In this morning's post, I pointed out the need for greater balance between different working parts of economic systems in somewhat broad strokes. So in this post I want to look a bit closer at an element one probably wouldn't expect to find in an economics text: interlocking components of local community which might be more amenable to coordination in the future, than simple wealth redistribution. Even though plenty of discussion abounds for taxation and redistribution, what's missing is an overall rationale as to how redistribution can actually accomplish what it sets out to do.
Because redistribution through taxation happens with limited knowledge and decision processes, many aspects of economic interaction simply fall out of balance with the passage of time. When this happens, sometimes it's best just to start over and keep things a bit more simple - only, wouldn't it would be great to be able to do so without the intervention of wars and calamity. So how might a better balance be possible between asset components and services at local levels?
When societies do not find ways to keep flexibility in living and working arrangements, unfortunately there's a good chance that imposed austerity will finally do the job for them. Yet no one really gains by the lower wealth valuations of bad deflation: neither is that a good recipe for greater inclusion. Rather, asset wealth to services scenarios need to happen within more flexible frameworks for participation. In other words, both environment and services could be transformed so that it is not necessary to be wealthy, to be able to access great services of all kinds (through time arbitrage). In particular, the choice of limited consumption responsibility could give far more time for greater services participation and options.
Presently, one doesn't just move to a neighborhood with great services unless there is plenty of additional income to provide one's contribution. What's more, good services require a stronger association with income, than was the case several decades earlier. Also, even if one's home is mostly intended for a good night's sleep, there is a good chance the dwelling's valuation includes nearby services and amenities, whether one seeks them or not. Indeed that services consumption "package" approximates investment value as well. It's easier to think about the actual connections between income and services consumption in close up settings, than in settings which separate the activities of business and government, or public and private concerns. For one thing, it's easier for larger settings to obscure the important nominal concerns which are such a primary anchor for monetary activity.
Indeed, that is a big part of my appreciation for NGDP and nominal targeting, because they point to the significance of income potential in macroeconomic settings. Local economies have the ability to highlight how important per capita considerations actually are. Plus, local economic experiments in services coordination have the potential to illustrate natural experiments in this regard. The local economy is capable of providing up close - albeit simplified versions of regional or national settings. To do so also allows the observer to forget about government, finance and credit, long enough to ask: what is really happening with monetary flows between all elements and all participants?
With such consideration, it becomes easier to think how services have been funded until now. And for many communities, this distribution form needs to be altered so that services might take on a more primary role. A balance still exists between asset formation and services, but it is a precarious balance which no longer provides adequate jobs in services for actual community need. Even so, present asset formations sometimes present hardships for residents, as they try to maintain at least minimal redistribution flows through the use of the assets themselves.
While a significant part of this burden could be lifted in the future through technological innovations, this is still but a part of the answer. After all, were innovation to take place - in turn leading to less expensive living and working habitat - there would not be enough taxes from these less expensive and more efficient habitats to provide necessary taxes for services. How to think about this? For one thing, it's the first part of the balance adjustment, from which a services adjustment could follow.
A high tech environment would not only mean less expense for the costs of the environment itself, but also less time needed in the maintenance of the environment. Consider for example, the ease of transporting plastics as containers for consumption goods of all kinds, and the low costs of doing so. For a bit more money, better quality plastics could come into use, which would be adequate for many kinds of modular repairs for instance, instead of wholesale repairs on living and working quarters of the present which involve tremendous resources just to do so. What if recyclable plastics were converted to modular home replacements locally, for instance? What if some environments that are prone to natural disasters could choose modular components over traditional housing?
Such an approach to living and working quarters would free up an incredible amount of time for local dwellers, because it wouldn't be necessary to go to a high paying job all day just to pay for suitable shelter. That would leave more time to engage in skills sets, knowledge use and other important ongoing functions without the higher incomes necessary for more permanent forms of housing and construction. What this means is that the lower cost, resource use and maintenance can provide the setting for an alternative approach to services provision which would be inclusive of entire populations. Previously, it was only possible to reimburse a small fraction of those in communities for local services positions because of the additional responsibilities their dwellings placed on income needs.
Inclusivity for services responsibilities means looking beyond the bounds of institutions, for knowledge use. Not only would this provide ways for communities to reorganize their service needs, it would allow them to reconfigure infrastructures when they are no longer able to maintain earlier infrastructures which they previously relied upon. Communities can ask themselves, how can we - as a group - still achieve important societal goals? That is, when it is no longer possible to tax a limited group of citizens who are either stretched to the limits or simply said no.
Importantly, success stories for coordination in skills sets would not exist in a vacuum, in terms of monetary valuations. The fact that knowledge use has been successfully applied and contributed to the transformation of communities would also make previously low valuations start to rise. However, this would not necessarily be a negative in a broad sense, because it would be an indication for any community that smart skills coordination strategies could provide greater options and possibilities for multiple populations. Indeed, other communities would be inspired to follow earlier examples, where real social value was created - seemingly out of "thin air". That is, the skills capacity came first - and the money valuations ultimately followed.
There are many ways to go about such a process. Plus, the needed adjustments can become more income oriented overall, than present circumstances of limited workplace participation allow. The inclusion of whole populations also means that greater subjectivity for product definition is possible, which can be quite important for services provision. How might coordinated efforts become a more effective community tool, than redistribution? After all, coordination does not have the "finality" of redistribution decisions, which imply failures of all kinds when they are not done "properly" or simply become overwhelming. Coordination gives people ways to start over and try again, which can sometimes make all the difference .
Thursday, November 21, 2013
AS and AD: Balance and Coordination are Possible
Granted, this may seem - to some - like a somewhat unusual argument to be making. How does one take a free market, i.e. our supply side realities, and expect them to take action with anything resembling the organizational capacity or focus of a central bank? After all, markets are supposed to be free to act on their own and uh...yeah, me too, much of the supply side doesn't look very free to do so, lately. That's just the point, for there is presently no shared purpose or vision to move ahead in spite of countless investments in knowledge and skills potential.
Many skills investments today remain in a holding pattern, in large part because of the outdated forms of institutional structures that skills use is expected to maintain. Mostly, everyone has been "free" to deny growth or opportunity to everyone else, in a struggle over tight money and long term indecision over growth paths. Not only has Washington been short on any substantial agreements for some time, but focus on combined AS and AD efforts (as needed by an entire population) for economic stability are no one's responsibility, right now.
After reading Scott Sumner's recent post, it would probably be helpful to explain what I mean by aggregate demand. Presently, the underlying structure of multiple product and asset formations are fragmented at a basic level, and that fragmentation stands in the way of economic progress. For instance, Washington faces gridlock by trying to factor in a percentage of the public to a healthcare system which was never designed for lower incomes or centralized mechanisms. Efforts to force this imbalance are not only making life more fragile for millions of individuals, but for businesses in general.
People with lower (or less certain) incomes will need to be able to create their own systems of economic access: systems which will not impose on the fought over systems of those in middle to higher income ranges. A major component of such systems would be to bring local economies (in terms of resource and knowledge use) back into better balance with global economic elements. Such systems would also need to keep AS and AD in balance through localized nominal targeting, so as not to suffer from the (endogenous) inflation spirals that local economies tend to otherwise create.
Balance and coordination are needed, which are also capable of matching the needs of various income levels and aspirations. After all, there is a sorting process in some regions and areas which makes it more difficult for all income levels to work within the same perimeters of economic access. Nor should everyone be expected to do so, as it forces too many square pegs into round holes and encourages political divisions which only work at cross purposes to resource use in general. While economists are not generally used to thinking in such terms, the traditional hands off approach has led to considerable astonishment, at the potential linear future trajectory which becomes more unsettling by the day.
Even though such coordination sounds "too complicated" to many, the fact remains that most governments are simply not ready to provide economic access to lower income or unemployed individuals through other means, and prisons need to be scaled back in the years ahead. There are just too many unresolved infrastructural issues that remain between the middle to upper income ranges, where in fact little progress is being made. In other words, individuals outside of governments could go ahead now and work on the tasks which are important to them, while Washington for instance is still attempting to take care of what it considers more pressing matters.
While representatives of aggregate demand (economists and individuals at the Fed) catch most of the heat these days, proponents of aggregate supply have mostly stayed out of the of the kitchen, even as they demand what meals are going to be served, and how said meals "must" be cut back (overall AD or NGDP). And increasingly the "meals" - while providing an adequate marketplace for those with higher incomes, leave too few points of economic entry for those at lower income levels. Hence, a marketplace all too often does not exist, except of course the default zone of prisons. How can anyone realistically hope for full employment, if there is not even a variety of marketplaces and infrastructure to represent all income levels?
Thus, the relationship between policy makers, Wall Street and Main Street has become ever more dysfunctional. Too many economic participants are not even able to come to the table, thus the economies of nations continue to fall further out of balance. It is past time for proponents of the supply side to acknowledge the very real role they have played - in combination with governments, of creating unnecessary limits of economic participation for all involved. This exclusionary strategy has created an unbalanced economy and a decrease in societal trust, yet too few have the desire to attack the underlying problems which keep it that way. However until people come to terms with this reality, more QE will be needed - in that more deflation would certainly occur, without it.
Regular readers here know that I have no qualms about being a "burr in the saddle" of some supply side representatives, who put most of the blame on the Fed in the present. Unfortunately there are also tight money advocates who are in the position of supposedly being proponents of aggregate demand, via roles in the Fed. Yet instead of finding ways to work with supply side interests throughout the nation to coordinate and balance AD efforts, they focus on shooting down potential solutions, instead.
Their demands for tighter money, and do-nothing attitudes towards structural problems and dropping workforce participation, are nothing but dangerous and irresponsible. What's more, the willingness of some within the Fed to encourage the public to view the institution itself with dismay, is inexcusable. Tight money advocates are presently adding on unnecessary blame, division, and confusion all around for their own short sighted goals. All of this is escalating into a problem which also means higher unemployment and more businesses losses in the future. How so?
Restrictions on the marketplace in terms of operating costs and regulations mean that neither businesses or individuals can meet the growing demands of the government. But instead of working together to undo the growing unbalance, both political parties continue to up the ante on the other, which only continues the economic conditions so intractable to begin with. The lack of a marketplace for lower income options in basic areas of life, is now leading to demands for higher minimum wages and "living wages". That in turn only puts more pressure on business which were already forced to factor in higher healthcare costs.
While it can be tempting for supply side interests to serve the needs of mostly higher incomes, that leaves society in general needing more liquidity for overall needs, than many in society are able to contribute to. However, when too much of the marketplace becomes defined for higher incomes over time, the liquidity which bears initially bears little risk, finally starts to appear as too much of a burden, and the lower bound begins to affect monetary policy in ways quite different from normal circumstance of multiple generations. Even though the process can be reversed by innovations at basic levels of product and asset formation, people are too entrenched in earlier patterns to be able to think of this as a solution.
Just the same, the way back to economic stability is to find ways to include people of all income levels in basic economic participation. While a straight, undifferentiated (national) level nominal target (NGDPLT) does not address lower incomes specifically, it is able to check the tendency of middle and upper range income levels re waging economic battles of constantly higher expectations. For when upper income levels do this for too long, they find themselves saddled with somehow finding provisions for the lower classes whose incomes are no longer adequate at the margin for basic economic needs. While government does shift incomes at lower levels in a number of ways, this argument is especially intended for the many who do not rely on any sort of government redistribution in a normal sense.
Part of creating balance is recognizing the embedded product formations and valuations which exist between environment structures, and the services which exist alongside them. Not only is balance needed between these local or traditionally non tradable elements of the economy, but also between global or tradable elements of the economy. Presently, the balance is broken in at least two important respects - between local and non local elements, and between levels of local access utilization. While government redistribution presently obscures the differences between income levels and well being, the majority of government redistribution needs to be cleared out of the way, so that all income levels can once again become active contributors to both consumption and production in more understandable terms.
Many skills investments today remain in a holding pattern, in large part because of the outdated forms of institutional structures that skills use is expected to maintain. Mostly, everyone has been "free" to deny growth or opportunity to everyone else, in a struggle over tight money and long term indecision over growth paths. Not only has Washington been short on any substantial agreements for some time, but focus on combined AS and AD efforts (as needed by an entire population) for economic stability are no one's responsibility, right now.
After reading Scott Sumner's recent post, it would probably be helpful to explain what I mean by aggregate demand. Presently, the underlying structure of multiple product and asset formations are fragmented at a basic level, and that fragmentation stands in the way of economic progress. For instance, Washington faces gridlock by trying to factor in a percentage of the public to a healthcare system which was never designed for lower incomes or centralized mechanisms. Efforts to force this imbalance are not only making life more fragile for millions of individuals, but for businesses in general.
People with lower (or less certain) incomes will need to be able to create their own systems of economic access: systems which will not impose on the fought over systems of those in middle to higher income ranges. A major component of such systems would be to bring local economies (in terms of resource and knowledge use) back into better balance with global economic elements. Such systems would also need to keep AS and AD in balance through localized nominal targeting, so as not to suffer from the (endogenous) inflation spirals that local economies tend to otherwise create.
Balance and coordination are needed, which are also capable of matching the needs of various income levels and aspirations. After all, there is a sorting process in some regions and areas which makes it more difficult for all income levels to work within the same perimeters of economic access. Nor should everyone be expected to do so, as it forces too many square pegs into round holes and encourages political divisions which only work at cross purposes to resource use in general. While economists are not generally used to thinking in such terms, the traditional hands off approach has led to considerable astonishment, at the potential linear future trajectory which becomes more unsettling by the day.
Even though such coordination sounds "too complicated" to many, the fact remains that most governments are simply not ready to provide economic access to lower income or unemployed individuals through other means, and prisons need to be scaled back in the years ahead. There are just too many unresolved infrastructural issues that remain between the middle to upper income ranges, where in fact little progress is being made. In other words, individuals outside of governments could go ahead now and work on the tasks which are important to them, while Washington for instance is still attempting to take care of what it considers more pressing matters.
While representatives of aggregate demand (economists and individuals at the Fed) catch most of the heat these days, proponents of aggregate supply have mostly stayed out of the of the kitchen, even as they demand what meals are going to be served, and how said meals "must" be cut back (overall AD or NGDP). And increasingly the "meals" - while providing an adequate marketplace for those with higher incomes, leave too few points of economic entry for those at lower income levels. Hence, a marketplace all too often does not exist, except of course the default zone of prisons. How can anyone realistically hope for full employment, if there is not even a variety of marketplaces and infrastructure to represent all income levels?
Thus, the relationship between policy makers, Wall Street and Main Street has become ever more dysfunctional. Too many economic participants are not even able to come to the table, thus the economies of nations continue to fall further out of balance. It is past time for proponents of the supply side to acknowledge the very real role they have played - in combination with governments, of creating unnecessary limits of economic participation for all involved. This exclusionary strategy has created an unbalanced economy and a decrease in societal trust, yet too few have the desire to attack the underlying problems which keep it that way. However until people come to terms with this reality, more QE will be needed - in that more deflation would certainly occur, without it.
Regular readers here know that I have no qualms about being a "burr in the saddle" of some supply side representatives, who put most of the blame on the Fed in the present. Unfortunately there are also tight money advocates who are in the position of supposedly being proponents of aggregate demand, via roles in the Fed. Yet instead of finding ways to work with supply side interests throughout the nation to coordinate and balance AD efforts, they focus on shooting down potential solutions, instead.
Their demands for tighter money, and do-nothing attitudes towards structural problems and dropping workforce participation, are nothing but dangerous and irresponsible. What's more, the willingness of some within the Fed to encourage the public to view the institution itself with dismay, is inexcusable. Tight money advocates are presently adding on unnecessary blame, division, and confusion all around for their own short sighted goals. All of this is escalating into a problem which also means higher unemployment and more businesses losses in the future. How so?
Restrictions on the marketplace in terms of operating costs and regulations mean that neither businesses or individuals can meet the growing demands of the government. But instead of working together to undo the growing unbalance, both political parties continue to up the ante on the other, which only continues the economic conditions so intractable to begin with. The lack of a marketplace for lower income options in basic areas of life, is now leading to demands for higher minimum wages and "living wages". That in turn only puts more pressure on business which were already forced to factor in higher healthcare costs.
While it can be tempting for supply side interests to serve the needs of mostly higher incomes, that leaves society in general needing more liquidity for overall needs, than many in society are able to contribute to. However, when too much of the marketplace becomes defined for higher incomes over time, the liquidity which bears initially bears little risk, finally starts to appear as too much of a burden, and the lower bound begins to affect monetary policy in ways quite different from normal circumstance of multiple generations. Even though the process can be reversed by innovations at basic levels of product and asset formation, people are too entrenched in earlier patterns to be able to think of this as a solution.
Just the same, the way back to economic stability is to find ways to include people of all income levels in basic economic participation. While a straight, undifferentiated (national) level nominal target (NGDPLT) does not address lower incomes specifically, it is able to check the tendency of middle and upper range income levels re waging economic battles of constantly higher expectations. For when upper income levels do this for too long, they find themselves saddled with somehow finding provisions for the lower classes whose incomes are no longer adequate at the margin for basic economic needs. While government does shift incomes at lower levels in a number of ways, this argument is especially intended for the many who do not rely on any sort of government redistribution in a normal sense.
Part of creating balance is recognizing the embedded product formations and valuations which exist between environment structures, and the services which exist alongside them. Not only is balance needed between these local or traditionally non tradable elements of the economy, but also between global or tradable elements of the economy. Presently, the balance is broken in at least two important respects - between local and non local elements, and between levels of local access utilization. While government redistribution presently obscures the differences between income levels and well being, the majority of government redistribution needs to be cleared out of the way, so that all income levels can once again become active contributors to both consumption and production in more understandable terms.
Wednesday, November 20, 2013
Midweek Market Monetarist Links and Summaries - 11/20/13
Needed: better quality Fed governors. Marcus Nunes also notes a new, downloadable e-book for forward guidance in this post: http://thefaintofheart.wordpress.com/2013/11/13/free-to-speak-out/
Is "pushing on a string" really working from the "right end" of the telescope? http://thefaintofheart.wordpress.com/2013/11/13/if-you-didnt-know-you-should/
Would a little deflation now be a "good" thing? Hmmm:
http://thefaintofheart.wordpress.com/2013/11/14/the-cato-conference-takes-off-and-crashes/
Marcus provides links for a Free Exchange roundtable:
http://thefaintofheart.wordpress.com/2013/11/15/unconventional-monetary-policy-ump%e2%89%a0easy-money-em/
Why does everything look like a bubble?:
http://thefaintofheart.wordpress.com/2013/11/17/when-you-set-out-to-control-a-bad-you-lose-sight-of-the-good/
Explanations in graphs, why the years prior to the crisis were not "easy money"
http://thefaintofheart.wordpress.com/2013/11/18/the-fixation-on-2003-05/
A guest post by Benjamin Cole - There's something about groupthink:
http://thefaintofheart.wordpress.com/2013/11/18/groupthink-plosser-and-the-fed-oblations-to-zero-inflation/
Marcus takes a look at Bernanke's legacy:
http://thefaintofheart.wordpress.com/2013/11/20/when-fiction-and-reality-clash-the-bernanke-legacy/
Hard to believe that hyperinflation could be a problem, in the same timeframe as deflation. From Lars Christensen: http://marketmonetarist.com/2013/11/14/venezuelas-monetary-craziness/
This is an important distinction which is sometimes missed by history:
http://marketmonetarist.com/2013/11/17/deflation-not-hyperinflation-brought-hitler-to-power/
Where Lars explains the EMH by jumping on a table in a crowd:
http://marketmonetarist.com/2013/11/18/the-crowd-lars-you-are-fat/
Department of "piling on", or Huzza Huszar - David Beckworth provides links for the tackle which Huszar received for his "apology": http://macromarketmusings.blogspot.com/2013/11/if-you-are-going-to-criticize-qe.html Here's one from Bonnie Carr: http://dajeeps.wordpress.com/2013/11/12/oh-please-on-huszars-great-confession/
From Kevin Erdmann: http://idiosyncraticwhisk.blogspot.com/2013/11/evidence-is-optional-with-finance.html
Not done yet! http://andolfatto.blogspot.com/2013/11/andrew-huszar-confessions-of.html
Okay, I'll stop after this video: http://www.cnbc.com/id/101192690
David Beckworth notes that Janet Yellen should have been able to ask questions, too: http://macromarketmusings.blogspot.com/2013/11/three-questions-janet-yellen-should.html
James Pethokoukis puts Kevin Warsh in his place: http://www.aei-ideas.org/2013/11/do-fed-critics-really-think-the-us-economy-would-be-stronger-with-tighter-monetary-policy/
Some thoughts from Scott Sumner, on Yellen's testimony: Janet Yellen on monetary offset
Scott's Free Exchange post: http://www.economist.com/blogs/freeexchange/2013/11/unconventional-monetary-policy-2
Anders Aslund of FP could have used a bit more monetary logic: When you put the phrase "blind spot" in the title of your essay
Alas...Fire, fire, in Noah's flood: In the belly of the beast
Raising the minimum wage to $10 hour is questionable: Where does America rank in terms of top rate?
It's time to adopt a policy not inhibited by the zero bound: Focus on NGDP expectations not interest rates
Scott wants more clarity in discussions about Germany: I beg you all to stop talking about German Inflation
China's government wants to avoid the middle income trap - China: The glass is now 51% full
Scott highlights a good video: Rick Santelli explains the real reason for QE3
Deflation as testament that structural reforms are working? Memo to FT editors: Be as crazy as you like, but give us an explanation
Nick Rowe - Don't use the New Keynesian model to support raising government spending at the ZLB: http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/on-understanding-and-spinning-nk-models.html
First and second best solutions in a hybrid model: http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/optimal-fiscalmonetary-policy-in-hybrid-oldnew-keynesian-models.html
Barbie was right, math is hard! But think about a very simple Keynesian cross...http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/a-suggestion-for-simplifying-some-macro-math.html
However, this post does need a second year macro text: http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/neo-wicksellian-indeterminacy-in-pictures.html
David Glasner looks at some of the issues surrounding QE:
http://uneasymoney.com/2013/11/18/the-internal-contradiction-of-quantitative-easing/
As smart as Larry Summers may be, he still misses the point - Ryan Avent, "The Solution That Cannot Be Named": http://www.economist.com/blogs/freeexchange/2013/11/secular-stagnation
Also of interest:
Good post from Alex Tabarrok: The FDA and International Reciprocity
You say bubble, I say fluctuating risk premia: http://www.capitalspectator.com/archives/2013/11/david_stockman.html
Is "pushing on a string" really working from the "right end" of the telescope? http://thefaintofheart.wordpress.com/2013/11/13/if-you-didnt-know-you-should/
Would a little deflation now be a "good" thing? Hmmm:
http://thefaintofheart.wordpress.com/2013/11/14/the-cato-conference-takes-off-and-crashes/
Marcus provides links for a Free Exchange roundtable:
http://thefaintofheart.wordpress.com/2013/11/15/unconventional-monetary-policy-ump%e2%89%a0easy-money-em/
Why does everything look like a bubble?:
http://thefaintofheart.wordpress.com/2013/11/17/when-you-set-out-to-control-a-bad-you-lose-sight-of-the-good/
Explanations in graphs, why the years prior to the crisis were not "easy money"
http://thefaintofheart.wordpress.com/2013/11/18/the-fixation-on-2003-05/
A guest post by Benjamin Cole - There's something about groupthink:
http://thefaintofheart.wordpress.com/2013/11/18/groupthink-plosser-and-the-fed-oblations-to-zero-inflation/
Marcus takes a look at Bernanke's legacy:
http://thefaintofheart.wordpress.com/2013/11/20/when-fiction-and-reality-clash-the-bernanke-legacy/
Hard to believe that hyperinflation could be a problem, in the same timeframe as deflation. From Lars Christensen: http://marketmonetarist.com/2013/11/14/venezuelas-monetary-craziness/
This is an important distinction which is sometimes missed by history:
http://marketmonetarist.com/2013/11/17/deflation-not-hyperinflation-brought-hitler-to-power/
Where Lars explains the EMH by jumping on a table in a crowd:
http://marketmonetarist.com/2013/11/18/the-crowd-lars-you-are-fat/
Department of "piling on", or Huzza Huszar - David Beckworth provides links for the tackle which Huszar received for his "apology": http://macromarketmusings.blogspot.com/2013/11/if-you-are-going-to-criticize-qe.html Here's one from Bonnie Carr: http://dajeeps.wordpress.com/2013/11/12/oh-please-on-huszars-great-confession/
From Kevin Erdmann: http://idiosyncraticwhisk.blogspot.com/2013/11/evidence-is-optional-with-finance.html
Not done yet! http://andolfatto.blogspot.com/2013/11/andrew-huszar-confessions-of.html
Okay, I'll stop after this video: http://www.cnbc.com/id/101192690
David Beckworth notes that Janet Yellen should have been able to ask questions, too: http://macromarketmusings.blogspot.com/2013/11/three-questions-janet-yellen-should.html
James Pethokoukis puts Kevin Warsh in his place: http://www.aei-ideas.org/2013/11/do-fed-critics-really-think-the-us-economy-would-be-stronger-with-tighter-monetary-policy/
Some thoughts from Scott Sumner, on Yellen's testimony: Janet Yellen on monetary offset
Scott's Free Exchange post: http://www.economist.com/blogs/freeexchange/2013/11/unconventional-monetary-policy-2
Anders Aslund of FP could have used a bit more monetary logic: When you put the phrase "blind spot" in the title of your essay
Alas...Fire, fire, in Noah's flood: In the belly of the beast
Raising the minimum wage to $10 hour is questionable: Where does America rank in terms of top rate?
It's time to adopt a policy not inhibited by the zero bound: Focus on NGDP expectations not interest rates
Scott wants more clarity in discussions about Germany: I beg you all to stop talking about German Inflation
China's government wants to avoid the middle income trap - China: The glass is now 51% full
Scott highlights a good video: Rick Santelli explains the real reason for QE3
Deflation as testament that structural reforms are working? Memo to FT editors: Be as crazy as you like, but give us an explanation
Nick Rowe - Don't use the New Keynesian model to support raising government spending at the ZLB: http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/on-understanding-and-spinning-nk-models.html
First and second best solutions in a hybrid model: http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/optimal-fiscalmonetary-policy-in-hybrid-oldnew-keynesian-models.html
Barbie was right, math is hard! But think about a very simple Keynesian cross...http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/a-suggestion-for-simplifying-some-macro-math.html
However, this post does need a second year macro text: http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/neo-wicksellian-indeterminacy-in-pictures.html
David Glasner looks at some of the issues surrounding QE:
http://uneasymoney.com/2013/11/18/the-internal-contradiction-of-quantitative-easing/
As smart as Larry Summers may be, he still misses the point - Ryan Avent, "The Solution That Cannot Be Named": http://www.economist.com/blogs/freeexchange/2013/11/secular-stagnation
Also of interest:
Good post from Alex Tabarrok: The FDA and International Reciprocity
You say bubble, I say fluctuating risk premia: http://www.capitalspectator.com/archives/2013/11/david_stockman.html
Monday, November 18, 2013
"Non-Sequiturs" and other Political Realities
This post serves to take note of some conversations which - for me - are "nested" in the larger issue of productivity reform. Already, productivity concerns had captured my attention this week (see last post). There's a couple of recent comments which deserve a closer look, before I spend some time with a more in depth perspective. Especially in that one of these is from an individual whose work I believe to be vitally important for the (potential) balance that is Market Monetarism: George Selgin.
Selgin was responding in turn to Mark Sadoswki at The Money Illusion. Mark was inspired by a comment from Bonnie Carr several days earlier, to a post by Marcus Nunes. Here I also have the chance to put in my two cents about Plosser: someone who is nervy enough to say in all seriousness"a period of mild deflation could at least in theory be positive". Charles Plosser, grrr, stick it where the sun doesn't shine, for you indeed know this isn't one of those times (given extremely low innovation where it is needed most). Yet he's reasonably confident that the public doesn't know the score, for major media hasn't really stepped in to help. Now, for the dajeeps (Bonnie Carr) comment, which was a nice slap at Plosser:
When I returned to Scott's post (with Selgin and Sadowski comments) to link for this one, I was struck at the degree to which some of Thomas Sargent's (a Nobel winner) quotes are reminiscent of Plosser. Egad! Anyway, as Scott noted afterward in the comment thread, it wasn't really clear whether Sadowski and Selgin had any disagreement. But inquiring minds such as my own want to know: what about that "simple" question of setting the NGDP growth-rate target at the trend rate of growth of weighted factor input? I think sometimes that when economists are talking amongst one another, they don't always recognize the moments when the rest of the audience goes "Wait! Hold on! Can you really explain that to me in English?"
What it basically boils down to for us laypeople is this: are the indices in place completely adequate for the task at hand? And - if not - how can we help to provide indices which are more useful? In other words, are current measurements capable of showing whether good deflation can be measured, so that the impediments for its growth can be loosed? Especially in the face of bad deflation which would knock down the most productive and innovative processes, given the chance.
For we need this capacity, if in fact incomes are to be optimized for even those who rely on the least income of all. Whether or not such indices would realistically be taken into account, was of course duly noted by Bonnie Carr - and that's no small matter. After all it's difficult enough to get the most important elements of measurement right - let alone deal with the willing obfuscation of those who would just as soon it not happen.
Selgin was responding in turn to Mark Sadoswki at The Money Illusion. Mark was inspired by a comment from Bonnie Carr several days earlier, to a post by Marcus Nunes. Here I also have the chance to put in my two cents about Plosser: someone who is nervy enough to say in all seriousness"a period of mild deflation could at least in theory be positive". Charles Plosser, grrr, stick it where the sun doesn't shine, for you indeed know this isn't one of those times (given extremely low innovation where it is needed most). Yet he's reasonably confident that the public doesn't know the score, for major media hasn't really stepped in to help. Now, for the dajeeps (Bonnie Carr) comment, which was a nice slap at Plosser:
Depends in the source of the deflation on whether good or bad. The good deflation doesn't come from monetary policy, and so the central bank doesn't really have a reason to target it.I mulled over her comment for a couple of days, and wasn't quite able to categorize it in my mind. Fortunately, Selgin's response to Sadowski (who had approached an earlier argument from Bonnie's point of view) took care of that:
A non-sequitur, Mark. Of course the CB cannot target productivity itself; but it can have an NGDP target such as would allow for good deflation. It's just a question of setting the NGDP growth-rate target at the trend rate of growth of weighted factor input. I made this recommendation and offer reasons in its favor in my 1997 pamphlet. The point of a "productivity norm", and indeed of any NGDP targeting scheme to some extent, is precisely that CB's should_refrain_from attempting to maintain a stable inflation rate in the face of productivity growth-rate innovation.Perhaps not quite the non-sequitur Selgin imagined, for politics has a way of piling on layers of silt in seemingly easy points of navigation. Speaking of rough and muddy slogs, there is a swamp of economese in his quote which may present a few problems for some of my readers - indeed I had a little trouble as well. Still, swamps are fascinating places as anyone who has explored them (hopefully with groups) knows, alligators and all. So let's grab some poles, and take a brief excursion - just look to where the sun is shining through the trees...
When I returned to Scott's post (with Selgin and Sadowski comments) to link for this one, I was struck at the degree to which some of Thomas Sargent's (a Nobel winner) quotes are reminiscent of Plosser. Egad! Anyway, as Scott noted afterward in the comment thread, it wasn't really clear whether Sadowski and Selgin had any disagreement. But inquiring minds such as my own want to know: what about that "simple" question of setting the NGDP growth-rate target at the trend rate of growth of weighted factor input? I think sometimes that when economists are talking amongst one another, they don't always recognize the moments when the rest of the audience goes "Wait! Hold on! Can you really explain that to me in English?"
What it basically boils down to for us laypeople is this: are the indices in place completely adequate for the task at hand? And - if not - how can we help to provide indices which are more useful? In other words, are current measurements capable of showing whether good deflation can be measured, so that the impediments for its growth can be loosed? Especially in the face of bad deflation which would knock down the most productive and innovative processes, given the chance.
For we need this capacity, if in fact incomes are to be optimized for even those who rely on the least income of all. Whether or not such indices would realistically be taken into account, was of course duly noted by Bonnie Carr - and that's no small matter. After all it's difficult enough to get the most important elements of measurement right - let alone deal with the willing obfuscation of those who would just as soon it not happen.
Thursday, November 14, 2013
Solutions Are Not Always Linear...One More Time With Feeling
Apparently I cannot say this enough. Do I wish today's solution sets were linear in nature? You betcha. There are few things lonelier in life, than being the fool who works on the prospects which clearly don't lend themselves to normal avenues of action. And yet, the definition of crazy is supposedly when something doesn't work but we keep trying to do that same thing over and over again, anyway. So which way is crazier? How crazy do we have to get before we try something else? This is also true for NGDPLT in that as long as the discussion revolves around inflation targeting, it's still the wrong conversation to be having about finding our way to a better economic place. To a degree, important aspects of nominal targeting also do not belong to the "logical" or linear realm.
However, my personal gripe today is in terms of guaranteed income proposals. Because - just like inflation targeting - conversations revolve around potential "solution sets" that don't get at the core issues involved. While I was glad to hear Tyler Cowen voice his concerns in this regard, I'm not convinced it really helped for him to "go there" in this post. Yes, guaranteed incomes can sound great on paper. Yes, they can provide assistance to people who desperately need help, and make others feel better for helping them. Even so, politically it's hard to say whether guaranteed incomes would ever "fly" in the U.S. anyway - despite the support they receive from those on the left and to a degree, the right.
But guaranteed incomes don't do a thing for long term solutions, and the overall equilibrium only goes further out of balance when little else gets changed on the supply side in production and consumption terms. And as Tyler indicated in so many words, it's just more welfare dressed up in slightly different clothes. It doesn't get at the root of the problem, which is that of bringing people back into meaningful lives and true social connections. Ultimately that's what it's all about, otherwise we are really wasting our time. We are long past the point of a couple of reforms "here" or a bit more common sense "there".
One problem for me is that it's somewhat difficult to make brief comments in other blog spaces regarding my work, and yet I find myself compelled to anyway. Of course that invites the occasional jeers and so mine was probably well deserved, when someone who goes by "Z" indicated that I should try for a fiction award. So here's what I didn't reply at MR. More than thirty years ago, in my initial thoughts about time coordination (in the middle of a recession), I would have been inclined to agree with him or her. That is, I wouldn't have considered such thoughts important enough to seriously pursue.
Even though I read little fiction, those early notes and thought processes felt so much like a science fiction novel that I came to call them "Enigami" - yep, imagine in reverse. Sure enough, the recession which had knocked me out of work for all that scribbling time, came to an end and all appeared normal. Before long I was back working and continued to do so steadily, that is, up until the spring of 2003. At that point I finally recognized that nothing was "normal" anymore, even if much of the primary economic news still sounded as if it was. When I was not able to keep a business venture going (and plenty of others also failing around me), I looked at possible options for non profit activity, but living in a rural area can impose significant roadblocks in that regard. Ultimately, I finally returned to my studies - and so the most recent "inward journey" was almost completely an economic emphasis.
As luck would have it, there is no clear cut way to approach any new normal which makes a lot of sense in previously designated contexts. That's why in so many posts I try to approach the problem of economic access in as many ways as possible (sort of like throwing mud at a wall...). Not only is there the vital issue of designating monetary activity for renewed economic access, there is also the problem of reimagining production processes for all income potentialities.
In other words, both aggregate supply and aggregate demand are at issue in the ultimate outcome. People have been blocked from participating in product definitions which actually make sense for so long, that getting there is going to be nothing short of a well thought out experimentation process. That's not an easy struggle, especially given the present fight over the very real connections between AS and AD which many a blockhead refuses to consider. Lots of "dots" can be connected in all of this, but not in the space of the couple of blog posts which many people actually have time to consider.
There are plenty who think I am wasting my time - some who think I could do better hanging out on Facebook to find new friends, perhaps. Or maybe going outside and building another cottage garden like the one which provided such good memories in my last post. But right now it takes extra effort just to keep some of the plants alive which Mom loved so much. Meanwhile, I think about the people in the world who are far more isolated and despairing of their purpose in life, than myself.
Fortunately, we often have the option of spending decades doing things that matter for ourselves, even when they don't have much meaning for others. Indeed, that's what people have tried to do in recent decades, and the worst part is that they have often been called selfish for this, when in fact they did not want to experience such things alone. For as human beings, experiencing things alone, really isn't the way we are wired to live our lives. At some point, our hobbies, passions, interests and challenges start to lose their meaning, if we are not also able to find ways to make them connect with the interests of others.
It's not enough to just give people money to write music in their room, for instance. That's why it's not enough to provide guaranteed income for someone to spend time with their favorite hobby if it's only or mostly for them to be experienced in a solitary way. That's why the idea of education needs to evolve to a sustainable and fully participatory whole, instead of permanently cutting people off from their peers and communities at arbitrary points of "graduation". By limiting the concepts of economic participation, credentials and rewards, much of educational value has now painted itself into a very fragile corner.
Once, I was told that my cottage garden should be "enough" for me, even if no one else saw it. And so perhaps it should have been, but it wasn't, for I am only human and never liked being a hermit. And most other people don't want to be hermits either. After all, that's why people gravitated to economic activity in the first place, because they really didn't want to be hermits. They were curious about what lay outside the realm of their own kin, their own ways of doing things, and their minds just needed to be expanded. Increased social activity with others from more distant places - which eventually evolved into the use of money, knowledge use and technology - you get the idea. What happened to all that?
That's the economics I don't want to lose - the context where economic connections set us free and allow us to feel good about ourselves and about being a part of the world. When economic life becomes less about inspiration and challenge and more about ever increasing responsibility for the basics of life - let alone punishment for those who can't provide them - economic thought loses the meaning which made it so great in the first place. If we do not find meaningful ways to make economics part of our lives again, none of this is going to end well. When people lose faith in economic ideas for creating better lives, blogs become mostly a place to wrangle over the minute details as the whole of them start to crash and burn. Perhaps I just believe in economic solutions more than I really should...
However, my personal gripe today is in terms of guaranteed income proposals. Because - just like inflation targeting - conversations revolve around potential "solution sets" that don't get at the core issues involved. While I was glad to hear Tyler Cowen voice his concerns in this regard, I'm not convinced it really helped for him to "go there" in this post. Yes, guaranteed incomes can sound great on paper. Yes, they can provide assistance to people who desperately need help, and make others feel better for helping them. Even so, politically it's hard to say whether guaranteed incomes would ever "fly" in the U.S. anyway - despite the support they receive from those on the left and to a degree, the right.
But guaranteed incomes don't do a thing for long term solutions, and the overall equilibrium only goes further out of balance when little else gets changed on the supply side in production and consumption terms. And as Tyler indicated in so many words, it's just more welfare dressed up in slightly different clothes. It doesn't get at the root of the problem, which is that of bringing people back into meaningful lives and true social connections. Ultimately that's what it's all about, otherwise we are really wasting our time. We are long past the point of a couple of reforms "here" or a bit more common sense "there".
One problem for me is that it's somewhat difficult to make brief comments in other blog spaces regarding my work, and yet I find myself compelled to anyway. Of course that invites the occasional jeers and so mine was probably well deserved, when someone who goes by "Z" indicated that I should try for a fiction award. So here's what I didn't reply at MR. More than thirty years ago, in my initial thoughts about time coordination (in the middle of a recession), I would have been inclined to agree with him or her. That is, I wouldn't have considered such thoughts important enough to seriously pursue.
Even though I read little fiction, those early notes and thought processes felt so much like a science fiction novel that I came to call them "Enigami" - yep, imagine in reverse. Sure enough, the recession which had knocked me out of work for all that scribbling time, came to an end and all appeared normal. Before long I was back working and continued to do so steadily, that is, up until the spring of 2003. At that point I finally recognized that nothing was "normal" anymore, even if much of the primary economic news still sounded as if it was. When I was not able to keep a business venture going (and plenty of others also failing around me), I looked at possible options for non profit activity, but living in a rural area can impose significant roadblocks in that regard. Ultimately, I finally returned to my studies - and so the most recent "inward journey" was almost completely an economic emphasis.
As luck would have it, there is no clear cut way to approach any new normal which makes a lot of sense in previously designated contexts. That's why in so many posts I try to approach the problem of economic access in as many ways as possible (sort of like throwing mud at a wall...). Not only is there the vital issue of designating monetary activity for renewed economic access, there is also the problem of reimagining production processes for all income potentialities.
In other words, both aggregate supply and aggregate demand are at issue in the ultimate outcome. People have been blocked from participating in product definitions which actually make sense for so long, that getting there is going to be nothing short of a well thought out experimentation process. That's not an easy struggle, especially given the present fight over the very real connections between AS and AD which many a blockhead refuses to consider. Lots of "dots" can be connected in all of this, but not in the space of the couple of blog posts which many people actually have time to consider.
There are plenty who think I am wasting my time - some who think I could do better hanging out on Facebook to find new friends, perhaps. Or maybe going outside and building another cottage garden like the one which provided such good memories in my last post. But right now it takes extra effort just to keep some of the plants alive which Mom loved so much. Meanwhile, I think about the people in the world who are far more isolated and despairing of their purpose in life, than myself.
Fortunately, we often have the option of spending decades doing things that matter for ourselves, even when they don't have much meaning for others. Indeed, that's what people have tried to do in recent decades, and the worst part is that they have often been called selfish for this, when in fact they did not want to experience such things alone. For as human beings, experiencing things alone, really isn't the way we are wired to live our lives. At some point, our hobbies, passions, interests and challenges start to lose their meaning, if we are not also able to find ways to make them connect with the interests of others.
It's not enough to just give people money to write music in their room, for instance. That's why it's not enough to provide guaranteed income for someone to spend time with their favorite hobby if it's only or mostly for them to be experienced in a solitary way. That's why the idea of education needs to evolve to a sustainable and fully participatory whole, instead of permanently cutting people off from their peers and communities at arbitrary points of "graduation". By limiting the concepts of economic participation, credentials and rewards, much of educational value has now painted itself into a very fragile corner.
Once, I was told that my cottage garden should be "enough" for me, even if no one else saw it. And so perhaps it should have been, but it wasn't, for I am only human and never liked being a hermit. And most other people don't want to be hermits either. After all, that's why people gravitated to economic activity in the first place, because they really didn't want to be hermits. They were curious about what lay outside the realm of their own kin, their own ways of doing things, and their minds just needed to be expanded. Increased social activity with others from more distant places - which eventually evolved into the use of money, knowledge use and technology - you get the idea. What happened to all that?
That's the economics I don't want to lose - the context where economic connections set us free and allow us to feel good about ourselves and about being a part of the world. When economic life becomes less about inspiration and challenge and more about ever increasing responsibility for the basics of life - let alone punishment for those who can't provide them - economic thought loses the meaning which made it so great in the first place. If we do not find meaningful ways to make economics part of our lives again, none of this is going to end well. When people lose faith in economic ideas for creating better lives, blogs become mostly a place to wrangle over the minute details as the whole of them start to crash and burn. Perhaps I just believe in economic solutions more than I really should...
Wednesday, November 13, 2013
Midweek Market Monetarist Links and Summaries - 11/13/13
After reading Steve Waldman's post, something along the lines of Scott Sumner's post title and response was going through my mind: In a world of IOR, the QTM still holds
Scott further explains his (misunderstood) stance to drop employment as a threshold: All is Lost
How does the recent crisis compare to that of 1907? Scott's thoughts on a recent talk by Bernanke:
Bernanke on the 1907 crisis
This post generated some interesting discussion: Is economics (mostly) the study of public policy?
If "words don't get in the way", AS and AD might have something in common:
A Socialist Worker organization analyzes Madison, Wisconsin
Even though the Eurozone has not been at the zero bound, it's been quite close: Paul Krugman on the Euro-depression
Don't like QE? Okay...what's your counterfactual? A view from the trenches
Banks "heart" government. Government "hearts" banks. With "friends" like these...The consequences of tight money go far beyond unemployment
Is "less bounce" a good thing? (Marcus Nunes) :
http://thefaintofheart.wordpress.com/2013/11/06/gdp-plus-should-be-gdp-less/
Marcus provides highlights from Brink Lindsey's recent policy paper for Cato, and also a recent post from Britmouse:http://thefaintofheart.wordpress.com/2013/11/07/theres-been-a-lot-of-growth-downgrading-lately/
A new paper on aggregate supply in the U.S. is linked in this post:
http://thefaintofheart.wordpress.com/2013/11/08/blowing-hot-cold/
1907 - a harder drop, but a faster recovery: http://thefaintofheart.wordpress.com/2013/11/08/i-would-welcome-1907/
Three possibilities for the Fed's Board of Governors: http://thefaintofheart.wordpress.com/2013/11/10/what-a-treat/
In a guest post for Marcus, Benjamin Cole looks at the feasibility of central banks adapting to the ZLB: http://thefaintofheart.wordpress.com/2013/11/12/can-independent-central-banks-adapt-to-zlb-probably-not/
An extensive list of development indicators from the World Bank prompts Nick Rowe to consider long run private debt/GDP ratios: http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/what-determines-long-run-private-debtgdp-ratios.html
What is rational, and what is not? http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/naive-vs-rational-expectations-is-a-partly-false-dichotomy.html
Is land more valuable than money?
http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/house-prices-bubbled-because-turgots-land-beats-samuelsons-money.html
James Pethokoukis looks at some of the confusion surrounding QE and Janet Yellen:
http://www.aei-ideas.org/2013/11/columnist-confusion-about-the-fed-qe-and-janet-yellen/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+aei-ideas%2Feconomics+%28AEIdeas+%C2%BB+Economics%29
Ryan Avent examines a new Fed paper which has generated considerable interest, in "On Escaping the Zero Lower Bound":
http://www.economist.com/blogs/freeexchange/2013/11/monetary-policy?fsrc=rss
David Beckworth asks, why have Republicans not understood the potential of monetary offset?
http://macromarketmusings.blogspot.com/2013/11/the-gops-golden-opportunity-on-monetary.html
It began as an aggregate demand problem, and gradually became an aggregate supply problem:
http://macromarketmusings.blogspot.com/2013/11/endogenous-aggregate-supply.html
Being a dove doesn't exactly mean one expects full employment, does it? Bill Woolsey responds to the linked Miles Kimball post: http://monetaryfreedom-billwoolsey.blogspot.com/2013/11/efficiency-wage-it-doesnt-make-sense.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MonetaryFreedom+%28Monetary+Freedom%29
Lars Christensen still has hope for the Euro Zone:
http://marketmonetarist.com/2013/11/08/miroslav-mccallum-singer-finally-acts/
Better communication is needed for the Czech central bank:
http://marketmonetarist.com/2013/11/12/cnb-should-move-to-level-targeting/
The ZLB is too close for comfort: http://marketmonetarist.com/2013/11/13/tick-tock-here-comes-the-zero-lower-bound-again/
David Glasner completes the series on Hawtrey with these two installments. Anyone who does research on Hawtrey will find this series of posts to be quite a treasure trove:
http://uneasymoney.com/2013/11/06/hawtreys-good-and-bad-trade-part-x-financial-crises-and-asset-crashes/
http://uneasymoney.com/2013/11/08/hawtreys-good-and-bad-trade-part-xi-conclusion/
Janet Yellen is well aware of what happened in 1937 (JP Koning):
http://jpkoning.blogspot.com/2013/11/1682-days-and-all-is-well.html
Also of interest:
Don't like something? Disdain still is not the logical reason to do something about it.
http://timharford.com/2013/11/swallow-your-contempt-wonga-is-the-symptom-not-the-problem/
Creative destruction has fallen since the early 2000s (Brian Caplan):
http://econlog.econlib.org/archives/2013/11/the_decline_of_4.html
An interesting Atlantic article: http://www.theatlantic.com/health/archive/2013/11/how-the-brain-creates-personality-a-new-theory/281287/
I took the test and have more active lower brain or "perceiver mode". That means, by definition, I'm generally not the type to initiate detailed or complex plans. Heh...oh well!
For those who are concerned about prisons in the U.S.
http://www.theatlanticcities.com/politics/2013/11/why-america-has-mass-incarceration-problem-while-germany-and-netherlands-dont/7553/
Scott further explains his (misunderstood) stance to drop employment as a threshold: All is Lost
How does the recent crisis compare to that of 1907? Scott's thoughts on a recent talk by Bernanke:
Bernanke on the 1907 crisis
This post generated some interesting discussion: Is economics (mostly) the study of public policy?
If "words don't get in the way", AS and AD might have something in common:
A Socialist Worker organization analyzes Madison, Wisconsin
Even though the Eurozone has not been at the zero bound, it's been quite close: Paul Krugman on the Euro-depression
Don't like QE? Okay...what's your counterfactual? A view from the trenches
Banks "heart" government. Government "hearts" banks. With "friends" like these...The consequences of tight money go far beyond unemployment
Is "less bounce" a good thing? (Marcus Nunes) :
http://thefaintofheart.wordpress.com/2013/11/06/gdp-plus-should-be-gdp-less/
Marcus provides highlights from Brink Lindsey's recent policy paper for Cato, and also a recent post from Britmouse:http://thefaintofheart.wordpress.com/2013/11/07/theres-been-a-lot-of-growth-downgrading-lately/
A new paper on aggregate supply in the U.S. is linked in this post:
http://thefaintofheart.wordpress.com/2013/11/08/blowing-hot-cold/
1907 - a harder drop, but a faster recovery: http://thefaintofheart.wordpress.com/2013/11/08/i-would-welcome-1907/
Three possibilities for the Fed's Board of Governors: http://thefaintofheart.wordpress.com/2013/11/10/what-a-treat/
In a guest post for Marcus, Benjamin Cole looks at the feasibility of central banks adapting to the ZLB: http://thefaintofheart.wordpress.com/2013/11/12/can-independent-central-banks-adapt-to-zlb-probably-not/
An extensive list of development indicators from the World Bank prompts Nick Rowe to consider long run private debt/GDP ratios: http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/what-determines-long-run-private-debtgdp-ratios.html
What is rational, and what is not? http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/naive-vs-rational-expectations-is-a-partly-false-dichotomy.html
Is land more valuable than money?
http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/house-prices-bubbled-because-turgots-land-beats-samuelsons-money.html
James Pethokoukis looks at some of the confusion surrounding QE and Janet Yellen:
http://www.aei-ideas.org/2013/11/columnist-confusion-about-the-fed-qe-and-janet-yellen/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+aei-ideas%2Feconomics+%28AEIdeas+%C2%BB+Economics%29
Ryan Avent examines a new Fed paper which has generated considerable interest, in "On Escaping the Zero Lower Bound":
http://www.economist.com/blogs/freeexchange/2013/11/monetary-policy?fsrc=rss
David Beckworth asks, why have Republicans not understood the potential of monetary offset?
http://macromarketmusings.blogspot.com/2013/11/the-gops-golden-opportunity-on-monetary.html
It began as an aggregate demand problem, and gradually became an aggregate supply problem:
http://macromarketmusings.blogspot.com/2013/11/endogenous-aggregate-supply.html
Being a dove doesn't exactly mean one expects full employment, does it? Bill Woolsey responds to the linked Miles Kimball post: http://monetaryfreedom-billwoolsey.blogspot.com/2013/11/efficiency-wage-it-doesnt-make-sense.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MonetaryFreedom+%28Monetary+Freedom%29
Lars Christensen still has hope for the Euro Zone:
http://marketmonetarist.com/2013/11/08/miroslav-mccallum-singer-finally-acts/
Better communication is needed for the Czech central bank:
http://marketmonetarist.com/2013/11/12/cnb-should-move-to-level-targeting/
The ZLB is too close for comfort: http://marketmonetarist.com/2013/11/13/tick-tock-here-comes-the-zero-lower-bound-again/
David Glasner completes the series on Hawtrey with these two installments. Anyone who does research on Hawtrey will find this series of posts to be quite a treasure trove:
http://uneasymoney.com/2013/11/06/hawtreys-good-and-bad-trade-part-x-financial-crises-and-asset-crashes/
http://uneasymoney.com/2013/11/08/hawtreys-good-and-bad-trade-part-xi-conclusion/
Janet Yellen is well aware of what happened in 1937 (JP Koning):
http://jpkoning.blogspot.com/2013/11/1682-days-and-all-is-well.html
Also of interest:
Don't like something? Disdain still is not the logical reason to do something about it.
http://timharford.com/2013/11/swallow-your-contempt-wonga-is-the-symptom-not-the-problem/
Creative destruction has fallen since the early 2000s (Brian Caplan):
http://econlog.econlib.org/archives/2013/11/the_decline_of_4.html
An interesting Atlantic article: http://www.theatlantic.com/health/archive/2013/11/how-the-brain-creates-personality-a-new-theory/281287/
I took the test and have more active lower brain or "perceiver mode". That means, by definition, I'm generally not the type to initiate detailed or complex plans. Heh...oh well!
For those who are concerned about prisons in the U.S.
http://www.theatlanticcities.com/politics/2013/11/why-america-has-mass-incarceration-problem-while-germany-and-netherlands-dont/7553/
Tuesday, November 12, 2013
What Makes Time Arbitrage Value Effective?
In other words, how might individual time arbitrage create greater aggregate value, than settings where time use is mostly determined through institutions? While individual time value is captured and defined (not necessarily for pay) in institutional settings, the purpose for doing so is to provide a single dimension wealth gain, or that which is capable of creating institutional profit. Whereas time arbitrage would also seek to recapture multi-dimensional processes of knowledge and skills use which came naturally, prior to the advent of today's institutions. By recording and coordinating these methods, they can be applied to today's contextual environments with technology and widespread monetary systems.
For the normal institution, arbitrage definition and "self preservation" mostly depend on a monetary result which exists independently of societal consideration or transformation. That is why the preservation of knowledge in societal terms can sometimes get "lost in the mix". A significant degree of today's knowledge, is in fact from a time when (individual to community) knowledge use was far more widespread at local levels than in the present. Suffice to say that one good reason to utilize individual to community time arbitrage, is to make it easier to spread and maintain knowledge use beyond normal institutional limits.
Time arbitrage in local individual to community settings has the capacity to capture time value in at least two capacities: on the part of the individual and on the part of the community which captures, measures and records the actions. In a strict sense one might refer to a community as acting in an institutional manner, because it too needs recognizable forms. However a community is not a hierarchical structure (or so one hopes) - hence knowledge can be freely applied and utilized wherever and however people see fit. Civilizations are built when local economies are free to apply and utilize knowledge in a myriad of ways not captured by institutional definition.
Plus, as a community seeks to maximize knowledge use for total wealth gain, the fact that knowledge is openly used means gains can spread well beyond its borders, making it capable of seeking out the knowledge wealth of "outsiders". This is possible because ongoing individual to community skills wealth connections exist beyond the need to create immediate profit. Fragility for community still exists mostly because of long term decision making processes that go awry, whereas normal institutional fragility is more immediate (in profit terms) - hence the frequent decisions to isolate knowledge within institutional structures.
How might time arbitrage differ from present negotiation processes outside of institutions? Consider some examples of comparative advantage that readily come to mind. A recent Catherine Rampell article emphasizes (individual) time management in relatively traditional terms - that of the ability to "outsource" activities to others in a lower pay range. There are natural limits to these forms of arbitrage: limits which result both from income variances in populations, and specific valuations on skills sets which tend to be fairly rigid in many respects as well. Such rigidities arise because education which could smooth actual societal needs has been severely limited. Time arbitrage in individual to community settings would especially seek to create greater elasticity in both skills valuations and educational needs.
The desired result? Communities which can aim for equivalence in time use amongst those with similar motivations and abilities. Individuals would be able to find economic balance amongst themselves which nations despair at being able to do in the present for their citizens through redistribution of wealth. However, time arbitrage also involves long term strategies for the spread of multiple forms of applied education, which are now limited to certain regions of the world. Applied education (local producers and consumers) would ultimately result in a blended "insourcing" form of time sharing in group settings, or "horizontal" comparative advantage such as what was once possible amongst populations.
More importantly, however, this form of work organization gives people from all walks of life a chance to blend aspirational responsibilities with the mundane, which is especially important in an era when otherwise, as Simon Kuper explains, "A class divide separates people who choose their job from people who don't." In other words, simply approaching work from a horizontal framing gives everyone a chance to look closely at what matters most with their personal time: not just those who are able to hire individuals based on a wage advantage. This increases time optimization in an aggregate sense. Of course, this perspective does not even detail the identity gains at stake by so doing - gains which can be quite significant.
Before anyone despairs at the thought of blending the inspirational with the mundane in a normal set of activities, consider: there is something any knowledge worker shares in common with someone doing hard physical labor. Our bodies (or metabolisms) often rebel whenever we try to maintain the same pace of focused thought or physical activity for more than an hour and a half, without breaks for entirely different kinds of activity. Of course many push through these natural limits just the same and pay for it in medical terms, but when we follow the rhythms our bodies were built for, we become more effective at both the inspiration and the mundane.
Another important reason for the effectiveness of time arbitrage is that it has the capacity to reestablish trust at local levels. How so? I must emphasize that this is a long run outlook and one that also would in some instances encounter cultural resistance. But here's the thing. A lot of cultural resistance to outside economic factors stems from the fact that the local economy is 1) forced to rely on said outside economic factors and 2) local resources on the part of said local economy are greatly affected by those same outside factors, in ways that sometimes leaves locals powerless.
Time arbitrage, on the other hand, becomes an internal lever by which local economies can finally begin the arduous process of taking their economic fate back into their own hands. And by so doing, trust finally has a chance to reemerge among local economic actors. It is too easy to assume that relative isolation dooms local economies. No wonder they don't trust the outside world or one another, we could rationalize. But how much of that is brought on unnecessarily? In many instances this isolation could be changed by creating economic access through knowledge use, so that locals no longer feel helpless to determine their own fate.
Without a doubt, one of the best examples of time arbitrage value I could promote, is the local (internal) balancing effect that tends to "fairness"concerns. For instance, the illogic of community ratings in Obamacare appears to have flown out the window, because it is a supposedly insurmountable concern at national levels. Greg Mankiw places the problem into simple context in this post. Community ratings in healthcare, is but another example of government throwing up its hands and giving up on basic economic principles, when they don't fit with the strategy of maintaining hierarchical structures in knowledge use.
What time arbitrage also makes possible is the use of an economic "camera" with a zoom lens. That would allow vital statistics and factors to be measured, which would otherwise be completely missed. While one often doesn't think of such a lens as important in everyday terms, ultimately what happens at a close up level is quite important to society: especially as any society fills up the larger perimeters which have been previously created in their overall structures. Long before those perimeters fill, the wealth a society is able to create is able to extend to the whole. In those circumstances, people often forget to notice what is happening in the "backwaters". Only when the larger perimeters fill, does society need to back up, and look at what happened to stop the flow of wealth through the entirety of the economic structure.
For the normal institution, arbitrage definition and "self preservation" mostly depend on a monetary result which exists independently of societal consideration or transformation. That is why the preservation of knowledge in societal terms can sometimes get "lost in the mix". A significant degree of today's knowledge, is in fact from a time when (individual to community) knowledge use was far more widespread at local levels than in the present. Suffice to say that one good reason to utilize individual to community time arbitrage, is to make it easier to spread and maintain knowledge use beyond normal institutional limits.
Time arbitrage in local individual to community settings has the capacity to capture time value in at least two capacities: on the part of the individual and on the part of the community which captures, measures and records the actions. In a strict sense one might refer to a community as acting in an institutional manner, because it too needs recognizable forms. However a community is not a hierarchical structure (or so one hopes) - hence knowledge can be freely applied and utilized wherever and however people see fit. Civilizations are built when local economies are free to apply and utilize knowledge in a myriad of ways not captured by institutional definition.
Plus, as a community seeks to maximize knowledge use for total wealth gain, the fact that knowledge is openly used means gains can spread well beyond its borders, making it capable of seeking out the knowledge wealth of "outsiders". This is possible because ongoing individual to community skills wealth connections exist beyond the need to create immediate profit. Fragility for community still exists mostly because of long term decision making processes that go awry, whereas normal institutional fragility is more immediate (in profit terms) - hence the frequent decisions to isolate knowledge within institutional structures.
How might time arbitrage differ from present negotiation processes outside of institutions? Consider some examples of comparative advantage that readily come to mind. A recent Catherine Rampell article emphasizes (individual) time management in relatively traditional terms - that of the ability to "outsource" activities to others in a lower pay range. There are natural limits to these forms of arbitrage: limits which result both from income variances in populations, and specific valuations on skills sets which tend to be fairly rigid in many respects as well. Such rigidities arise because education which could smooth actual societal needs has been severely limited. Time arbitrage in individual to community settings would especially seek to create greater elasticity in both skills valuations and educational needs.
The desired result? Communities which can aim for equivalence in time use amongst those with similar motivations and abilities. Individuals would be able to find economic balance amongst themselves which nations despair at being able to do in the present for their citizens through redistribution of wealth. However, time arbitrage also involves long term strategies for the spread of multiple forms of applied education, which are now limited to certain regions of the world. Applied education (local producers and consumers) would ultimately result in a blended "insourcing" form of time sharing in group settings, or "horizontal" comparative advantage such as what was once possible amongst populations.
More importantly, however, this form of work organization gives people from all walks of life a chance to blend aspirational responsibilities with the mundane, which is especially important in an era when otherwise, as Simon Kuper explains, "A class divide separates people who choose their job from people who don't." In other words, simply approaching work from a horizontal framing gives everyone a chance to look closely at what matters most with their personal time: not just those who are able to hire individuals based on a wage advantage. This increases time optimization in an aggregate sense. Of course, this perspective does not even detail the identity gains at stake by so doing - gains which can be quite significant.
Before anyone despairs at the thought of blending the inspirational with the mundane in a normal set of activities, consider: there is something any knowledge worker shares in common with someone doing hard physical labor. Our bodies (or metabolisms) often rebel whenever we try to maintain the same pace of focused thought or physical activity for more than an hour and a half, without breaks for entirely different kinds of activity. Of course many push through these natural limits just the same and pay for it in medical terms, but when we follow the rhythms our bodies were built for, we become more effective at both the inspiration and the mundane.
Another important reason for the effectiveness of time arbitrage is that it has the capacity to reestablish trust at local levels. How so? I must emphasize that this is a long run outlook and one that also would in some instances encounter cultural resistance. But here's the thing. A lot of cultural resistance to outside economic factors stems from the fact that the local economy is 1) forced to rely on said outside economic factors and 2) local resources on the part of said local economy are greatly affected by those same outside factors, in ways that sometimes leaves locals powerless.
Time arbitrage, on the other hand, becomes an internal lever by which local economies can finally begin the arduous process of taking their economic fate back into their own hands. And by so doing, trust finally has a chance to reemerge among local economic actors. It is too easy to assume that relative isolation dooms local economies. No wonder they don't trust the outside world or one another, we could rationalize. But how much of that is brought on unnecessarily? In many instances this isolation could be changed by creating economic access through knowledge use, so that locals no longer feel helpless to determine their own fate.
Without a doubt, one of the best examples of time arbitrage value I could promote, is the local (internal) balancing effect that tends to "fairness"concerns. For instance, the illogic of community ratings in Obamacare appears to have flown out the window, because it is a supposedly insurmountable concern at national levels. Greg Mankiw places the problem into simple context in this post. Community ratings in healthcare, is but another example of government throwing up its hands and giving up on basic economic principles, when they don't fit with the strategy of maintaining hierarchical structures in knowledge use.
What time arbitrage also makes possible is the use of an economic "camera" with a zoom lens. That would allow vital statistics and factors to be measured, which would otherwise be completely missed. While one often doesn't think of such a lens as important in everyday terms, ultimately what happens at a close up level is quite important to society: especially as any society fills up the larger perimeters which have been previously created in their overall structures. Long before those perimeters fill, the wealth a society is able to create is able to extend to the whole. In those circumstances, people often forget to notice what is happening in the "backwaters". Only when the larger perimeters fill, does society need to back up, and look at what happened to stop the flow of wealth through the entirety of the economic structure.
Subscribe to:
Posts (Atom)