time value, money captures the relationship between both resource availability (scarce or not) and also the ways in which time value affects a given product.

Healthcare - for example - would only reflect value in exchange in purely monetary terms if it were completely automated. However, time arbitrage could preserve sought after human activity, by providing a value in use function for healthcare time investment, which allows time based healthcare product to approximate a value in exchange framework. The "catch"?  Value in exchange in this instance, would be a result of coordinated product in terms of time, rather than price. Why would such a strategy even be worth pursuing? Is that really economic? Let's pick up Ricardo's discussion regarding value, from the above quote:

In the early stages of society, the exchangeable value of these commodities, or the rule which determines how much of one shall be given in exchange for another, depends almost exclusively on the comparative quantity of labor expended in each. 

"The real price of everything," says Adam Smith, "what everything really costs to the man who wants to acquire it,  is the toil and trouble of acquiring it"..."Labor was the first price - the original purchase-money that was paid for all things." Again, "in that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labor necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them with one another."

Today, healthcare is still paid for according to the original price of labor - i.e. the amount of labor that is actually required in total for an individual to present a product. It's fair to suggest that healthcare remained in the "primitive state", in terms of labor compensation, as contrast with the labor associated with tradable sectors.

Granted, it makes sense to compensate a physician for the extensive investments taken in order just to practice. However, if the value of the physician's time based product were equivalent to that of a tradable good, it would be as though - instead of paying the price of a toaster in today's terms which means good deflation benefits from divisions of labor and organizational capacity  - the product is instead compensated in consideration of the fact one person undertook this vast investment process, alone. It would be like paying someone to build a toaster who had to seek out each piece and assemble the whole toaster, again, alone.

Presently, a physician's time investments cannot be tapped as sustainable revenue to compensate him or her during the course of early learning processes. Which makes it necessary for the physician to demand "more" when the time finally comes, in terms of monetary compensation. This effect is also an increase in one's time value in relation to the time value of others. The relative differences in time investment, force down the aggregate time value of those who did not need the same extensive dedication to time investment in order to accomplish various tasks and endeavor. In many instances it is possible for individuals make up differences according to access to other forms of resource capacity, but even this strategy has proven inadequate for healthcare as a marketplace.

When institutions have to share the expenses of deferred compensation for a physician's time investment, they have more incentive over time, to prefer automation which would make it less necessary for them to pay for that level of expense. Hence a physician's time becomes as vulnerable to automation (in aggregate), as the asymmetric compensation of a low skill maintenance worker.

Lifelong education for knowledge use is important. The problem for all of us, is that we make one another wait till an arbitrary point in learning processes, before many of us can ever offer sets of services skills to one another. This process imposes unnecessary expenses on all concerned, and detracts from other resource use potential as well.

No one wants their doctor to know "less" in any relative sense, especially when it's a matter of life and death. That's why multiple institutions have been willing till now, to pay what has been deemed absolutely necessary. But what happens when supply and budgets alike simply become too constrained for this process? It is possible to continuously reinforce (compensate) important skills sets along the entire continuum, through peer to peer sharing of knowledge use and application.

Instead of presenting a barrier for long term government budgets, the time investments of time arbitrage would become a stepping stone process of incremental growth for all concerned. Knowledge acquisition would serve as both investment and compensation, simultaneously. Time arbitrage could eventually put the knowledge use of non tradable sectors on a more sustainable wealth creation path. One that is more amenable to time use as a value in exchange process.

Monopolies Versus the Value in Use Option

In "The Costs of Monopoly: A New View", James Schmitz Jr. of the Federal Reserve Bank of Minneapolis writes:

Imagine what types of substitutes a monopoly might try to weaken or eliminate. It would not go after those with broad political support. Rather, it would target those with little support, those purchased by politically disadvantaged low-income segments of the population.

Consequently, some of the damage from monopoly is actually hidden from the middle class, even though it often affects them just the same, since lower income levels end up competing with them for (purposely) limited services and housing. The article is worth reading in its entirety, and Schmitz does a good job of explaining how monopolies are productivity killers. However, it is no easy task to challenge monopolies, entrenched as they are at multiple levels.

At issue is not really a matter of "breaking up" monopolies, but reexamining the marketplace conditions they impose on all involved. How do monopolies impact the trajectory of long term government obligations and future growth potential? Much of the economic damage imposed by monopolies, is due to the ways they define the scope and character of today's environments. Citizens are not only limited in their choices of housing and building components (no price saving mass production of yet) but also in terms of the services that individuals are able to offer one another.

Indeed, central banking has become a part of this restrictive scenario as well. Given today's volatile political climate, I have to swat away my skepticism when I hear "All lives matter". If monetary representation is no longer adequate for the full range of nominal income, how can that possibly be true? Central bankers are becoming less inclined to provide full economic representation, as the alternative marketplace conditions needed for lower income levels to participate, are still being regulated out of existence. 

By far the most common monopolist restriction is a citizen's right to produce - a right which was once taken for granted in the U.S. Indeed, our country's founders worried about potential losses in this regard, as they were hashing out the messy details of constitution making. Yet many of today losses added up slowly. They can be difficult to notice when the loss occurs, because citizens have had plenty of means for economic engagement, during most periods. And more is at stake than diminished output or economic stagnation. How so? Frugality and resourcefulness are no longer enough to make the difference, between success and failure.

Resourcefulness and frugality were still celebrated qualities, as recently as the Great Depression. It's a sign of my age, but I am still shocked when I observe the ways in which people "prove" to their peers how they don't have to be careful in this regard. Apparently this is a social signal, one that associates success with an income which makes such attributes an unnecessary throwback to an earlier era.

Throwback or no, an equilibrium corporate structure could still create economic environments in which personal resourcefulness and frugality would count for something. In the past, formal environments for value in use options certainly would not have been necessary. However, too many possibilities in this regard have been gradually undermined, in general equilibrium conditions - possibilities which once included shared productivity as a part of marriage. Hence an alternative equilibrium scenario, would also include resource use elements which go beyond the standard pricing of normal economic exchange.

Consider what is at stake, when of value in use options are lost. As David Ricardo noted in "Principles of Political Economy":

Utility is not the measure of exchangeable value, although it is absolutely essential to it.

For lower income levels, value in use options for time value and asset formation would serve as stepping stones for incremental progress, and as safe harbor during life's inevitable setbacks. These additional means would make it possible for those with small wages and income, to not only reciprocate with others on economic terms, but take part in the mutual security that every society seeks to build.

It can be difficult to discern value in use production and consumption options, in part because there is no clear line between economic wants and needs. Just the same, the difference between the two is invariably felt at a personal level, in times of uncertainty. All that is needed during most periods of life, is a simple fallback position, by which one can bounce back and once again thrive. The value in use option during such times in life, would be valuable indeed.

Notes on Value in Use vs Value in Exchange

In a value in exchange world, is there still room for value in use in any real context? To a utilitarian such as myself, that matters. Often, one hears that not everything in life is - or even "should" be - economic. But given the fact that people structure the majority of their lives around value in exchange routines, too few patterns remain, for value in use activity to contribute to important outcomes. A marketplace for time value, would help to restore personal habits and routines which include value in use functions.

Here's a Wikipedia definition for value-in-use:

Value-in-use is the net present value (NPV) of a cash flow or other benefits that an asset generates for a specific owner under a specific use. In the U.S., it is generally estimated at a use which is less than the highest-and-best use, and therefore is generally lower than market value.

While this description is more cash oriented than my "time as meaning" interpretation, "a specific owner under a specific use" is on the mark. Internal definition for consumption potential, could lead to cost savings for both service formation and building components, in group settings specified to meet that purpose. Participating groups would be able to consider a full range of resource potential, to generate new non tradable sector growth.

Contrast the above definition of value-in-use with value in exchange, from InvestorWords:

The ability to trade an asset, such as money, for goods and services. Money has no "value in use". In itself, it does not satisfy wants or needs. To satisfy wants and needs, it must be traded. Although money has no value in use, it has value in exchange.

Money needs to be exchanged in order to have value, just as time needs to be exchanged in order to have value in use. A new form of corporate structure could legally back value in use functions, for purposeful time based activity. In this setting, time value would exist as a basic production commodity, available to almost everyone who is willing and able to take part in a marketplace for services, knowledge and skill.

Time as value in use, still contributed to value in exchange activity, as recently as the twentieth century. Familial value in use functions began to decline, as the production patterns of agriculture changed. This is also when women began to enter the workplace in large numbers, and marriage became more associated with consumption roles instead of production roles.

Given the present lack of organizational capacity for value in use functions, the majority of aggregate time value has been structured according to the wealth of other existing resource capacity. However, organizational patterns for time value don't exist in direct relation to marketplace representation for services and goods.

Instead, present nominal income depends on how profits for tradable sector production are diffused through other means. How many time based services - for instance - have to be paid for twice through fiscal policy? Roughly speaking, when time based services are fiscally generated and have to be paid for twice, the result is half the time based services product in the marketplace than would otherwise be possible. Which is an unfortunate result for both potential producers and consumers of time based product.

This also helps to explain why there is limited utility in revealed preferences, which do not sort by direct or linear patterns with the goods and services that are actually available. A marketplace for time value, which would create a base price structure for time use alongside income potential, could help to alleviate the resource disconnect between preferences for services and goods. By generating new value in use patterns on monetary terms, value in exchange activity would be reinforced as well.

The Knowledge Prior in Action

While I've not referred to the knowledge prior recently, it is one of several dual terms I began using some years earlier. This one exists in relation to what could simply be thought of as a monetary prior, for wealth formation. A knowledge prior would allow time value to work in concert with monetary arbitrage, to generate further economic momentum. Through its value in use (alongside the value in exchange of money) function, knowledge can serve as a initial wealth building component, by directly linking time value to local resource use patterns.

Whereas a monetary prior refers to a point of economic origin which generally begins with production of physical product. In turn, these activities gradually progress (at least in relatively complex economies) to non profit activity which culminates in a certain degree of support for knowledge use. Often, the fact that some areas cannot readily support knowledge is obscured by the fact revenue often comes from elsewhere. System structure which incorporates a knowledge prior, could make useful and experiential knowledge use less random - regardless of region.

Through symmetric time coordination, important elements of wealth generation can be turned "inside out", by tapping additional knowledge capacity at the outset. Knowledge use systems would coordinate and - over time - magnify existing resource capacity and time value in small decentralized groups. While the monetary prior is associated with general equilibrium conditions, knowledge prior use would be associated with alternative equilibrium growth capacity, which includes flexible definitions for both time value and environment.

In particular, innovation for flexible physical infrastructure would be key in these settings. When people age in place in their environments, so does their housing and local infrastructure. The ability to replace old components with new components can be vitally important in these circumstance. The object for small wage patterns working in concert is not to seek out "low quality" infrastructure and housing components. Rather, it is to mass produce less costly components which can be readily changed out when it is clearly time to do so. Indeed, the vast majority of tradable product has been created with similar intent for as long as anyone can remember. While some of this process is disparagingly referred to as throwaway product, the changing circumstance by which one makes best use of a given product, cannot be denied.

No fiscal budgets are going to get any real relief, until non tradable sectors are willing to make room for innovation. Non tradable sectors have already benefited from the innovation of tradable sectors for centuries, and now it is their turn to contribute to the process. Consider today's municipal dilemma, in which aggregate time value for populations as a whole, is no longer sufficient to meet today's requirements for infrastructure. Much of the appearance of lost income gains in recent decades, is due to the stubborn nature of non tradable sectors, as they continue to resist innovation in their own ranks. And the fact that policy makers have grown weary of printing more money for what basically amounts to infrastructure rigidity, is now reflected in a growing lack of ability to fund time based service capacity.

Consider also what has happened to aggregate time value, since a subset of the population now holds the majority of economic time value. If one were to roughly surmise, what policy makers imagine aggregate income potential (for all ages) to be in terms of available revenues, basic income for all citizens is a reasonable way to arrive at such a figure.

However: the basic income that governments might actually be able to provide citizens (say, in the event of an automated future), is a far cry from the revenue governments actually need to maintain their already existing building and infrastructure requirements! An apt context for this approximation is the fact municipalities no longer include many new start up homes. From a recent WSJ article, "How City Hall Exacerbates the Entry-level Housing Squeeze", regarding the need for impact fees:

These fees fund the local infrastructure needed to support a growing population - schools, transportation, environmental mitigation and utilities.

Basically, the above article implied that for most municipalities, their hands are tied and it has become difficult to provide (housing) room for those who are just starting out, or have otherwise become marginalized in some capacity for that matter. Knowledge use systems would not only provide a point of economic entry for lower income levels, but coordinate time value so as to allow greater economic and social cohesion. At the outset, knowledge use systems would set up and maintain a lower cost threshold for all local non tradable sector activity, which would be reinforced with symmetric compensation for time value.

A basic tenet for knowledge prior contribution to employment potential, is that general equilibrium conditions aren't capable of providing a given asymmetric wage across entire population sets. Domestic home activity is an excellent example, why asymmetric wage structure does not automatically apply for all who might otherwise just stay home to take advantage of market wages.

For example, how many parents could realistically pay their children for housework at the going rate of home cleaning services? It helps to remember that only so many employers can meet the requirements of an asymmetric wage, and that ability remains dependent on availability of additional revenue at any given moment. This could partly explain why housework did not become a part of the GDP measure, given the fact sufficient revenue did not exist to pay voluntary domestic labor in a routine workplace capacity.

Symmetric wage structure would not be limited by existing revenue in the marketplace, but by the number of participants who are willing to equally coordinate for group time value alongside the option of discretionary income through resource arbitrage. Even so, a small base wage would go far, because knowledge use systems would recreate non tradable sector consumption. By maintaining innovative and flexible infrastructure, knowledge use systems can be built at a fraction of what the costs would be in general equilibrium conditions.

A knowledge prior function can also provide greater social cohesion for knowledge use patterns, which are otherwise difficult for lower income levels to access. One of the most unfortunate instances in this regard has been the ongoing obligation of public school for all citizens. In spite of required attendance for students, not to mention lifetime taxation responsibilities for U.S. homeowners, public schooling provides little if any social or economic cohesion for those who participate, once they graduate from high school. Knowledge use systems would take care to ensure that local responsibilities for education include economic results for time value, so that all participants can take part in knowledge based activity.

As Buckminster Fuller said, "We are called to be the architects of the future, not its victims." While one often imagines the infrastructure possibilities for general equilibrium conditions, imagination also holds promise for environment definition at all income levels. The knowledge prior could provide a much needed point of origin, for new economic communities. Even though symmetric monetary compensation may not appear equivalent to the rewards of asymmetric compensation, aggregate time value could finally gain the respect it deserves, through better links to potential resource capacity.

Human Capital in Services Context

How well is human capital actually represented, in present day economies? Answers range widely, and depend on individual perceptions re how human capital contributes to wealth. This post also serves as a continuation from yesterday's post on aggregate time value, and is in part a response to some of the Wikipedia references below.

The Wikipedia post for human capital starts out reasonably enough:

Human capital is the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value.

Note the emphasis of human capital as equated with economic value. In other words: individual (and group) sustenance which results from personal connections and existing resource capacity, has mostly given way to workplace viability. Even so, value in exchange (as workplace defined) with no corresponding value in use settings, means monetary compensation for only a limited portion of human potential.

It's a process that leads to decreased aggregate time value, which is starting to take a toll on monetary systems as well. There's too little room in today's economies, for time value as a point of arbitrage. Previously, value in use activity was an important part of organizational capacity, in many ways. Consider what losses in value in use activity could mean, now that this is paired with declining labor force participation in the U.S.

A marketplace for time value would not only reorganize human capital for (monetarily compensated) value in use settings, but also alleviate the problem of declining labor force participation. Time arbitrage would gradually assume a greater role, alongside the normal functions of monetary arbitrage. Ultimately - due to symmetric coordination - time based services would no longer be limited to third level or tertiary activity. Fortunately, there is no need for knowledge based services to remain completely dependent on fiscal policy, particularly in times of government austerity.

Time based services would become capable of first mover activity in the marketplace, on monetary terms. How to think about the organizational capacity, which is normally capable of first mover activity? Wikipedia defines services as tertiary, in a three sector theory. What I normally refer to as traditional manufacture or tradable sectors, consists of extractive and manufacturing industries, whose prominence has gradually given way to the wealth of non tradable sectors.

Even though services experienced tremendous growth in the 20th century, time based product needs to further evolve, so as not to lose its earlier momentum. Services capacity cannot rely on asymmetric compensation alone, especially now that global growth has begun to slow. Why did Wikipedia appear to assume that services wealth would remain ascendant over the first and second sectors? In all likelihood, the assumption that services growth could continue its expansion, was made prior to the changed circumstance which followed the Great Recession.

So long as international wealth capacity appeared certain, national governments were able to arbitrage the additional wealth of international asset formation, as well. These international wealth flows were what made fiat monetary policy a reasonable undertaking. But some are now questioning fiat money, and tradable sectors are being stressed as central bankers have refused to maintain aggregate spending capacity and nominal income. Should tradable sectors lose too much momentum, non tradable sectors might not be far behind.

Admittedly, preserving the wealth capacity of knowledge based services would take time. So much has occurred as a result of centralized fiscal policies, which now needs to be teased apart and put back together at local levels. Is it possible to do so? If enough of society is asked to participate in this project, the answer might just be "yes".

The Importance of Aggregate Time Value

Why is aggregate time value such a vital concept? It defines how societies think about social inclusion on economic terms. Prior to the mid 20th century, there were stronger family links between those who worked directly with local resources, alongside those who gained income from employment. Hence it wasn't always necessary to define time value on strictly monetary terms, to maintain connections with others through the course of a lifetime. As those earlier cultural links slowly faded, citizens became responsible for their own destinies.

This reality - a steadily growing need for economic self reliance - meant new challenges, as production became associated with cities and prosperous regions. Developed nations came to rely on a "consumption based economy" in order to provide services - a pattern which continues to this day. Knowledge based service sectors also developed in ways which proved incapable, of replacing earlier forms of societal coordination. As more citizens were expected not to assist others (marginalized, old and young), pressure only grew for those who remained employed, to somehow provide for the rest. Just as freedoms were lost for those who shouldered the burdens, freedoms were particularly lost for those who were no longer expected to provide.

Since the Great Recession, the worth of aggregate time value is becoming less certain, as policy makers debate whether technology could mean even fewer are needed in the workplace. What too many forget is the fact no society remains stable, when people lose their means to provide for one another. Monetarily speaking, aggregate time value is also nominal income. Are central bankers now hesitant to acknowledge the importance of nominal income, because they believe aggregate time value isn't important to maintain wealth? If so, they are wrong.

However, organizational capacity needs to be approached more directly, so that services product can be locally generated and acknowledged. Otherwise, present imbalances between time based product and other resource capacity in the marketplace, will only grow larger. Lest anyone forget, the human aspect of social exclusion also needs to be taken into account, and reduced wherever possible. Ultimately, reviving time value means believing that people can provide real help for one another, in those moments when institutions forget how to do so.

Fortunately, some of life's pressing issues don't always need an active response, in order to find resolution. This is not one of those times. If citizens do not act in the near future, there is a good chance that the strong growth trajectory which lasted well over a century (here in the U.S.), could be lost. Central bankers need to be more responsive to the monetary nature of time value, and citizens from all walks of life will need real means to contribute, as well. Money is freedom, and this is not the negative that some still imagine.

Hopefully these thoughts will contribute to aggregate time value, as one of the terms in a slowly evolving glossary page for the blog. Recently a friend suggested that I create one. Indeed, the project was already forming in my mind, so her encouragement provided further impetus for me to get started. There are times when I need to provide more concise explanations, for readers who are interested but don't have an economic background or perspective.

P.S. Aggregate time value as a concept is not complete without discussion of human capital. However, a Wikipedia reference for human capital, took a services approach which is quite different from my own, and I plan to respond in the next post.

Time Value In Use: A Missing Foundation

Even though value in exchange is the wealth that gets noticed, it's easy to forget how value in exchange overlays a number of value in use foundations, which include time value. Value in use also includes time use which exists in multiple non rival capacities - some of which are cultural in nature. Other value in use components are more clearly defined - particularly asset formation and knowledge use as they exist in relation to economic access and labor force participation.

Asset formation has been measured and emphasized of late, and (value in exchange) knowledge based skills sets are debated on a regular basis. Unfortunately, few have considered the possibility that total economic participation (time use aggregates) could have greater bearing on economic circumstance, than either of these.

Aggregates for economic time value, hold active - as opposed to passive considerations - for value in use. The practicality of time value can contribute to ongoing economic activity, whereas housing assets - while "practical" - mostly contribute to ongoing activity through taxation. Present housing structure also reflects the same rival preferences which now designate "preferred" knowledge use structures. Hence the value in use structure of time can be endangered, when wealth is circumvented by methods which gradually limit overall labor force participation. For instance, housing assets can only "park" nominal income to the degree that income remains engaged in current activity.

Value in use settings for time aggregate capacity, are vital. Compensation for value in use settings, would provide means to ensure continuous story lines for knowledge use, as well as meaning and context for specific place. Labor force participation - whether through self directed or other means - is what embeds the components which give stability to economic structure. The marketplace which needs new definition, is that which holds the time value of interpersonal relationships.

Without a marketplace for time value, the threads which bind knowledge and people together could gradually unravel, from all but a small part of the world's population. Even though corporations and governments provide continuity for valuable thought processes, they only manage insofar as their limited missions and value in exchange time use settings will allow. How might compensated value in use, be capable of strengthening the social "fabric"?

Compensated time on value in use terms, could be thought of as a series of ledges along a steep cliff or mountainside. These ledges can stop or at least slow the "fall", whenever institutions and individuals find themselves in the midst of setbacks. The process would protect knowledge use diversity, skills diversity, investment strategies, and the concept of time value as capable of options for non rival cooperation and coordination.

Understandably, both for-profit and not for profit structures would prefer to maintain control over economic value in exchange structures as they presently exist. Increasingly - however - these already existing structures are proving insufficient for complete labor force participation and economic access. It's time to consider other means of preserving both economic access, and the foundations of knowledge which have existed for so long.

When nations are doing well, it can seem as though possible for a vast wealth of knowledge - from centuries earlier - to remain in the public realm. But when nations stumble, their ability to remain stewards of earlier existing wealth capacity, becomes uncertain. If nations are willing to look to their own citizens and compensate them for time based value in use economies, the chances of maintaining both past and present wealth, will be vastly improved.

Government Services Provision? Time for a Restart

For a long time, governments have been able to rely on the conditions that value in exchange economies create, in order to contribute to knowledge based services formation. Strictly speaking, money is not just the preferred means of getting things done in a value in exchange economy - it remains the only means.

That also means no individual is free to contribute time value for the governmental support systems they deem important, in lieu of taxation. Why is this a problem? Taxation has a lot of places to go before it can get the job done that it sought to accomplish in the first place. As a result, growing services needs have led to extreme gridlock in Washington, as disputes continue regarding who even "deserves" services. However, democracy does not have to be doomed, as Yglesias feared in a recent post. There are better ways of moving ahead, which have yet to be considered.

While the seemingly infinite resources of a value in exchange economy can coordinate the time of individuals up to a point, that point has been reached. Even though some in power likely suspect this reality, sharing this knowledge with the public would mean putting their own social and economic standing in jeopardy. In the meantime, growth is slowly being scaled back, as production seeks a closer alignment with the services which remain possible on normal value in exchange terms.

In spite of recent employment gains in the workplace, low labor force participation rates indicate the degree to which some potential workers are still considered marginally productive. Granted, there are some who neither want to work or who may be incapable of work. Still, their numbers are practically nothing, compared to the individuals who would choose work under more forgiving sets of economic circumstance.  People need more freedom to define time value for work according to the needs of all citizens, not just the limited needs of established governments and businesses. Without a reliable work based safety net in local circumstance, citizens lose capacity to contribute to their own well being - let alone that of their families and communities.

Money is presently the only good that substitutes for other goods. However, traditional resource generation can only provide a base for knowledge, time and services for so long. As a result, time value also needs representation as a good which can purchase other time value, so that valuable services generation can continue. Essentially, doing so would generate a parallel value in use economy which is monetarily compensated (at a minimum) with lifetime investment options.

Eventually, human based elements of wealth need to run under their own steam, so that service formations need no longer drag down governments and private industry alike. Today, the value in exchange economics of traditional production, is insufficient to provide knowledge based services for entire populations. The worst part? Instead of generating greater well being, formal education has become a sorting mechanism which arbitrarily divides people into fully functioning members, and a sub class which has little more position in society than a mere animal. Healthcare issues becomes the other part of this sorting mechanism, which drastically limits the lifespan of many who are not able to participate in the knowledge based economy.

This is also why present day taxation doesn't suffice, particularly when government budgets are caught in a tangled web of entitlement transfers - all of which desperately wish to rely on the "exceptional human beings" instead of the "animals". Time use "taxation" of the future needs to remain direct and voluntary, both for the services one desires to seek and provide. Education would remain informal, fluid and according to changing needs and desires. Governments and businesses alike need to get out of the way of what individuals can provide for one another: if for no other reason than the fact redistribution for indirect services formation has become a colossal nightmare.

More time aggregates need to be tapped for their wealth potential, if populations are to continue engaging in the knowledge based services which became the hallmark of governments in the 20th century. This means no more false education promises, as education becomes part of the (monetarily) compensated activity people provide for one another as they move through all stages of their lives. One might even think of knowledge use systems as an organized form of human "fracking", which would be capable of getting at underlying human capital potential which today's institutions simply cannot reach.

Would one think of such a restart for time and knowledge use as government driven? To a degree such a definition is semantic, in that most local individuals would (once again) come to assume broader roles in community. The main problem for government dialogue, is that it devolved to environments where average individuals of average intelligence had no means to maintain their personal circumstance. One primary difference for future knowledge use communities is that some laws would be replaced by guidelines - many which would remain subject to change as cultural and resource based adaptations continue to evolve.

It has been widely assumed that direct democracy is not needed. While this is certainly true in terms of multiple resource and infrastructure capacities, it is not true for services which are a part of the lives of everyone. It is also not true for those moments when citizens need to define resource use and infrastructure beyond what present day governments have been able to provide. This is why local and direct democracy is needed, for the services formation and knowledge use of the future.

Thankfully, a broader role for democracy in knowledge use and services, would make it possible to find the kinds of equality which actually matter. Without a marketplace for time use, the idea of freedom only goes so far for any individual who presently has no meaningful role in the marketplace.

More Musings on Human Capital

Recently I wrote about the importance of human capital from a value in use perspective. It's not enough to think about human capital strictly in value in exchange terms, for this is only part of the mechanism by which individuals - given the chance - make use of knowledge and resources in their environments. Why is value in use activity so important? This (applied) form of human capital allows endogenous or internal social formation. In turn, these social structures have the potential to augment the (necessarily limited) skills and knowledge sets sought by today's institutions.

For instance, value in use contributions are beneficial in that they allow young and old to maintain strong identity formation. Both groups have complained (in their own way) for decades, of the often patronizing consumer functions now assigned to them by an adult based, value in exchange work world. And yet who has heard? Instead, police have been called into the schools, medications are prescribed to keep students "in line", and senior citizens are simply handed more papers to sign, particularly when they are sick.

Of course, senior citizens get their "calming" medications, too. Yet how can any senior citizen be expected to "behave", when already they may not have not been expected to fully reciprocate or participate with others, for decades? Unfortunately, the value in exchange perspective, capable of rewarding primarily "the best" in the workplace, has gradually led to belittlement of old and young alike. What's more, this not only limits identity and potential economic contribution, the process places unnecessary burdens on adult populations, to care for both.

Value in use functions have a practical nature, and can provide needed services at informal levels on time based terms. The time value we assign individuals for human capital value, need not be the same as what institutions assign individuals who gain time value from set educational standards. Given the chance, people would seek one another out for topics and activities which encompass all walks of life. This shouldn't be any surprise, for anyone who remembers the earlier diversity and complexity of subject matter once held in libraries and bookstores across the U.S.

Time use quality has an endogenous nature which is different for all individuals, which is why investment and income strategies need to be different for everyone concerned. Value in exchange understandably focuses on those who utilize time most productively with a short time frame. However, knowledge value also comes from those who take ten times longer to produce a (knowledge based) product than the norm, for instance. That product might hold considerable value which exists independently of the time investment involved.

One aspect of self employment is the fact no one knows ahead of time whether investment in any form of capital will pay off, from a value in exchange perspective. For individuals with little wealth, it is sometimes better to attempt value in exchange investment which also holds value in the fallback terms of value in use. Once, homes provided fallback in this capacity, in that they could offer both value in use and also space for much needed value from personal exchange with others.

A major problem with present day zoning - for instance - is that it has become more difficult for people to invest in value in exchange endeavor which also holds a personal value in use component as a fallback measure. By way of example, if forced to choose between owning a business and a house, some would gladly choose the business, and yet they can't live on the business premises (how many have slept there at night anyway?). Too many people - especially those who may not have been self employed - automatically assume investment of any kind as some boring and reliable function. Indeed, sometimes this gets expressed in ways that make me want to pull my hair out. (Minskyites I'm looking at you...)

Uncertainty of investment for lower income levels in value in exchange terms, is one of the reasons I question investment and savings models which attempt to delineate what "specifically" happens for investment. No one knows until they try! Even activities which may appear as little more than simple consumption represent personal investment to some degree, particularly after one experiences major setbacks. Why? Because there are multiple forms of consumption one becomes less willing to sacrifice for, if it doesn't appear those consumption decisions can still meaningfully contribute to ongoing goals. Automobiles are but one major example.

Value in use environments offer more diverse complexity for human capital and time use, than what has become possible in too many value in exchange settings. For instance, individuals once coordinated time in ways that they could accomplish multiple activities at the same time, particularly when different generations lived and worked in closer quarters. This wasn't multitasking, this was just normal life!

Perhaps knowledge use systems and the time value in use they hold, might even be thought of in numerical terms. Recently, Brad Delong pointed to the fact that only three workers out of ten are needed to produce the goods we consume. When one considers that fiscal activity became a natural flow of monetary activity, it becomes evident that - if government is particularly efficient - they may expect to generate another three workers to match the initial (production) three which Delong spoke of. Basically, knowledge use value for production value, right? Unfortunately, this mostly works for middle to upper income level services.

What about the remaining four positions which are needed to generate a complete services marketplace? It is not reasonable or possible to expect business to give up profits to create work for those four as well, especially given the fact business paved the way for efficient governments to match three for three. Plus, business creates profit by selecting the "best" human capital...ahh, oh well. That leaves four working positions of every ten, which could generate a starting point for a directly compensated, value in use economy. Value in exchange investment and consumption for the formerly excluded, can then go a long way to make the difference for long term growth. There is no single time investment ratio to other forms of capital investment ratio, because no one knows in advance how much time will be required for the product they want most to present to the public.

Brad Delong suggested "Making Do With More", for Project Syndicate. Why not go much further than "making do", by making time aggregates truly optimal? Value in exchange needs value in use, in order to remain whole and viable. No one need be diminished, just because their perceived (exogenous) value isn't as "great" as those whose knowledge gains augmentation from economies of scale.

Human Capital Also Holds Value In Use

Why is this important? Because value in exchange can at times be limited by definition, in terms of both resource potential and economic access. While many forms of scarcities have been relieved, scarcity is still problematic for both time use potential and geographic potential - i.e. the land versus human capital equivalence. This has bearing why it can be difficult to make time aggregates optimal, as a whole.

Because time product is naturally limited (finite), services coordination cannot always be accessed on value in exchange terms without distorting general equilibrium. Even so, people compensate for given scarcities however they can, through value in use means. While value in use can be helpful on a personal level, its potential could be greatly magnified through societal coordination. Value in use services formation would help to address present day imbalances, and (underutilized) human capital potential would play a primary role.

After writing yesterday's, post, I read two other posts about human capital, the first by Nick Rowe ("Human Capital" and "Land Capital") who was responding to Branco Milanovic. To be sure I was somewhat upset by the post from Milanovic, and am reminded that Piketty's recent book gives rise to these kinds of arguments. Milanovic stressed getting rid of the notion of human capital, while most readers are well aware I believe a move in the other direction is needed, instead.

Yesterday's post provided examples regarding knowledge transformation as value in use, through contractual agreement. However value in (knowledge) use needs careful delineation, from a value in exchange knowledge perspective. Many thought processes which individuals respond to, are voiced on commonly accepted value in exchange terms. That is certainly the perspective one finds in Nick Rowe's post.

His land examples as contrast with human capital examples are particularly helpful. For one thing, land holds greater value if it is adjacent to other land which has gained in value. This dovetails nicely with human capital educational investment, which generally holds less risk in the event of family connections. Meritocratic structure of human capital and knowledge use is limited, given a lack of fiscal ability to compensate knowledge under value in exchange circumstance.

Hence when it is not possible to increase economic growth through traditional means, an understandable value in use framework is needed for knowledge use. This would make it possible for a greater percentage of any population, to work with what has become today's primary resource. How has knowledge use value surpassed land value in this regard?

Primary land value tends to be determined by its access to prosperous regions, even though land still holds value in use through small scale agriculture. A century earlier, if few other means of production existed, one could still gain value in exchange through the application of skill, time, muscle and new machinery to work the land. The problem for many was that once agricultural product became less expensive, personal effort in this regard mostly became value in use. Today, knowledge use has supplanted agriculture as the primary means of survival. Even though land associated with knowledge use systems would not gain the value of prosperous regions, it would gain value as compared to land used for agricultural purposes.

Knowledge (in human capital context) which holds additional value of exchange, can at times be devalued when it is contrast with knowledge which might undermine "conventional wisdom" in some way. However, competition of this sort is not at all the intent of any coordinated knowledge use system.

On the contrary, knowledge use simply needs a more respectable position for populations as a whole, beyond existing university systems. While it may be easy to assume that practical knowledge use applies where other knowledge is in short supply, this has not been the case, given political realities in the U.S. Political dialogue is insufficient for solving the problems of the present. If value in exchange means limited services formation, further services growth is also needed on value in use terms.

Fortunately, there are reasonable ways to distinguish whether knowledge holds value in use versus value in exchange. First, a marketplace for time is necessary, before knowledge use as practical in nature has workable context. Within value in exchange, human capital is compensated according to pricing as recognized and also coordinated by primary equilibrium. Whereas value in use is compensated through time coordination within specific groupings on equal terms. That compensation provides seed money for further investment endeavor. The difference in this perspective, provides room for knowledge use and human capital potential, which would otherwise have little room to grow

Time, Price and Incentive

The main problem for general (or primary) equilibrium in the present, is the lack of a marketplace for time aggregates. Presently, some of life's most important skills exist in secondary, hence partial or incomplete economic settings. Time use concerns can be difficult to measure purely in terms of standard pricing, because money needs to represent all resource value and potential - not just the choices one seeks through time use.

Resource aggregates as a whole are immense, in relation to the finite resource of time. This is why government obligations - divided up as representative of per capita responsibility - seem immense. Even though governments have vast resource capacity, many economic activities now take place at levels surpassing the time value most "mere mortals" hold.

Hence a leap of faith is involved, even given the fiscal capacity Washington holds. Any perceived risk also exists in relation to other risks. In terms of time based support, governments already have quite a few promises to keep. What's more these obligations have increased, relative to a slowdown in growth for broader resource representation. This is why further taxation has little ability to address the underlying problem of a missing marketplace in time value.

So long as an economy grows at a fast pace, it is not difficult for associations representing high skill value, to stake claims existing in relation to the broader equilibrium. But should an economy begin to slow, it can be more difficult to coordinate time use patterns at general equilibrium level. Indeed, the most important monetary functions are called into question, when governments struggle to provide the same services balancing and coordinating functions as before.

Increasingly, it is difficult for price levels to provide reliable markers for time use aggregates in services. Even the question of participation in today's services marketplace is highly politicized. Until now, the most highly valued skills sets were built on decades of preparation, and they needed to be reimbursed on those same terms - not what other economic participants could "afford".

However, those earlier stakes in time use value, left too many economic participants without reliable economic functions. Time as value in personal use, has to be sacrificed for value in personal exchange - when in fact it remains possible to do so. Furthermore, if value in exchange is either missing or insufficient, time value in use no longer retains the same productive dynamic, because it may not be possible to utilize resources other than in consumer context. Most individuals need stable and ongoing relationships with others, in order to utilize resources in any productive capacity.

Only consider that at the beginning of the twentieth century, self employment was still a reality for many individuals. Incentives tended to be internally aligned, even at the level of families which still held similar production goals in common. This was a simpler reality, in which individuals took for granted the ability to transform resources and arbitrage the resulting product. There were reasonably reliable economic gains to be had, when incentive meant getting up early in the morning to undertake activity for economic and personal gain.

Once product became more associated with institutional production, time balance gradually shifted away from both individual and family efforts, as incentives were externalized. With a little luck and a reliable work role, "early risers" continued to benefit from personal effort. However, without a career or ownership stake in a production base, incentive could still gradually be lost.

As the twentieth century progressed, the odds became greater for success in terms of paid employment, rather than production on personal terms. Even though that meant externally aligned incentives (if one didn't "own" some crucial aspect of the job, a day could feel "long"), the tradeoff could mean not worrying about money to pay the bills. Once again, the pendulum is swinging towards a need for internal alignment - even while business formation slows and older firms dominate the national stage. Where to begin?

A marketplace for time use would realign incentive, but many aspects of life would be unrecognizable from a century earlier. To be sure, locals would still coordinate for commonly shared goal sets and activities, just as they once coordinated for agricultural and simpler production activities. The main difference is that services would become the first focus of time alignment, and further production would follow. Using services as a central organizational factor, would allow individuals to rediscover production on the changing terms of automation and 3D printing as well.

By realigning time use within locally acquired resource context, more individuals would have a chance to learn services and production on new terms. Fortunately, individual groups are capable of balancing and coordinating functions which governments should not have to be entirely responsible for. Not everyone needs high pay as the primary incentive for high skill work. How many would choose environments which support high skill levels on simpler terms? It would be interesting indeed, to find out.