(Nick Rowe) Only a subset of assets is acceptable as collateral by central banks That can put a restraint on the supply of money, which in turn leads to loss in output: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/colateral-and-the-money-supply.html
What happens when firms are aware of shocks at different times?
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/relative-price-shocks-price-level-shocks-and-who-moves-first.html
Chris House makes Scott Sumner's point, with microfoundations:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/chris-house-is-a-market-monetarist.html
Nick provides three examples how capital income can respond to a recession:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/capital-income-in-a-recession.html
Marcus Nunes highlights Doug Irwin's Article, "Who Anticipated the Great Depression?" Mark Sadowski provides additional commentary, and James Hamilton also highlighted Irwin's article here.
Australia has safely run a CA deficit almost continuously for more than a hundred years:
http://thefaintofheart.wordpress.com/2014/02/13/the-fragile-5-among-the-developed-economies/
Nominal targeting is replacing discussion re price targeting:
http://thefaintofheart.wordpress.com/2014/02/15/i-certainly-hope-time-will-tell/
It's too easy to distort the representation for productivity and real hourly compensation:
http://thefaintofheart.wordpress.com/2014/02/15/spinning-tales/
Why monetary policy was not too easy in 2003-06, in graphs:
http://thefaintofheart.wordpress.com/2014/02/16/some-questions-do-have-answers/
Monetary policy prevented a domino effect, but not the run up to the crisis:
http://thefaintofheart.wordpress.com/2014/02/16/old-wars-and-debates-rekindled/
Benjamin Cole: Labor costs have become deflationary
An illuminating post from David Glasner: http://uneasymoney.com/2014/02/13/what-does-keynesian-mean/
Bill Woolsey's recent response to Miles Kimball inspired several Market Monetarist posts this week:
More on Negative Interest Rates
Surely the Australian housing bubble would burst (Scott Sumner):
I predict that Steve Keen will eventually look correct
Scott explains the intuition behind his futures paper from two decades ago:
Optimal policy rules and close substitutes
It helps to have the chief economist from Goldman Sachs suggest the Fed target wage growth:
Jan Hatzius touts wage growth as a policy indicator
What matters most regarding CA deficits? The Growing Value of Sandy Countries
Scott's posts this week at Econlog:
http://econlog.econlib.org/archives/2014/02/immaculate_infl.html
As commenter Jon Murphy noted, "Price and quantity are not the determinants (they are the results): it's supply and demand that are the determinants: http://econlog.econlib.org/archives/2014/02/never_reason_fr.html
http://econlog.econlib.org/archives/2014/02/in_the_1930s_it.html
Kevin Erdmann responds to the above link, here
These two are not the same - Obama and "brighter economic picture": http://econlog.econlib.org/archives/2014/02/bastiat_just_ro.html
Lars Christensen provides positive news regarding Kazakhstan:
http://marketmonetarist.com/2014/02/13/kazakhstans-wise-devaluation/
Monetary conditions have become too tight for China:
http://marketmonetarist.com/2014/02/17/the-risk-of-chinese-monetary-policy-failure/
"The lesson of the last five years is that the CPI rate is not a good proxy for aggregate demand" (Britmouse)
http://uneconomical.wordpress.com/2014/02/18/holy-disinflation-batman/
It doesn't seem like two years (already!) since Bonnie Carr started her blog:
http://dajeeps.wordpress.com/2014/02/16/the-2nd-anniversary-of-my-word-press-blog-is-today/
(Justin Irving) "How is it that Cassel is nearly forgotten while the long winded (and incomprehensible) von Mises gets his own internet cult, to say nothing of Lord Keynes sainthood?"
http://economicsophisms.com/2014/02/17/i-think-you-should-read-irwins-article-on-gustav-cassel/
James Caton: http://moneymarketsandmisperceptions.blogspot.com/2014/02/were-all-mostly-monetarists-now-not-new.html
Also of interest:
"Work finally begins...when the fear of doing nothing exceeds the fear of doing it badly." So true! (Megan McCardle) http://www.theatlantic.com/business/archive/2014/02/why-writers-are-the-worst-procrastinators/283773/
Wednesday, February 19, 2014
Saturday, February 15, 2014
Intelligent Tech Can Coexist With Human Intelligence
That's my positive take for the day...now I just need to stick with it! Even so, I am compelled to begin by highlighting a quote from Timothy Taylor which Arnold Kling also noted:
What brought me back to the thoughts in that discarded post draft was this book review from The Capital Spectator, "Mindless: Why Smarter Machines are Making Dumber Humans" by Simon Head. Today I am happy to allow a summary from the esteemed publisher Basic Books, do the complaining for me!
What to make of widespread singularity trends which are becoming more difficult to discount? Consider workplaces that are returning to normal, both in business and economic terms. They rely on fewer people not only for those earlier middle class skills sets; but also fewer knowledge based capacities in general. Even though some workplaces maintain a "human touch", the volunteers who are eager to provide that in healthcare environments are stymied by insurance related regulations. That often prevents them from assisting patients when healthcare providers are not available. Unfortunately, many people will not realize how impersonal the singularity feels, until they need to spend a couple of weeks or months in a hospital or other assisted care environment.
In order for intelligent tech to coexist with human intelligence, knowledge use and skills sets need to be reintegrated and coordinated at local levels. People can then become partners with technology, rather than being subjected to social destruction by technology through the centralized services formations of the present. Otherwise, healthcare providers which care about patients and spend time with them, could be "undone" by organizations which realize more profit by cutting out "unnecessary" social or personal time. That circumstance alone should give proponents of centralized services systems reason for pause. Knowledge use as dictated by decisions from elsewhere - hence reliant on minimal social interaction, cannot help but be dehumanizing.
Another aspect of lost social relationships in the workplace, is that people rely on those social aspects to bring positive structure home, and into their personal lives. Some with higher incomes still benefit from adequate social structure in the workplaces they inhabit. However, the loss of workplace social structure for lower income levels, also means these individuals have little social interaction to positively emulate in their own personal circumstance. By decentralizing services so that knowledge use is a part of all workplaces and income levels, the present threat of polarization between classes could be greatly diminished in the process.
We have now returned to an economy where those who leave their jobs are more likely to have done by quitting voluntarily than by being laid off or discharged involuntarily.Yikes, so full recovery is here. Do I hear a collective groan? Seems like a few "duhs" being voiced as well. Taylor's observation implies any number of economic factoids, so to speak. As the workplace increasingly appears normal, there's another aspect to this development which - while it would be no surprise in singularity terms, doesn't often get the statistical spin that Kling also noted last month. From the NY Fed:
...the broader V-shaped pattern in the unemployment rate over the past two decades is consistent with new research arguing that there has been a reversal in the demand for cognitive skills since 2000.Observant readers want to know - why only now, a nearly month old link from me, on something as important as knowledge use reversal in the workplace? As is sometimes the case, I reacted to the (apparent) approaching singularity, in an earlier draft response with too much negative emotion. Which in turn leads to the kind of language use that even offends me afterward - let alone some of my readers. Hence I deleted out last month's post draft, along with its useful links. Fortunately, the above quote stayed in my mind thus I was able to fish it out of January postings.
What brought me back to the thoughts in that discarded post draft was this book review from The Capital Spectator, "Mindless: Why Smarter Machines are Making Dumber Humans" by Simon Head. Today I am happy to allow a summary from the esteemed publisher Basic Books, do the complaining for me!
We live in the age of Computer Business Systems (CBSs) - the highly complex, computer-intensive management programs on which large organizations increasingly rely. In "Mindless", Simon Head argues that these systems have come to trump human expertise, dictating the goals and strategies of a wide array of businesses, and de-skilling the jobs of middle class workers in the process. CBSs are especially dysfunctional, Head argues, when they apply their disembodied expertise to transactions between humans, as in health care, education, customer relations, and human resources management. And yet there are industries with more human approaches, as Head illustrates with specific examples whose lead we must follow and extend to the mainstream American economy.To be fair, I've been in hospital environments where patients were not only treated with respect and dignity by healthcare staff, but received a reasonable amount of their time. But I've also been in hospital environments where practically the only reason a healthcare provider ever came into the patient's room, was to interact in some capacity with a wide array of high tech devices and instruments. Said high tech devices also take up an increasing amount of the room's space, in recent years. Environments where healthcare employees didn't even glance at room occupants as they arrived and left, were a bit unnerving. Those were the places one sensed a palpable fear on the part of management, that if staff spent any "unstructured" time with patients, the organization might quickly lose their ability to pay the bills.
What to make of widespread singularity trends which are becoming more difficult to discount? Consider workplaces that are returning to normal, both in business and economic terms. They rely on fewer people not only for those earlier middle class skills sets; but also fewer knowledge based capacities in general. Even though some workplaces maintain a "human touch", the volunteers who are eager to provide that in healthcare environments are stymied by insurance related regulations. That often prevents them from assisting patients when healthcare providers are not available. Unfortunately, many people will not realize how impersonal the singularity feels, until they need to spend a couple of weeks or months in a hospital or other assisted care environment.
In order for intelligent tech to coexist with human intelligence, knowledge use and skills sets need to be reintegrated and coordinated at local levels. People can then become partners with technology, rather than being subjected to social destruction by technology through the centralized services formations of the present. Otherwise, healthcare providers which care about patients and spend time with them, could be "undone" by organizations which realize more profit by cutting out "unnecessary" social or personal time. That circumstance alone should give proponents of centralized services systems reason for pause. Knowledge use as dictated by decisions from elsewhere - hence reliant on minimal social interaction, cannot help but be dehumanizing.
Another aspect of lost social relationships in the workplace, is that people rely on those social aspects to bring positive structure home, and into their personal lives. Some with higher incomes still benefit from adequate social structure in the workplaces they inhabit. However, the loss of workplace social structure for lower income levels, also means these individuals have little social interaction to positively emulate in their own personal circumstance. By decentralizing services so that knowledge use is a part of all workplaces and income levels, the present threat of polarization between classes could be greatly diminished in the process.
Thursday, February 13, 2014
Skills Use - The Missing Collateral
Today's post is inspired by a recent one from Nick Rowe, "Collateral and the Money Supply". Limits as to what banks accept as collateral, continue to affect the quantities of money printed by central banks, in spite of income and spending realities. For the most part, that constraint had not been overly problematic since the days of the Great Depression. Unfortunately, it does present a growing degree of difficulty since the Great Recession ended. As a result, time use liquidity in an aggregate sense has become low indeed - since neither time use nor skills sets provide an adequate source of collateral.
Significantly, governments have tried to make up for a lack of skills collateral through redistribution - a strategy which was successful for a long time. In the U.S., many services remain defined and compensated at the national level. However, more responsibility for services is being transferred to the state level, in that "...federal debt held by the public will equal 74 percent of GDP at the end of this year and 79 percent in 2024" according to a CBO estimate. While such estimates may be far from accurate, they nonetheless indicate the importance of restructuring services before they become more problematic than they already are.
Of course, one noteworthy aspect of the ongoing national to state services shift, is that the states which appear most healthy economically, are those such as Texas which do not place a high emphasis on services provision in the first place. Fortunately, Texas has a fair amount of "breathing room", with a reasonably good job market in the present. Just the same, that does not mean that Texas - or any other state for that matter - would not benefit from a more direct association of skills provision in compensation and collateral based terms.
We need for skills use to become real collateral for multiple reasons. Consider for a moment, how the main way people maintain respect, is to not become a burden on their community...wait, what? In present day terms, the individual who takes care of one's own needs out of necessity or desire, is also an unknown economic element in the social fabric. That is, there's little significance in the fact they are part of the environment they exist in. Especially in that they have either limited resources or incentive to contribute to the social fabric or take from it.
Low income areas in particular have become extremely and unnecessarily services deficient, save the occasional patronizing government service "intervention". While DIY services provisioning is a way to preserve one's integrity and self worth, it can nonetheless exist as a profoundly anti-economic and also anti-social mechanism. When economies are structured so that the best anyone can do is avoid becoming a burden to others, vital economic elements are missing.
Sometimes DIY provisioning is a reasonable solution or option: certainly it works out great for companies which save costs when customers take on part of the workload for free. DIY provisioning can also be suitable for most who have resources to take care of problems, if they so desire. But does DIY provisioning continue to work well when people are paying the bills, yet no longer have family or friends nearby? Sure, someone may be close who can help out to a degree. Just the same, far too many circumstance find people cash "rich", yet "skills poor" in liquidity terms. And these are the ones who have adequate monetary means.
As people get older, they tend to have increasing sets of needs which appear as though non-market related. Immediate friends and family may also be overwhelmed by skills needs which are not necessarily their forte. Understandably, time spent with family and friends is time when people need to be able to unwind. A fully functioning skills marketplace means not having to feel either helpless or overly dependent, for that matter.
Often we hear that future economic growth needs to be considered in non-market goals and terms. I would suggest that the reasoning in this Project Syndicate link is backwards: we need to bring multiple skills sets into the economy that were previously considered non economic. What's more, we certainly don't need to be struggling to pay for services costs with pollution control incentives and the like. It's already become difficult enough to pay for services with the redistribution that still applies. In other words, skills use possibilities need to become a fully represented component of the marketplace, in their own right.
Such a measure would also go a long way to address the recent drop in the labor force participation rate - let alone give people renewed incentive to leave one's abode for the more stimulating realm of economic life. The LFPR has especially been hit hard, by the rationale that many skills no longer matter in the workplace. How do we know for certain, that a vast multitude of skills sets are supposedly not necessary or desirable? Are we going to take the word of a handful of company representatives, over the unvoiced concerns of populations? Are we going to assume that a few among the elite can actually give voice to skills related supply and demand needs, for millions? Why not take a chance on finding out for ourselves what people might find useful at individual levels, instead of depending on economic intermediaries who have gotten such economic cold feet since the Great Recession.
However, I need to consider the problem which was giving Nick Rowe a "headache" in the above mentioned post (First commenter "louis" sums up the gist of Nick's efforts fairly well). What to do about much needed public collateral, which banks don't really have a way to accept? There are of course constitutional issues with the way labor provisioning became defined, which stemmed from the end of slavery in the U.S. However, there are missing components for skills use collateral in the marketplace, which can still leave people vulnerable to circumstance not unlike the past.
Since most of us (at any rate) are not "slaves" in the earlier sense of the word, we're not the kind of collateral that the bank can take back, whenever financial obligations go unmet...hence the problem. But unfortunately, that contributes to the fact that our skills sets have a lower liquidity (or economic velocity) than they need in the marketplace to fulfill responsibilities - quite the conundrum. What's more, people who could benefit from our service offerings do not have a recognizable marketplace in which to negotiate for them.
Thus the task for us is to tweak the marketplace so as to provide greater liquidity or economic possibility, for more than a subset of skills we can utilize in any given moment. Yep, easier said than done. But the biggest task of all is simply one of providing context. That's where ongoing services calendars for skills arbitrage come in, alongside compensation which is capable of matching up with resource use that fits basic living needs.
Until we do this, some have considerable incentive to hoard all the assets and money they can, to provide for an eventual unknown quantity of skills needs. That's just the thing. On government terms, skills sets for services remain out of reach of many who actually need them the most. And making certain that skills become collateral which others find valuable, means getting the permission of government in order to do so. That means opening the marketplace to more than just the money "hoarders".
Consider services for the direct product formations they actually represent. It's not easy to think this way - granted - because we are used to supporting or hiring the services time of others when other tangible assets are already in the picture. That is, we are conditioned to believe something has to be brought up from the ground or built first - which someone in turn then benefits from - before services creation becomes an option. Except for limited government services provisioning of course, which is even further down the resource line of transference. But all this indirect effort misses the true product capacity, which actually exists in services formations. Because direct coordination for services was factored out by monetary exchange, the liquidity of skills capacity - in many instances - gradually diminished over time.
Presently there are a number of reasons, why our skills sets don't provide the kind of liquidity that is possible through fixed assets collateral. Even though we are capable of many things, the workplace tends to hone in on a subset of those skills options on our part. Thus, we may indeed end up with a marketplace "mismatch", for a skill set which demanded a major part of our quality time commitment.
And therein lies the problem. Chances are our relatively scarce quality time commitment was a single investment, in a world that requires multiple investments for sustainable continuity. After all, the most common advice in other forms of investment is to diversity. Yet, we need the ability to regularly arbitrage our time use, in order to make skills investment diversity work for us at a personal level.
Another issue is that the marketplace does not always ask us for skills diversity in economic terms. To be sure, we are expected to have multiple skills sets to get through the day but not for reasons that accrue to us financially. We need to create a skills marketplace capable of growth due to skills diversity, rather than struggle with a marketplace which cannot use skills. Local skills coordination expands the definition of acceptable collateral.
Even at a decentralized level, stills arbitrage compensation still has what could be considered both fiscal and "financial" characteristics. How so? Think of the two loan components. Skills match coordination works like a time loan, in the sense of two components becoming one component of measured wealth. The first part of the match is the "loan" which is then "paid" with the other coordinated time hour - which cancels to the single hour base of newly measured services wealth. The fiscal resemblance is reminiscent of the government debt obligation which requires payment. The main commitment on everyone's part is time, but unlike government fiscal obligation, becomes a completed transaction in short order - no "juggling" necessary.
These comparative aspects of debt/ fiscal and skills arbitrage stand in contrast, to the monetary activity representing new commodities and product separate from the use of our time. Also, skills arbitrage becomes an economic fiscal component which is arrived at directly. That also makes a considerable amount of taxation - let alone special interest subsidizing - unnecessary.
Think how it feels, to have multiple skill sets and yet still be expected to have "all the others" as well just to get things done. No matter what skills we have: we're told they're the "wrong" ones! Essentially we now have to be ready for all contingencies - personal and business related - even though it is not possible for anyone to do so. Stop and think for a moment how profoundly uneconomic that reality actually is. The whole idea of the marketplace was supposed to provide voluntary divisions of labor which meant we shouldn't have to do every single thing on our own. It is up to us to regain the kind of marketplace that once was capable of allowing us to pick and choose from meaningful skills sets. It is up to us to regain the missing collateral, of our own abilities.
Significantly, governments have tried to make up for a lack of skills collateral through redistribution - a strategy which was successful for a long time. In the U.S., many services remain defined and compensated at the national level. However, more responsibility for services is being transferred to the state level, in that "...federal debt held by the public will equal 74 percent of GDP at the end of this year and 79 percent in 2024" according to a CBO estimate. While such estimates may be far from accurate, they nonetheless indicate the importance of restructuring services before they become more problematic than they already are.
Of course, one noteworthy aspect of the ongoing national to state services shift, is that the states which appear most healthy economically, are those such as Texas which do not place a high emphasis on services provision in the first place. Fortunately, Texas has a fair amount of "breathing room", with a reasonably good job market in the present. Just the same, that does not mean that Texas - or any other state for that matter - would not benefit from a more direct association of skills provision in compensation and collateral based terms.
We need for skills use to become real collateral for multiple reasons. Consider for a moment, how the main way people maintain respect, is to not become a burden on their community...wait, what? In present day terms, the individual who takes care of one's own needs out of necessity or desire, is also an unknown economic element in the social fabric. That is, there's little significance in the fact they are part of the environment they exist in. Especially in that they have either limited resources or incentive to contribute to the social fabric or take from it.
Low income areas in particular have become extremely and unnecessarily services deficient, save the occasional patronizing government service "intervention". While DIY services provisioning is a way to preserve one's integrity and self worth, it can nonetheless exist as a profoundly anti-economic and also anti-social mechanism. When economies are structured so that the best anyone can do is avoid becoming a burden to others, vital economic elements are missing.
Sometimes DIY provisioning is a reasonable solution or option: certainly it works out great for companies which save costs when customers take on part of the workload for free. DIY provisioning can also be suitable for most who have resources to take care of problems, if they so desire. But does DIY provisioning continue to work well when people are paying the bills, yet no longer have family or friends nearby? Sure, someone may be close who can help out to a degree. Just the same, far too many circumstance find people cash "rich", yet "skills poor" in liquidity terms. And these are the ones who have adequate monetary means.
As people get older, they tend to have increasing sets of needs which appear as though non-market related. Immediate friends and family may also be overwhelmed by skills needs which are not necessarily their forte. Understandably, time spent with family and friends is time when people need to be able to unwind. A fully functioning skills marketplace means not having to feel either helpless or overly dependent, for that matter.
Often we hear that future economic growth needs to be considered in non-market goals and terms. I would suggest that the reasoning in this Project Syndicate link is backwards: we need to bring multiple skills sets into the economy that were previously considered non economic. What's more, we certainly don't need to be struggling to pay for services costs with pollution control incentives and the like. It's already become difficult enough to pay for services with the redistribution that still applies. In other words, skills use possibilities need to become a fully represented component of the marketplace, in their own right.
Such a measure would also go a long way to address the recent drop in the labor force participation rate - let alone give people renewed incentive to leave one's abode for the more stimulating realm of economic life. The LFPR has especially been hit hard, by the rationale that many skills no longer matter in the workplace. How do we know for certain, that a vast multitude of skills sets are supposedly not necessary or desirable? Are we going to take the word of a handful of company representatives, over the unvoiced concerns of populations? Are we going to assume that a few among the elite can actually give voice to skills related supply and demand needs, for millions? Why not take a chance on finding out for ourselves what people might find useful at individual levels, instead of depending on economic intermediaries who have gotten such economic cold feet since the Great Recession.
However, I need to consider the problem which was giving Nick Rowe a "headache" in the above mentioned post (First commenter "louis" sums up the gist of Nick's efforts fairly well). What to do about much needed public collateral, which banks don't really have a way to accept? There are of course constitutional issues with the way labor provisioning became defined, which stemmed from the end of slavery in the U.S. However, there are missing components for skills use collateral in the marketplace, which can still leave people vulnerable to circumstance not unlike the past.
Since most of us (at any rate) are not "slaves" in the earlier sense of the word, we're not the kind of collateral that the bank can take back, whenever financial obligations go unmet...hence the problem. But unfortunately, that contributes to the fact that our skills sets have a lower liquidity (or economic velocity) than they need in the marketplace to fulfill responsibilities - quite the conundrum. What's more, people who could benefit from our service offerings do not have a recognizable marketplace in which to negotiate for them.
Thus the task for us is to tweak the marketplace so as to provide greater liquidity or economic possibility, for more than a subset of skills we can utilize in any given moment. Yep, easier said than done. But the biggest task of all is simply one of providing context. That's where ongoing services calendars for skills arbitrage come in, alongside compensation which is capable of matching up with resource use that fits basic living needs.
Until we do this, some have considerable incentive to hoard all the assets and money they can, to provide for an eventual unknown quantity of skills needs. That's just the thing. On government terms, skills sets for services remain out of reach of many who actually need them the most. And making certain that skills become collateral which others find valuable, means getting the permission of government in order to do so. That means opening the marketplace to more than just the money "hoarders".
Consider services for the direct product formations they actually represent. It's not easy to think this way - granted - because we are used to supporting or hiring the services time of others when other tangible assets are already in the picture. That is, we are conditioned to believe something has to be brought up from the ground or built first - which someone in turn then benefits from - before services creation becomes an option. Except for limited government services provisioning of course, which is even further down the resource line of transference. But all this indirect effort misses the true product capacity, which actually exists in services formations. Because direct coordination for services was factored out by monetary exchange, the liquidity of skills capacity - in many instances - gradually diminished over time.
Presently there are a number of reasons, why our skills sets don't provide the kind of liquidity that is possible through fixed assets collateral. Even though we are capable of many things, the workplace tends to hone in on a subset of those skills options on our part. Thus, we may indeed end up with a marketplace "mismatch", for a skill set which demanded a major part of our quality time commitment.
And therein lies the problem. Chances are our relatively scarce quality time commitment was a single investment, in a world that requires multiple investments for sustainable continuity. After all, the most common advice in other forms of investment is to diversity. Yet, we need the ability to regularly arbitrage our time use, in order to make skills investment diversity work for us at a personal level.
Another issue is that the marketplace does not always ask us for skills diversity in economic terms. To be sure, we are expected to have multiple skills sets to get through the day but not for reasons that accrue to us financially. We need to create a skills marketplace capable of growth due to skills diversity, rather than struggle with a marketplace which cannot use skills. Local skills coordination expands the definition of acceptable collateral.
Even at a decentralized level, stills arbitrage compensation still has what could be considered both fiscal and "financial" characteristics. How so? Think of the two loan components. Skills match coordination works like a time loan, in the sense of two components becoming one component of measured wealth. The first part of the match is the "loan" which is then "paid" with the other coordinated time hour - which cancels to the single hour base of newly measured services wealth. The fiscal resemblance is reminiscent of the government debt obligation which requires payment. The main commitment on everyone's part is time, but unlike government fiscal obligation, becomes a completed transaction in short order - no "juggling" necessary.
These comparative aspects of debt/ fiscal and skills arbitrage stand in contrast, to the monetary activity representing new commodities and product separate from the use of our time. Also, skills arbitrage becomes an economic fiscal component which is arrived at directly. That also makes a considerable amount of taxation - let alone special interest subsidizing - unnecessary.
Think how it feels, to have multiple skill sets and yet still be expected to have "all the others" as well just to get things done. No matter what skills we have: we're told they're the "wrong" ones! Essentially we now have to be ready for all contingencies - personal and business related - even though it is not possible for anyone to do so. Stop and think for a moment how profoundly uneconomic that reality actually is. The whole idea of the marketplace was supposed to provide voluntary divisions of labor which meant we shouldn't have to do every single thing on our own. It is up to us to regain the kind of marketplace that once was capable of allowing us to pick and choose from meaningful skills sets. It is up to us to regain the missing collateral, of our own abilities.
Wednesday, February 12, 2014
Midweek Market Monetarist Links and Summaries - 2/12/14
Bill Woolsey - in response to Miles Kimball - asks, can electronic money end recessions? Kimball on Ending Recessions and Inflation
Miles' reply for Bill: http://blog.supplysideliberal.com/post/76196184332/reply-to-bill-woolsey-on-the-possibility-of-ending
How did a defining characteristic of Keynesian theory arise from an assumption which Keynes downplayed as important? (David Glasner) http://uneasymoney.com/2014/02/06/why-are-wages-sticky/
Roger Farmer highlights, and adds to posts which picked up on David's discussion: http://rogerfarmerblog.blogspot.com/2014/02/keynes-and-sticky-pricestime-to-think.html
Sometimes, bipartisanship isn't all it's cracked up to be: http://uneasymoney.com/2014/02/07/now-we-know-ethanol-caused-the-2008-financial-crisis-and-the-little-depression/
Glasner responds to Krugman and Farmer: http://uneasymoney.com/2014/02/10/paul-krugman-and-roger-farmer-on-sticky-wages/
Fortunately, not too many countries have taken this path (Lars Christensen) http://marketmonetarist.com/2014/02/06/the-cedi-panic-when-prayers-dont-work-you-go-for-currency-controls/
Is red money backed by "garbage"? (Nick Rowe) http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/negative-money.html
Would flexible NGDPLT beat strict NGDPLT? http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/tiff-macklem-retail-competition-flexible-it-vs-ngdplt.html
Are emerging markets being hurt by the Fed's high long term interest rates? (Scott Sumner) About those high interest rates
"The fit seems better than ever" The musical chairs model updated
Scott responds to Nick Rowe's recent post on interest rates An old monetarist interpretation of interest on money (money isn't credit)
A response to this recent post by Arnold Kling: If it's an identity does that mean I'm right?
Scott remembers a time when the St. Louis Fed had monetarist leanings: Daniel Thornton on QE
Some recent Econlog posts from Scott Sumner:
http://econlog.econlib.org/archives/2014/02/the_ecb_is_stee.html
http://econlog.econlib.org/archives/2014/02/ok_now_im_reall.html
Don't miss this thoughtful post:
http://econlog.econlib.org/archives/2014/02/why_do_booms_fe.html
What might we think when we read articles that suggest global growth has peaked...but there's no need to worry? (Marcus Nunes)
http://thefaintofheart.wordpress.com/2014/02/05/9587/
This tongue-in-cheek post (with graphs) also inspired a post by Lorenzo from Oz:
http://thefaintofheart.wordpress.com/2014/02/05/north-dakota-germany/
The ECB doesn't want to simply say that it is targeting very low inflation: http://thefaintofheart.wordpress.com/2014/02/06/the-ecb-decision-was-not-surprising-but-nevertheless-remained-the-sickest-joke/
As commenter James in London remarked, the "champagne bottle" of 66-81 inflation is great:
http://thefaintofheart.wordpress.com/2014/02/06/maybe-an-ngdp-level-target-will-happen-sooner-than-expected/
When "solid" simply isn't enough: http://thefaintofheart.wordpress.com/2014/02/06/the-meaning-of-solid-report-has-drastically-changed/
Two posts on the "longhorn" shaped economy here and here.
Interest rate targeting and forward guidance with thresholds, no longer works
The graphs from 1870 to 2013 will especially remain on my mind:
http://thefaintofheart.wordpress.com/2014/02/10/if-this-is-as-good-as-it-gets-have-mercy-on-us/
Asset purchases and forward guidance have not put downward pressure on long term interest rates: http://thefaintofheart.wordpress.com/2014/02/11/the-loony-principle-of-monetary-policy/
Benjamin Cole considers whether Janet Yellen can make the most of remaining QE
Bonnie Carr has concerns what Yellen can do, as well:
http://dajeeps.wordpress.com/2014/02/12/how-many-times-can-yellen-contradict-herself/
James Pethokoukis: There are still 4 million fewer full-time jobs in America than before the Great Recession
George Selgin has an interesting identity crisis! (Or, being lonely isn't fun) http://www.freebanking.org/2014/02/10/economic-schools-of-thought/
Yichuan Wang: Why Monetary Policy Should Ignore Financial Stability
Representative stories also include time and micro-level interaction (James Caton): http://moneymarketsandmisperceptions.blogspot.com/2014/02/away-from-equilibrium-approach-to.html
Also of interest:
Tim Worstall (Adam Smith Institute): Why this insistence that things that need to be collectively done must be centrally done?
Finance has created problems for emerging markets (Dani Rodrik): http://www.project-syndicate.org/commentary/dani-rodrik-reviews-the-fundamental-lessons-about-emerging-economies-that-economists-have-refused-to-learn
Is it a stretch to suggest that governments cause homelessness?
http://www.pamplinmedia.com/pt/9-news/209817-66668-high-cost-of-affordable
Miles' reply for Bill: http://blog.supplysideliberal.com/post/76196184332/reply-to-bill-woolsey-on-the-possibility-of-ending
How did a defining characteristic of Keynesian theory arise from an assumption which Keynes downplayed as important? (David Glasner) http://uneasymoney.com/2014/02/06/why-are-wages-sticky/
Roger Farmer highlights, and adds to posts which picked up on David's discussion: http://rogerfarmerblog.blogspot.com/2014/02/keynes-and-sticky-pricestime-to-think.html
Sometimes, bipartisanship isn't all it's cracked up to be: http://uneasymoney.com/2014/02/07/now-we-know-ethanol-caused-the-2008-financial-crisis-and-the-little-depression/
Glasner responds to Krugman and Farmer: http://uneasymoney.com/2014/02/10/paul-krugman-and-roger-farmer-on-sticky-wages/
Fortunately, not too many countries have taken this path (Lars Christensen) http://marketmonetarist.com/2014/02/06/the-cedi-panic-when-prayers-dont-work-you-go-for-currency-controls/
Is red money backed by "garbage"? (Nick Rowe) http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/negative-money.html
Would flexible NGDPLT beat strict NGDPLT? http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/tiff-macklem-retail-competition-flexible-it-vs-ngdplt.html
Are emerging markets being hurt by the Fed's high long term interest rates? (Scott Sumner) About those high interest rates
"The fit seems better than ever" The musical chairs model updated
Scott responds to Nick Rowe's recent post on interest rates An old monetarist interpretation of interest on money (money isn't credit)
A response to this recent post by Arnold Kling: If it's an identity does that mean I'm right?
Scott remembers a time when the St. Louis Fed had monetarist leanings: Daniel Thornton on QE
Some recent Econlog posts from Scott Sumner:
http://econlog.econlib.org/archives/2014/02/the_ecb_is_stee.html
http://econlog.econlib.org/archives/2014/02/ok_now_im_reall.html
Don't miss this thoughtful post:
http://econlog.econlib.org/archives/2014/02/why_do_booms_fe.html
What might we think when we read articles that suggest global growth has peaked...but there's no need to worry? (Marcus Nunes)
http://thefaintofheart.wordpress.com/2014/02/05/9587/
This tongue-in-cheek post (with graphs) also inspired a post by Lorenzo from Oz:
http://thefaintofheart.wordpress.com/2014/02/05/north-dakota-germany/
The ECB doesn't want to simply say that it is targeting very low inflation: http://thefaintofheart.wordpress.com/2014/02/06/the-ecb-decision-was-not-surprising-but-nevertheless-remained-the-sickest-joke/
As commenter James in London remarked, the "champagne bottle" of 66-81 inflation is great:
http://thefaintofheart.wordpress.com/2014/02/06/maybe-an-ngdp-level-target-will-happen-sooner-than-expected/
When "solid" simply isn't enough: http://thefaintofheart.wordpress.com/2014/02/06/the-meaning-of-solid-report-has-drastically-changed/
Two posts on the "longhorn" shaped economy here and here.
Interest rate targeting and forward guidance with thresholds, no longer works
The graphs from 1870 to 2013 will especially remain on my mind:
http://thefaintofheart.wordpress.com/2014/02/10/if-this-is-as-good-as-it-gets-have-mercy-on-us/
Asset purchases and forward guidance have not put downward pressure on long term interest rates: http://thefaintofheart.wordpress.com/2014/02/11/the-loony-principle-of-monetary-policy/
Benjamin Cole considers whether Janet Yellen can make the most of remaining QE
Bonnie Carr has concerns what Yellen can do, as well:
http://dajeeps.wordpress.com/2014/02/12/how-many-times-can-yellen-contradict-herself/
James Pethokoukis: There are still 4 million fewer full-time jobs in America than before the Great Recession
George Selgin has an interesting identity crisis! (Or, being lonely isn't fun) http://www.freebanking.org/2014/02/10/economic-schools-of-thought/
Yichuan Wang: Why Monetary Policy Should Ignore Financial Stability
Representative stories also include time and micro-level interaction (James Caton): http://moneymarketsandmisperceptions.blogspot.com/2014/02/away-from-equilibrium-approach-to.html
Also of interest:
Tim Worstall (Adam Smith Institute): Why this insistence that things that need to be collectively done must be centrally done?
Finance has created problems for emerging markets (Dani Rodrik): http://www.project-syndicate.org/commentary/dani-rodrik-reviews-the-fundamental-lessons-about-emerging-economies-that-economists-have-refused-to-learn
Is it a stretch to suggest that governments cause homelessness?
http://www.pamplinmedia.com/pt/9-news/209817-66668-high-cost-of-affordable
Monday, February 10, 2014
Skills Arbitrage: The Point of Agreement is the Point of Reference
Before they "get away" from me, I want to address some follow up thoughts for a recent skills arbitrage post. The idea of monetary compensation for what remains inadequate services provided through government assistance, needs a bit more clarification. The government component of monetary compensation, would simply be government backing of direct economic coordination on the part of individuals. What's more, people would engage in knowledge and skills use, based on what they can teach themselves with the informal assistance of others and the digital realm. The point of agreement is where those processes are set up to take place, among service providers of all kinds. Instead of "choosing one's boss" as in one guaranteed work plan, the idea would be to match one's desired economic destination with others.
These skills arbitration systems would provide meaningful employment and economic engagement for millions. What's more, they could also bypass special interest networks which skim too much of productive exchange in the present, for lower income levels to be able to access either services or workplaces adequately. Governments could provide regulation free zones (free from special interest limitations, that is) so that renewed negotiations and social arrangements among individuals might begin. New wealth creation would also be possible, for many who have little hope otherwise of participating in present day work environments.
Such systems would not just subsidize labor or provide monetary "life support" in any normal sense. Nor would they be last ditch efforts to hire the unemployed. Instead, skills arbitrage systems could provide services beyond the present U.S. governmental budgetary impasse which eventually threatens education, healthcare and much more. Local coordination could also prevent local services offerings from becoming the zero sum battles of competing interests. How would wide diversity in skills sets be compensated?
The point of agreement is also the main point of reference on a number of levels, for skills arbitrage. What people agree upon individually and in groups for services (in short and ongoing time segments) is also the economic activity which gets recorded. Generally, these ongoing agreements would also be more knowledge based, than one might normally associate with basic income arrangements for the unemployed. In effect, much more than additional consumer demand could be met through such compensation. After all, this exponential amount of added services wealth over time would not be possible, otherwise.
People would guarantee their ongoing "employment", by regular engagement and matching efforts with others through local services calendars. That is, they would ultimately be reimbursed for seeking out how they might tend to the needs others have. What's more, endless discussions about skills mismatches in the marketplace would be over and done with, as skills set possibilities are worked out and negotiated individually. Skills arbitrage would allow people to regain self respect through their own efforts, and dispense with a lot of political b.s. in the process. And oftentimes, rather than random bids for employment in group settings, it is one's personal concerns and connections to ongoing projects that create bids for economic inclusion in a defined sense.
Through skills arbitrage, participants would seek to match their desired economic "destinations" as best as possible with one another. These environments would also allow the two way nature of services which is presently missing in so many settings. While some guaranteed income envisions compensation for these efforts with no match, it's not the same outcome for the economy, let alone one's spirit. Even though not every match would seem "significant" to the outsider or participant, neither do multiple product formulations for that matter. The point is to create a real space where significant transactions can be found and imagined. In the aggregate, multiple points of agreement and reference have the capacity to move people back into productive economic activity - at far more than a basic level.
Skills arbitrage could provide ways to reintroduce knowledge use which is now quickly falling away from monetary compensation in the marketplace. Knowledge use is by no means just a default position for "after the fact" solutions or "before the fact" (of hiring) investments. Knowledge use should be primary through all economic processes. Even so, knowledge use is marginalized in many marketplaces. What's more, much knowledge use infrastructure that contributes to present wealth has fallen away from economic compensation.
A primary component of skills arbitrage is that it would attempt to recreate many services which are presently endangered in today's economy. After all, this is especially the work that people want and need. It presently represents 80 percent of economic activity in the U.S. and without such work, millions of people literally would not know what to do with themselves. To be sure, it is not easy for any government to contemplate handing over the keys of the knowledge realm to its citizens. Nevertheless, economic stability could depend on doing so; at least where it is not possible to successfully provide for populations otherwise.
For in the meantime, governments are turning vital aspects of services and knowledge use into a hollow shell, where "one size fits all" is supposed to work for the snowflake realities of our existence. When healthcare services such as Obamacare are subjected to the tragedy of the commons, people also become less responsive to individual initiative and compassion. Jonathan Finegold recently highlighted this quote from Aristotle:
One way to bring coordinated services under community umbrellas successfully is to recognize the value of competing interests. That is, simply refuse to allow "winning" interests to turn the playing field into a zero sum game. Clearly, governments have had plenty of difficulty doing so as of late, thus they could learn much from their own citizens who allow competing economic interests to thrive together. While "co-opetition" has been recognized as a business concept, it is equally applicable in local economies which would be capable of providing "homes" for wide diversity of knowledge use functions that otherwise could not take place.
Monetary compensation of service and knowledge use could clearly go beyond the workplace and resource use limitations of the present. There is simply no need to treat skills and knowledge use as though they were lottery tickets. By approaching knowledge and skill in decentralized and sustainable ways, populations can once again make full use of their actual capacities.
These skills arbitration systems would provide meaningful employment and economic engagement for millions. What's more, they could also bypass special interest networks which skim too much of productive exchange in the present, for lower income levels to be able to access either services or workplaces adequately. Governments could provide regulation free zones (free from special interest limitations, that is) so that renewed negotiations and social arrangements among individuals might begin. New wealth creation would also be possible, for many who have little hope otherwise of participating in present day work environments.
Such systems would not just subsidize labor or provide monetary "life support" in any normal sense. Nor would they be last ditch efforts to hire the unemployed. Instead, skills arbitrage systems could provide services beyond the present U.S. governmental budgetary impasse which eventually threatens education, healthcare and much more. Local coordination could also prevent local services offerings from becoming the zero sum battles of competing interests. How would wide diversity in skills sets be compensated?
The point of agreement is also the main point of reference on a number of levels, for skills arbitrage. What people agree upon individually and in groups for services (in short and ongoing time segments) is also the economic activity which gets recorded. Generally, these ongoing agreements would also be more knowledge based, than one might normally associate with basic income arrangements for the unemployed. In effect, much more than additional consumer demand could be met through such compensation. After all, this exponential amount of added services wealth over time would not be possible, otherwise.
People would guarantee their ongoing "employment", by regular engagement and matching efforts with others through local services calendars. That is, they would ultimately be reimbursed for seeking out how they might tend to the needs others have. What's more, endless discussions about skills mismatches in the marketplace would be over and done with, as skills set possibilities are worked out and negotiated individually. Skills arbitrage would allow people to regain self respect through their own efforts, and dispense with a lot of political b.s. in the process. And oftentimes, rather than random bids for employment in group settings, it is one's personal concerns and connections to ongoing projects that create bids for economic inclusion in a defined sense.
Through skills arbitrage, participants would seek to match their desired economic "destinations" as best as possible with one another. These environments would also allow the two way nature of services which is presently missing in so many settings. While some guaranteed income envisions compensation for these efforts with no match, it's not the same outcome for the economy, let alone one's spirit. Even though not every match would seem "significant" to the outsider or participant, neither do multiple product formulations for that matter. The point is to create a real space where significant transactions can be found and imagined. In the aggregate, multiple points of agreement and reference have the capacity to move people back into productive economic activity - at far more than a basic level.
Skills arbitrage could provide ways to reintroduce knowledge use which is now quickly falling away from monetary compensation in the marketplace. Knowledge use is by no means just a default position for "after the fact" solutions or "before the fact" (of hiring) investments. Knowledge use should be primary through all economic processes. Even so, knowledge use is marginalized in many marketplaces. What's more, much knowledge use infrastructure that contributes to present wealth has fallen away from economic compensation.
A primary component of skills arbitrage is that it would attempt to recreate many services which are presently endangered in today's economy. After all, this is especially the work that people want and need. It presently represents 80 percent of economic activity in the U.S. and without such work, millions of people literally would not know what to do with themselves. To be sure, it is not easy for any government to contemplate handing over the keys of the knowledge realm to its citizens. Nevertheless, economic stability could depend on doing so; at least where it is not possible to successfully provide for populations otherwise.
For in the meantime, governments are turning vital aspects of services and knowledge use into a hollow shell, where "one size fits all" is supposed to work for the snowflake realities of our existence. When healthcare services such as Obamacare are subjected to the tragedy of the commons, people also become less responsive to individual initiative and compassion. Jonathan Finegold recently highlighted this quote from Aristotle:
What is common to the greatest number gets the least amount of care. Men pay most attention to what is their own; they care less for what is common or at any rate they care for it only to the extent to which each is individually concerned. Even when there is no other cause for inattention, men are much more prone to neglect their duty when they think that another is attending to it.How superfluous do many of us feel? Think of our time use, grasp of knowledge, and actual ability to contribute. All have been treated as superfluous commodities for so long, that many now not only question their own worth, they don't see how it is possible to be responsible for anything that matters. This is the circumstance that must be changed - not just to preserve democracy, but to preserve humanity as we were led to believe it exists. Somehow we knew that governments were able to take away the value of civilizations in the past, we just didn't quite know how they managed to do it. It's not that we don't want government. But government cannot survive if it is not responsive to us, and if it doesn't give us the keys back to our own knowledge domains.
One way to bring coordinated services under community umbrellas successfully is to recognize the value of competing interests. That is, simply refuse to allow "winning" interests to turn the playing field into a zero sum game. Clearly, governments have had plenty of difficulty doing so as of late, thus they could learn much from their own citizens who allow competing economic interests to thrive together. While "co-opetition" has been recognized as a business concept, it is equally applicable in local economies which would be capable of providing "homes" for wide diversity of knowledge use functions that otherwise could not take place.
Monetary compensation of service and knowledge use could clearly go beyond the workplace and resource use limitations of the present. There is simply no need to treat skills and knowledge use as though they were lottery tickets. By approaching knowledge and skill in decentralized and sustainable ways, populations can once again make full use of their actual capacities.
Saturday, February 8, 2014
Some Notes on the Barter Similarities of Skills Arbitrage
While I remain quite anxious to be posting more than occasional notes, technical (computer) issues have continued to dominate recently, along with the ongoing distraction of bad weather! So I'll focus as best as possible today on skills arbitrage, especially in regard to barter terminology as means of exchange. Barter in the normal sense is of course not practical, for our fixed amount of time alongside random resource use never "lines up" or finds predictable equilibrium, either internally (as a local group) or externally. What's more, even though the time available to us is fixed, the time we need to establish product formation (create product) is not fixed at all - it is random. This remains true whether we are the sole provider of product separate from our time, or if our work provides a labor component for other production settings.
That is why price setting (rather than broad informal voting measures) is more efficient for coordination, wherever time use (labor) and product separate from time, are mixed. Fluctuating prices serve as signals for the constantly changing quantity of the product or resource. On the other hand, endogenous voting processes (internally coordinated groupings) provide a more efficient construct for the fixed nature of services time that is compensated without additional product.
Since the time available to us does not fluctuate, we can provide greater economic stability by managing and supporting our aggregate time use in group settings. We need to do this whenever we provide services that are structured on the basis of our limited time. Time vote structures also serve as a constantly changing signal, in that no one wants the same service sets all the time. Time use options take place in an understandable context of service target possibilities, which random resource use is often not capable of providing.
A good way to think about what may appear similar to barter in skills arbitrage, is that our time is fixed while all other economic associations with our time are random, or constantly changing. Skills arbitrage would seek to compensate time use in terms that restore time value for all participants and their (accepted) time use offerings. What's more, a stabilized context for time use in services potential, can provide greater monetary stability for overall target predictions in the long run. A systems method such as this could make economies less reliant on resources separate from our time, as monetary anchors.
The mixed equilibrium of random and fixed components is what makes barter inefficient for product that exists separately from time input. Because random elements are generally utilized alongside fixed elements, the pricing mechanism makes it possible to at least coordinate the values of resources that are separate from the use of our own time. The fact that our time use does not line up to random resource use, is also why the idea of labor as a fixed component in production also never made sense.
Just the same, people tried to rationalize the idea of labor theory of value as best as they could, because it never appeared necessary to tease out the idea of one's actual time use from production in general. As inadequate as the labor theory of value actually was, it allowed people to reconcile time use with pricing mechanisms, in lieu of other means for coordinating skills use activity. Today however, Baumol's disease make it necessary to reconsider the uneasy economic distribution of fixed time use alongside random resources. This fixed-to-random juxtaposition becomes all the more problematic, when people are fooled by the seemingly infinite nature of certain random production processes.
Amazingly enough, we have managed to reach the point where services now comprise 80 percent of the economy. Services coordination in society came a long way through taxation and redistribution this time, before the process finally started to break down with overburdened asset formations. However, this feat has mostly been accomplished by government debt loads, which are no longer as manageable as they were in the recent past. It's not that government couldn't provide for many services directly - indeed, skills arbitrage compensation would give it a decentralized way to do so. Only, the process could happen monetarily. That is, instead of through massive regulation and arbitrary limits on knowledge use - let alone inefficient and complex redistribution patterns that reward private contractors instead of populations.
Unfortunately, government debt loads are now constrained through both knowledge limitation entitlements and pension entitlements. Those entitlements create a long and tortuous path to services formation. How to go about more direct means of supporting knowledge use wealth, so that entitlements are no longer caught between a rock and the hard place of the previous fragile equation?
Think for a moment about the pricing mechanism. In a real sense, the prices we are willing to pay in the marketplace represent our votes for the product that are offered. If only these were as voluntary as they seem! The fact that much of today's pricing has strayed from actual choice, is what makes the pricing mechanism less flexible than it once was. Therefore the first challenge any direct services coordination would face, is that of creating more flexible pricing mechanisms than now exist in the marketplace. The confusing aspect of this is that we need to "price" something (in terms of commitment and resource allocation) that we each have in equal measure - our time. It is the fixed element of time that needs to have representative pricing at an internal or endogenous group level. How so?
Return to the idea of barter for skill. Even though our time is fixed, people often try to barter for skills unsuccessfully in recessionary economies, as though skills sets were fixed components. However skills sets are also random while our time use is not random at all. The difference here is crucial. It is our time that is fixed, not our skills sets. Not only do people need different skills abilities at different times, but absolute time limits mean that artificial skills rigidity creates tremendous market breakdowns as well.
Thus, the time factor is the room for coordination that we actually have. By so doing, we treat our skills sets as baskets of ongoing options in time, which allow for smooth economic function on a daily basis. Fortunately, people have been able to work with time and skills this way in the past. Even the artificially fixed skills sets which society currently pays for are quite arbitrary: the highest portion of the skills set on the part of skills providers, are not what is always needed.
In a sense, one could say that direct monetary compensation is needed for a form of arbitrage that appears as barter in terms of supply and demand. That is, there is no aggregate supply and demand variance management in the fixed element of time use. Even so, the ongoing monetary management for supply and demand variation continues to exist, for all product of a random nature which remains separate from the use of our time. The resource coordination which created a need for macroeconomic management, will always exist in random product formations.
It's the artificially random nature of time value (we all have the same time) that especially thwarts macroeconomic management. This happens because asset structures remain forced to reflect the "winning" power holding in skills use, which in turn is backed by the demands of financial interests. Those aggregate services demands - which take the form of countless budgets - do not match up to actual household economic potential. If that were not enough, governments have tried to compensate by further limiting the economic potential of their own populations as a response, instead of empowering them.
The barter aspect of endogenous pricing (internal group voting mechanisms for services) exists in contrast to the exogenous structure of pricing that relies on random formations. Monetary printing expands not just because of a fixed element of new participants, but also the degree to which those participants are able to integrate random product formation in their own activities. The non barter aspect of supply and demand is simply that there is no expectation of equilibrium in the exogenous realm of random resources. However it is possible to achieve equilibrium locally in services, so that exogenous and random monetary components have a more reliable anchor. Importantly, the inclusion of most individuals at an economic level is the primary means of achieving low inflation as well. Much inflation is a direct result of too many without adequate economic access, which the overall equilibrium is then forced to account for.
One important aspect of skills arbitrage is present day differences in IQ levels. Even though we have relative differences in IQ, in many instances they need not remain as polarized as monetary compensation, or lack thereof, indicates in the present. Even if skills arbitrage were not employed to reduce skills use rigidity, robots would eventually make up the difference for what are frequently artificial limitations. Why not also make up the difference with more flexible skills use options, wherever possible? Any time that skills sets are made artificially rigid, that tendency unfortunately increases over time, till it creates castes or unnecessary divisions between individuals. This is not to say that IQ differences would be miraculously "leveled" with skills arbitrage in equal time use. Just the same, today's apparent differences could be greatly reduced, over time.
Before wrapping up this post, I want to go back and illustrate a few differences that occur in our time use, versus time use that result in separate product. First: when we create service product solely through time use, the customer seeks a strictly limited quantity on our part. That is the fixed element which time arbitrage - resembling barter in terms of a predictable supply and demand equilibrium - would seek to address by every means possible. There may also be separate product involved which we aren't charging for in time arbitrage. When this is the case, it needs to be factored in such a way as to correspond with product that backs the time of others, instead of creating roadblocks for participants to find equilibrium in skills use.
Whereas, when our time leads to product formation that can be exchanged separately from our time, we do not need to worry about time coordination with supporting product, because it becomes possible to pay for additional capital use through the wealth that separate product allows beyond the use of our own time. In other words, product separate from our time becomes random in the sense that it no longer follows our time limitations. Thus, it becomes applicable to the normal pricing structures which do not involve coordination of skills education and skills set voting processes.
That is why price setting (rather than broad informal voting measures) is more efficient for coordination, wherever time use (labor) and product separate from time, are mixed. Fluctuating prices serve as signals for the constantly changing quantity of the product or resource. On the other hand, endogenous voting processes (internally coordinated groupings) provide a more efficient construct for the fixed nature of services time that is compensated without additional product.
Since the time available to us does not fluctuate, we can provide greater economic stability by managing and supporting our aggregate time use in group settings. We need to do this whenever we provide services that are structured on the basis of our limited time. Time vote structures also serve as a constantly changing signal, in that no one wants the same service sets all the time. Time use options take place in an understandable context of service target possibilities, which random resource use is often not capable of providing.
A good way to think about what may appear similar to barter in skills arbitrage, is that our time is fixed while all other economic associations with our time are random, or constantly changing. Skills arbitrage would seek to compensate time use in terms that restore time value for all participants and their (accepted) time use offerings. What's more, a stabilized context for time use in services potential, can provide greater monetary stability for overall target predictions in the long run. A systems method such as this could make economies less reliant on resources separate from our time, as monetary anchors.
The mixed equilibrium of random and fixed components is what makes barter inefficient for product that exists separately from time input. Because random elements are generally utilized alongside fixed elements, the pricing mechanism makes it possible to at least coordinate the values of resources that are separate from the use of our own time. The fact that our time use does not line up to random resource use, is also why the idea of labor as a fixed component in production also never made sense.
Just the same, people tried to rationalize the idea of labor theory of value as best as they could, because it never appeared necessary to tease out the idea of one's actual time use from production in general. As inadequate as the labor theory of value actually was, it allowed people to reconcile time use with pricing mechanisms, in lieu of other means for coordinating skills use activity. Today however, Baumol's disease make it necessary to reconsider the uneasy economic distribution of fixed time use alongside random resources. This fixed-to-random juxtaposition becomes all the more problematic, when people are fooled by the seemingly infinite nature of certain random production processes.
Amazingly enough, we have managed to reach the point where services now comprise 80 percent of the economy. Services coordination in society came a long way through taxation and redistribution this time, before the process finally started to break down with overburdened asset formations. However, this feat has mostly been accomplished by government debt loads, which are no longer as manageable as they were in the recent past. It's not that government couldn't provide for many services directly - indeed, skills arbitrage compensation would give it a decentralized way to do so. Only, the process could happen monetarily. That is, instead of through massive regulation and arbitrary limits on knowledge use - let alone inefficient and complex redistribution patterns that reward private contractors instead of populations.
Unfortunately, government debt loads are now constrained through both knowledge limitation entitlements and pension entitlements. Those entitlements create a long and tortuous path to services formation. How to go about more direct means of supporting knowledge use wealth, so that entitlements are no longer caught between a rock and the hard place of the previous fragile equation?
Think for a moment about the pricing mechanism. In a real sense, the prices we are willing to pay in the marketplace represent our votes for the product that are offered. If only these were as voluntary as they seem! The fact that much of today's pricing has strayed from actual choice, is what makes the pricing mechanism less flexible than it once was. Therefore the first challenge any direct services coordination would face, is that of creating more flexible pricing mechanisms than now exist in the marketplace. The confusing aspect of this is that we need to "price" something (in terms of commitment and resource allocation) that we each have in equal measure - our time. It is the fixed element of time that needs to have representative pricing at an internal or endogenous group level. How so?
Return to the idea of barter for skill. Even though our time is fixed, people often try to barter for skills unsuccessfully in recessionary economies, as though skills sets were fixed components. However skills sets are also random while our time use is not random at all. The difference here is crucial. It is our time that is fixed, not our skills sets. Not only do people need different skills abilities at different times, but absolute time limits mean that artificial skills rigidity creates tremendous market breakdowns as well.
Thus, the time factor is the room for coordination that we actually have. By so doing, we treat our skills sets as baskets of ongoing options in time, which allow for smooth economic function on a daily basis. Fortunately, people have been able to work with time and skills this way in the past. Even the artificially fixed skills sets which society currently pays for are quite arbitrary: the highest portion of the skills set on the part of skills providers, are not what is always needed.
In a sense, one could say that direct monetary compensation is needed for a form of arbitrage that appears as barter in terms of supply and demand. That is, there is no aggregate supply and demand variance management in the fixed element of time use. Even so, the ongoing monetary management for supply and demand variation continues to exist, for all product of a random nature which remains separate from the use of our time. The resource coordination which created a need for macroeconomic management, will always exist in random product formations.
It's the artificially random nature of time value (we all have the same time) that especially thwarts macroeconomic management. This happens because asset structures remain forced to reflect the "winning" power holding in skills use, which in turn is backed by the demands of financial interests. Those aggregate services demands - which take the form of countless budgets - do not match up to actual household economic potential. If that were not enough, governments have tried to compensate by further limiting the economic potential of their own populations as a response, instead of empowering them.
The barter aspect of endogenous pricing (internal group voting mechanisms for services) exists in contrast to the exogenous structure of pricing that relies on random formations. Monetary printing expands not just because of a fixed element of new participants, but also the degree to which those participants are able to integrate random product formation in their own activities. The non barter aspect of supply and demand is simply that there is no expectation of equilibrium in the exogenous realm of random resources. However it is possible to achieve equilibrium locally in services, so that exogenous and random monetary components have a more reliable anchor. Importantly, the inclusion of most individuals at an economic level is the primary means of achieving low inflation as well. Much inflation is a direct result of too many without adequate economic access, which the overall equilibrium is then forced to account for.
One important aspect of skills arbitrage is present day differences in IQ levels. Even though we have relative differences in IQ, in many instances they need not remain as polarized as monetary compensation, or lack thereof, indicates in the present. Even if skills arbitrage were not employed to reduce skills use rigidity, robots would eventually make up the difference for what are frequently artificial limitations. Why not also make up the difference with more flexible skills use options, wherever possible? Any time that skills sets are made artificially rigid, that tendency unfortunately increases over time, till it creates castes or unnecessary divisions between individuals. This is not to say that IQ differences would be miraculously "leveled" with skills arbitrage in equal time use. Just the same, today's apparent differences could be greatly reduced, over time.
Before wrapping up this post, I want to go back and illustrate a few differences that occur in our time use, versus time use that result in separate product. First: when we create service product solely through time use, the customer seeks a strictly limited quantity on our part. That is the fixed element which time arbitrage - resembling barter in terms of a predictable supply and demand equilibrium - would seek to address by every means possible. There may also be separate product involved which we aren't charging for in time arbitrage. When this is the case, it needs to be factored in such a way as to correspond with product that backs the time of others, instead of creating roadblocks for participants to find equilibrium in skills use.
Whereas, when our time leads to product formation that can be exchanged separately from our time, we do not need to worry about time coordination with supporting product, because it becomes possible to pay for additional capital use through the wealth that separate product allows beyond the use of our own time. In other words, product separate from our time becomes random in the sense that it no longer follows our time limitations. Thus, it becomes applicable to the normal pricing structures which do not involve coordination of skills education and skills set voting processes.
Wednesday, February 5, 2014
Midweek Market Monetarist Links and Summaries - 2/5/14
Some readers are wondering what happened, as I generally post often! My computer was in the repair shop for over a week. Thus I've got lots of catching up to do, online. As a result, this week's links don't quite do justice to the wealth of Market Monetarist posts from the past two weeks. I'll at least include some from the previous (missed) week here, as well.
The winning prediction, five years on (Marcus Nunes): http://thefaintofheart.wordpress.com/2014/01/26/backtesting/
Was there a break in the time series of U.S. RGDP: http://thefaintofheart.wordpress.com/2014/01/27/will-bernankes-legacy-be-having-introduced-a-unit-root-in-us-rgdp/
A "scientific fact"? Really? http://thefaintofheart.wordpress.com/2014/01/27/quote-of-the-day-3/
George Selgin couldn't believe what Prescott said, either. Or Paul Krugman.
The markets lose confidence: http://thefaintofheart.wordpress.com/2014/01/29/if-it-was-widely-expected-the-fomc-decision-why-did-markets-fall-significantly-on-the-news/
More confusion, than direction: http://thefaintofheart.wordpress.com/2014/01/30/forward-guidance-can-easily-lead-you-astray/
Is this really momentum? http://thefaintofheart.wordpress.com/2014/01/30/what-the-fomc-says-and-what-the-facts-show/
When success isn't understood: http://thefaintofheart.wordpress.com/2014/01/31/why-should-success-frighten/
Will they escape the blame? http://thefaintofheart.wordpress.com/2014/02/01/you-cant-be-a-monetary-hegemon-and-then-duck-responsibility-or-can-you/
Job recovery charts after recessions have become shallower over time:
http://thefaintofheart.wordpress.com/2014/02/03/do-you-really-need-to-crunch-10-million-data-points-to-understand-whats-going-on-in-the-labor-market/
Is it time for complacency, already?
http://thefaintofheart.wordpress.com/2014/02/04/according-to-the-bea-in-a-couple-of-years-real-output-rgdp-will-be-back-to-potential/
Ed Prescott, bond buying and rain dancing..."Well that settles it" (Scott Sumner)
Updating prior beliefs
Inequality is way down the list: The 4% and the real problems
Mankiw wins the bet: The forces of evil easily triumph over Krugman and DeLong
Could be that lots of arm twisting and schmoozing was involved: Farewell to Ben Bernanke
Ramesh Ponnuru, the unit root debate and more: Short Notes
Is RGDP volatile, compared to optimal policy? Do monetary shocks matter? And what is a monetary shock?
Some Econlog posts from Scott Sumner:
A good basic post about NGDP http://econlog.econlib.org/archives/2014/01/ngdp_isnt_the_e.html
For the Chinese, education is important: http://econlog.econlib.org/archives/2014/01/_over_at_themon.html
http://econlog.econlib.org/archives/2014/01/keynesian_confi.html
http://econlog.econlib.org/archives/2014/02/where_the_stres.html
Bitcoin is just a medium of exchange, right? (Nick Rowe)http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/01/one-good-thing-about-bitcoin.html
When investment values change: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/01/coloured-sunspots-and-shells.html
How do we know when monetary policy makes things worse?http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/separating-real-from-nominal-shocks.html
Two rates of interest, for holding and lending money: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/two-interest-rates-and-a-simple-question.html
(Lars Christensen) http://marketmonetarist.com/2014/02/04/the-colombian-central-bank-should-have-a-look-at-the-export-price-norm/
Not all EM central bankers suffer from fear of floating: http://marketmonetarist.com/2014/02/04/listen-to-my-new-hero-jose-dario-uribe/
Emerging markets need to stay committed to floating exchange rates: http://marketmonetarist.com/2014/01/31/four-graphs-em-central-bankers-should-study-lessons-from-two-reserve-banks-1997-98/
From an op-ed on UK's City AM: http://marketmonetarist.com/2014/01/30/the-sharply-rising-risk-of-emerging-market-policy-blunders/
Even Lars agrees with Krugman on occasion... http://marketmonetarist.com/2014/01/29/the-awkward-moment-when-george-selgin-realized-he-agree-with-paul-krugman/
China also matters: http://marketmonetarist.com/2014/01/28/the-em-sell-off-and-china-as-a-global-monetary-superpower/
Lars takes a closer look at emerging markets: http://marketmonetarist.com/2014/01/27/please-dont-fight-it-the-risk-of-em-policy-mistakes/
The Fed is not the only monetary superpower for emerging markets (David Beckworth): http://macromarketmusings.blogspot.com/2014/01/when-monetary-superpowers-flex-emerging.html
Time to scrap forward guidance: http://macromarketmusings.blogspot.com/2014/01/the-feds-foward-guidance-is-not-trully.html
Good nautical analogy http://macromarketmusings.blogspot.com/2014/01/forward-guidance-is-hard-so-is.html
Bernanke never tried Abenomics
http://macromarketmusings.blogspot.com/2014/01/the-two-big-failures-of-bernanke-fed.html
David Glasner:
http://uneasymoney.com/2014/01/26/two-cheers-well-maybe-only-one-and-a-half-for-falsificationism/
A review of Kartik Athreya's book:
http://uneasymoney.com/2014/02/03/big-ideas-in-macroeconomics-a-review/
From Britmouse:
http://uneconomical.wordpress.com/2014/01/24/sticky-wages-and-living-standards/
http://uneconomical.wordpress.com/2014/01/29/productivity-shocker/
(Bill Woolsey) minimum wage affects employment patterns: Robert Murphy on the Minimum Wage
The winning prediction, five years on (Marcus Nunes): http://thefaintofheart.wordpress.com/2014/01/26/backtesting/
Was there a break in the time series of U.S. RGDP: http://thefaintofheart.wordpress.com/2014/01/27/will-bernankes-legacy-be-having-introduced-a-unit-root-in-us-rgdp/
A "scientific fact"? Really? http://thefaintofheart.wordpress.com/2014/01/27/quote-of-the-day-3/
George Selgin couldn't believe what Prescott said, either. Or Paul Krugman.
The markets lose confidence: http://thefaintofheart.wordpress.com/2014/01/29/if-it-was-widely-expected-the-fomc-decision-why-did-markets-fall-significantly-on-the-news/
More confusion, than direction: http://thefaintofheart.wordpress.com/2014/01/30/forward-guidance-can-easily-lead-you-astray/
Is this really momentum? http://thefaintofheart.wordpress.com/2014/01/30/what-the-fomc-says-and-what-the-facts-show/
When success isn't understood: http://thefaintofheart.wordpress.com/2014/01/31/why-should-success-frighten/
Will they escape the blame? http://thefaintofheart.wordpress.com/2014/02/01/you-cant-be-a-monetary-hegemon-and-then-duck-responsibility-or-can-you/
Job recovery charts after recessions have become shallower over time:
http://thefaintofheart.wordpress.com/2014/02/03/do-you-really-need-to-crunch-10-million-data-points-to-understand-whats-going-on-in-the-labor-market/
Is it time for complacency, already?
http://thefaintofheart.wordpress.com/2014/02/04/according-to-the-bea-in-a-couple-of-years-real-output-rgdp-will-be-back-to-potential/
Ed Prescott, bond buying and rain dancing..."Well that settles it" (Scott Sumner)
Updating prior beliefs
Inequality is way down the list: The 4% and the real problems
Mankiw wins the bet: The forces of evil easily triumph over Krugman and DeLong
Could be that lots of arm twisting and schmoozing was involved: Farewell to Ben Bernanke
Ramesh Ponnuru, the unit root debate and more: Short Notes
Is RGDP volatile, compared to optimal policy? Do monetary shocks matter? And what is a monetary shock?
Some Econlog posts from Scott Sumner:
A good basic post about NGDP http://econlog.econlib.org/archives/2014/01/ngdp_isnt_the_e.html
For the Chinese, education is important: http://econlog.econlib.org/archives/2014/01/_over_at_themon.html
http://econlog.econlib.org/archives/2014/01/keynesian_confi.html
http://econlog.econlib.org/archives/2014/02/where_the_stres.html
Bitcoin is just a medium of exchange, right? (Nick Rowe)http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/01/one-good-thing-about-bitcoin.html
When investment values change: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/01/coloured-sunspots-and-shells.html
How do we know when monetary policy makes things worse?http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/separating-real-from-nominal-shocks.html
Two rates of interest, for holding and lending money: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/two-interest-rates-and-a-simple-question.html
(Lars Christensen) http://marketmonetarist.com/2014/02/04/the-colombian-central-bank-should-have-a-look-at-the-export-price-norm/
Not all EM central bankers suffer from fear of floating: http://marketmonetarist.com/2014/02/04/listen-to-my-new-hero-jose-dario-uribe/
Emerging markets need to stay committed to floating exchange rates: http://marketmonetarist.com/2014/01/31/four-graphs-em-central-bankers-should-study-lessons-from-two-reserve-banks-1997-98/
From an op-ed on UK's City AM: http://marketmonetarist.com/2014/01/30/the-sharply-rising-risk-of-emerging-market-policy-blunders/
Even Lars agrees with Krugman on occasion... http://marketmonetarist.com/2014/01/29/the-awkward-moment-when-george-selgin-realized-he-agree-with-paul-krugman/
China also matters: http://marketmonetarist.com/2014/01/28/the-em-sell-off-and-china-as-a-global-monetary-superpower/
Lars takes a closer look at emerging markets: http://marketmonetarist.com/2014/01/27/please-dont-fight-it-the-risk-of-em-policy-mistakes/
The Fed is not the only monetary superpower for emerging markets (David Beckworth): http://macromarketmusings.blogspot.com/2014/01/when-monetary-superpowers-flex-emerging.html
Time to scrap forward guidance: http://macromarketmusings.blogspot.com/2014/01/the-feds-foward-guidance-is-not-trully.html
Good nautical analogy http://macromarketmusings.blogspot.com/2014/01/forward-guidance-is-hard-so-is.html
Bernanke never tried Abenomics
http://macromarketmusings.blogspot.com/2014/01/the-two-big-failures-of-bernanke-fed.html
David Glasner:
http://uneasymoney.com/2014/01/26/two-cheers-well-maybe-only-one-and-a-half-for-falsificationism/
A review of Kartik Athreya's book:
http://uneasymoney.com/2014/02/03/big-ideas-in-macroeconomics-a-review/
From Britmouse:
http://uneconomical.wordpress.com/2014/01/24/sticky-wages-and-living-standards/
http://uneconomical.wordpress.com/2014/01/29/productivity-shocker/
(Bill Woolsey) minimum wage affects employment patterns: Robert Murphy on the Minimum Wage
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