Why is Innovation "Not Enough"?

Dani Rodrik has a Project Syndicate post, "Innovation is Not Enough", which in some respects is spot on:

...who can seriously doubt that innovation is progressing rapidly? The debate is whether these innovations will remain bottled up in a few tech-intensive sectors that employ the highest-skilled professionals and account for a relatively small share of GDP, or spread to the bulk of the economy. The consequences of any innovation for productivity, employment and equity ultimately depend on how quickly it diffuses through labor and product markets. 

Technological diffusion can be constrained on both the demand and supply sides of the economy. Take the demand side. In rich economies, consumers spend the bulk of their income on services such as health, education, transportation, housing and retail goods. Technological innovation has had comparatively little impact in many of these sectors.  

...The two sectors in the United States that have experienced the most rapid productivity growth since 2005 are the ICT (information and communications technology) and media industries, with a combined GDP share of less than 10%. By contrast, government services and health care, which together produce more than a quarter of GDP, have had virtually no productivity growth.

...On the supply side, the key question is whether the innovating sector has access to the capital and skills it needs to expand rapidly and continuously. 

Consider also, how the primary investment of recent decades has occurred. Where once the most important forms of saving were designated for capital other than time value, knowledge use - especially the value of which accrues to non tradable sectors - has gradually become the more dominant form of wealth. Where land value was once closely aligned with the value of basic food commodities, real estate now more closely responds to the nominal income representative of time value, and the spontaneous coordination of prosperous regions.

Human capital representation on economic terms is only partial, despite the fact investment priorities for time value begin early in life. Even public education attempts to determine what might augment human capital investment, before other forms of capital savings come into play. Thus far, however, only a fraction of time investment expenditure shows up as wealth gains - given today's partial representation of time value at an economic level. Consequently, additional savings for capital contribution (in the classic sense), are mostly limited to those who benefited from initial time value investment, as represented in general equilibrium.

Even though human capital is key to potential productivity, there's good reason why (what appears as) non productive sectors have yet to experience the broader gains of innovation. One reason these sectors seem non productive, is that technological gains have mostly generated wealth capture for greater administrative capacity.

Worse, the value of human capital (in aggregate) as a economic component, is at odds with a natural inclination for societal exclusion, which governments and private interests alike are able to tap for wealth capture. It is the struggle for economic access, and the many forms of signalling required to gain access, which pushes up the price of markets in ways that make costs of living higher for everyone. The time and knowledge based services of healthcare and education, are especially prone to these forces. Indeed, the natural tendency to judge can prevent the organizational capacity, which would otherwise result in product that generates good deflation and a freer, more open marketplace.

Oddly enough, perhaps the innovation most needed, is for the human mind to be willing to tap the potential of human capital - much as other resources have also been utilized in their turn. Granted, this is not something that either can or should be expected of every environment, given what have become vast differences in human capacity and lifestyle choice. Rather, human capital potential could be tapped in settings which acknowledge the importance of developing useful marketplace patterns along a continuum of income potential. This, as a viable alternative to today's default settings of relative rich or poor as the sole options.

Conceptualizing a (Shifting) General Equilibrium

There's plenty of uncertainty about general equilibrium conditions. Is the economy stable? Will the marketplace even function recognizably in the decades to come? Ahh, just dish it up straight: are people coming unhinged? If so, it's not so hard to figure out why. A Vox article prints yet another variation, on a loosely thought through argument:

Lessons from the IT Revolution are that firms with relatively low-skilled employees are likely to be affected negatively by the new industrial revolution, and those with highly skilled employees tend to reap benefits.

My concern is the takeaway this reasoning implies. Does that mean everyone still needs to prepare for high skill work, all the while making certain that they don't end up with the unfortunate signal of lower skill work, instead? Good luck with that. Oh, the horror and social stigma, that it's become necessary to distinguish today's work "lottery" as such! Hence Andre Spicer of The Guardian:

The idea of the knowledge economy is appealing. The only problem is it is largely a myth. Developed Western economies such as the UK and the US are not brimming with jobs that require degree level qualification. For every job as a skilled computer programmer, there are three jobs flipping burgers. The fastest growing jobs are in the service sector. One-third of the US labor force market is made up of three types of work: office and administrative support, sales and food preparation.

The majority of jobs being created today do not require degree-level qualifications. In the US in 2010, 20% of jobs required a bachelor's degree, 43% required a high school education, and 26% did not require even that. Meanwhile, 40% of young people today study for degrees. This means over half the people gaining degrees today will find themselves in jobs that don't require one.

Of course this doesn't stop employers from expecting their employees to have college degrees, whether or not they are truly warranted. Perhaps these facts are also on the minds of those who are coming out in support of UBI. Granted, the rational solution of government subsidies for low skill workers is only a partial one as well. Why? Government low wage subsidies would be limited to existing jobs, i.e. those of today's prosperous regions, given today's high bar of economic engagement. However, one person's idea of what a UBI "should" be, is possibly another person's nightmare. From Charles Murray at the WSJ:

...the UBI is an idea whose time has finally come, but it has to be done right...A UBI will do the good things I claim only if it replaces all other transfer payments and the bureaucracies that oversee them.

Murray's vision of a UBI might be thought of as a "gotcha!" moment, for long term budget issues which most people have been sane enough (unlike myself) not to address, directly. Murray's "let's not think too hard about this" approach would also threaten some of the aforementioned administrative service jobs, which often make college degrees so lucrative in the first place. Equally important, is that a no holds barred UBI would be the next logical step from block grants to the states. Just add one part political gridlock to one part economic stagnation, mix well, and watch budget minded policy makers gradually unwind government obligations beyond that of police and the military, it would seem.

So the question remains: Are policy makers and the private sector committed to supporting broad prosperity, should national government gradually reduce itself to a bare minimum? Are there sufficient means to include widespread knowledge use, as part of a vital marketplace? If a radically minimal government seems preposterous, one can't help but notice how the private sector is too quiet about aspects of austerity which aren't being replicated for free markets, even as their subsidies are threatened. Imagine a devolution to "government services: there's an app for that", or people completely opting out of education or healthcare because of marketplace deterioration.

While digital platforms have the capacity to transform economic outcomes, personal time and consideration must remain integral to the process, for those platforms to matter. However, knowledge use as a central component of the economy, is in no position to be taken for granted right now. Indeed, limits on knowledge use continue to raise the bar for economic entry. A consequent reasoning of college degrees as poor investments, is unfortunately not too far off the mark.

Even though I identify as a libertarian, I'm not averse to all aspects of centralized government. Just the same, nation states don't realize the extreme harm they continue to cause their own citizens, who resort to taking out their frustrations on one another. The concept of freedom should mean being able to freely choose one's activities with others in the marketplace, on economic terms. Governments and private interests took a hierarchical approach to services in the twentieth century. Not only is this approach outdated, neither governments or special interests can expect the time/knowledge based marketplace of the future to be supported through fiscal means.

Hence governments don't have the capacity to build upon and protect knowledge use for the long run. This prerogative belongs to the private sector, for better or for worse. Which is why it is so unnerving, that the fact knowledge use potential actually belongs to the private sector, has been completely missed in the dialogue about automation and the workplace of the future. Will the private sector accept the challenge? One can only hope.

Knowledge Use Systems in Time Aggregate Value Context

Knowledge use systems would create time value for closely coordinated sets - in contrast to the random nature of time based coordination in today's prosperous regions - for knowledge based services activity. Only consider that an important attribute for (city oriented) higher income levels, is the time based service capacity they take for granted. Fortunately, time value can also be tapped to generate positive economic complexity, even without the monetary flows of more prosperous regions.

Even though time arbitrage might be considered a "lesser" form of knowledge use in contrast with normal economic patterns, an option such as this is paramount, if aggregate time value is to maintain economic stability over the long term. After all, the long term means ever expanding resource wealth, which gradually "pulls away" from aggregate time value in general equilibrium conditions. Historically, societies have not always compensated well for growing discrepancies between time value and other forms of resource value, to say the least. Bad deflation in these circumstance can perhaps be thought of, as a lot of unhinged bad attitudes.

Fortunately, the alternate equilibrium of knowledge use systems could create additional time value wealth without debt, to address this problem. True, "the poor with always be with us" as noted by Scott Sumner. "Rich" versus "poor" is as relative as relative comes. But the reason such discrepancies matter, has little to do with minor wage inequality among peers, or disappointments in middle class consumer expectations. Rather, inequality is vitally important because of the degree to which GDP has decoupled from median wages, particularly in the last forty years. Sumner emphasized for instance that "Government quality regulations are set based on average living conditions." And yet the fastest growing jobs continue to be those which are often below average in pay.

The wage to GDP decoupling serves as a distinct reminder that while total resource capacity the world over continues apace, aggregate time value is being left behind. Even more important, is the fact median income is only representative of those who presently have economic access. Others who are also expected to "get in (the same general equilibrium) line" for time based services, are scarcely even accounted for, on economic terms! Does anyone really wonder why immigrants - in aggregate time value terms - have become a net loss to any skills subsidized welfare state?

Hence among the reasons time arbitrage could be of benefit, is that knowledge use systems would create broader value for time aggregates as a whole. For instance, greater access for production and consumption of knowledge use, would address the largely hidden wait time in today's knowledge based service sectors. Yesterday's long lines for product in tradable sector markets that weren't free, are today's lines in non tradable sector markets that also aren't free. When populations have little chance to compete for the production of time based services, more queuing is the result, for basic knowledge use functions.

An alternative equilibrium would ultimately shorten the line for time based services product. Participation in a knowledge use system, is equivalent to the entire group purposely "buying a ticket" (via the right to produce) for mutually desired destinations. Time based group coordination is also a form of social insurance, particularly for multiple aspects of healthcare services. Tim Harford explains the process of waiting in line, in a way which aptly expresses the potential of time value when each individual "buys a ticket":

Queue engineers understand that queues can have strange properties...Queues are a terrible, inefficient waste of time. If the resource in question is genuinely limited, then the existence of a queue shows that it is being underpriced.

Consider the line for healthcare. Time based product is not underpriced in the same sense one associates with tradable goods. Rather, the physician is undersupplied to a degree that it is next to impossible to calculate the existing price as an accurate signal - in relation to time based resource capacity given potential aggregate demand. For instance, the U.S. has 2.6 doctors per 1,000 people.

In this instance, queues develop because the time based service provider purchased a ticket (i.e. time investment) that is calculated in relation to price potential on the part of complete or worldwide resource representation. Local coordination for time based services is difficult in general equilibrium, because the time aggregates of medium to high income levels are calculated alongside resource use patterns which exist beyond national boundaries. As a result, specific values in terms of long term time investment, are not calculated among the immediate groups of which they supposedly represent. As Harford noted, queues have strange properties, indeed. Again, Tim Harford:

If everyone had to pay to join a queue, the queue itself would be shorter, because some people would decide not to bother. Those who did queue would earn back their entry fee in time saved, while the person selling tickets for the queue would make some cash. 

Using time value in relation to itself - via production rights - would allow each individual to buy a ticket or an entry fee to the desired destination. In knowledge use systems, individuals would make the decision whether to "stand in line" to wait for currently offered services. Missed opportunities would be noted, in ways that also send time based production/consumption pricing signals within the group.

Not unlike what would occur in a direct democracy, one's time value can become a multi faceted and meaningful vote for the desired product. Note that when time value exists solely in relation to the world resource capacity of general equilibrium, everyone doesn't get the chance to buy a ticket because aggregate time value is not fully represented in general equilibrium conditions. The alternate equilibrium conditions of knowledge use systems - at the very least - would seek to address this at the margin.

Economic Time Value as a Steady State

What are the advantages of using economic time value as a steady state? Are there viable alternatives to the twentieth century practice of employing individuals during the height of their abilities, while leaving them dependent on fortunate circumstance in youth, sickness and old age? Economic time value as a steady state in one's life, could provide a much needed alternative to the vagaries of maintaining steady and sufficient employment during prime working years.

Yet all too often, unemployment concerns are confused with whether people actually want to work, or whether they should even need to work. Where to begin? As Isabel Sawhill notes:

The debate centers around why we think people are jobless. Unless we can agree on the diagnosis, we will not be able to fashion an appropriate policy response.

Economic historians and others have pointed out over the centuries, that people often end up jobless due to social design. This practice persists today, yet is scarcely clarified in present day arguments. Fortunately, Adam Smith offers plenty of explanation in "The Wealth of Nations", despite the fact it is mostly the monopoly aspect of this reality which is stressed by progressives and conservatives alike.

As a result, supply side factors which purposely limit employment, are chalked up to excessive regulation. Worse, regulations are so diverse and complex, that the public can scarcely determine cause and effect for the circumstance of low labor force participation. The fact that U.S. unemployment is so well concealed - under statistics that seemingly insist otherwise - contributes to the vague and ill conceived nature of today's growing populism.

Looking back on what has already occurred, of course it's possible to put a positive spin on meritocratic workplace exclusion. By limiting workplace design to those society perceives as most skilled (judgmental or not), more resources were freed up, so those with high incomes could put the resulting capital to good use. Admittedly, this approach led to the solid and often beautiful housing of medieval cities for instance - some of which still stands. Just the same, the majority of housing today is not built with the kind of craftsmanship, that warrants taking away the choice of mass produced building components.

Hence one might insist that beautiful environments result from the purposeful limiting of labor stock. Intentional limits for employment are a form of equilibrium shifting, which sometimes works reasonably well, so long as economies maintain a strong growth trajectory. However - should stagnation set in - those cultural patterns can start to break down. Many end up waiting too long to gain economic assimilation, such as the apprentices in Adam Smith's time. Consumption smoothing would mean economic access, for individuals and society as a whole. The option of economic time value as a steady state, could ensure that an ever growing percentage of the population is not left behind.

Indeed, more than consumption smoothing is at stake. The human inclination to take part in productive activity is strong from a young age, yet is is frequently lost. Young students have been expected to concentrate on their own learning, instead of discovering how to purposely interact with others while they are still inclined to do so. Adam Smith explains how apprentices were not paid for the years they were expected to learn their trades - a practice which is unfortunately echoed by long years of education today. Here's Smith:

The property in which every man has in his own labor, as it is the foundation of all other property, so it is the most sacred and inviolable. The patrimony of a poor man lies in the strength and dexterity of his hands; and to hinder him from employing this strength and dexterity in what manner he thinks proper, without injury to his neighbor, is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty, both of the workman and those who might be disposed to employ him. As it hinders him from working at what he thinks proper, so it hinders others from employing who they think proper. To judge whether he is fit to be employed, may surely be trusted to the discretion of the employers, whose interest it so much concerns. The affected anxiety of the lawgiver, lest they should employ an improper person, is evidently as impertinent as it is oppressive...

The institution of long apprenticeships has no tendency to form young people to industry. A journeyman who works by the piece is likely to be industrious, because he derives a benefit from every exertion of his industry. An apprentice is likely to be idle, and almost always is so, because he has no immediate interest to be otherwise...A young man naturally conceives an aversion to labor, when for a long time he receives no benefit from it.

Lest anyone complain that the life of a student is not labor, this may appear so in comparison to the hard labor of the past. The societal commitment of schooling is not the privilege to the student that many imagine! Hard labor versus classroom is not the point of reference for many students, who mostly see a long road ahead with a very uncertain payoff for one's efforts in the classroom - especially during periods of low economic growth.

Those familiar with my work, know that in knowledge use systems, individuals of all ages who take part in the system would provide mutual employment for one another, determined by individual preferences at various points in a given year. The resulting work patterns would also reflect today's time based services patterns, albeit with internal coordination at local levels. Each young student would become a knowledge entrepreneur, alongside more routine responsibilities. The elderly would gain the ability to return to knowledge based endeavor, when it becomes more difficult to perform other forms of work. The elderly would also be able to bring young people together, who they feel would benefit from mutual learning efforts with one another.

Smith spoke of the "affected anxiety of the lawgiver", as a way to expose the fallacy of government "protection" of the public in particular. Once, home construction may have required the largest income possible, hence teaching may have needed to be limited to the "best and the brightest". But there is no excuse now to exclude those who seek to work, given the capacity of technology to generate today's environments with a mere fraction of the time and resources that were once required. Fortunately, today's technology gives people the chance to create wealth along more horizontal dimensions than in the past.

Notes on Income Consumption Ratios

This is another phrase which deserves a glossary term, and it has close parallels with circles of sustainability. I don't think of an income consumption ratio as strictly singular, because in some respects it would respond to variance in a given alternate equilibrium.

There are similarities to the calculations of a mortgage to income ratio, but my Wikipedia search for mortgage (or rent) to income ratio came up short. Still, many recognize that this cost shouldn't be more than 30 percent of one's income. A mortgage or rent percentage of income would be considered a singular ratio, due to longstanding cultural expectations for housing in general equilibrium. Apparently this ratio is no longer clearly designated, since lenders now combine it with debt factors held simultaneously with housing costs. Just the same, personal resource capacity for housing debt is a crucial consideration.

In general equilibrium conditions, bankers have the responsibility of judging whether people may be capable of acquiring loans - hence in many instances whether they are capable of economic access. In alternate equilibrium, loans would no longer be necessary to generate economic access and economic viability. Rather than loan formation as a point of economic origin, participants would generate new wealth directly, through coordinated time value. Matched time value would gradually accrue towards asset formation for living, working, and (eventually) investment potential. Alternate equilibrium would generate economic access internally, with income consumption ratios that reflect the resource capacity of the group in question.

Income consumption ratios would be built into local corporate structure, as means to combat excessive zoning and regulation which increases costs. Building and infrastructure components would be sought which particularly have cost benefits, from innovation in both materials and methods. Time based product for services would take a similar free market approach, to avoid the regulatory circumstance which derails the income and wage expectations of general equilibrium.

All too often, municipalities and governments alike have sought to do the opposite: i.e. create as much internal cost as possible, as favors for special interests. The result of course is that everyone inadvertently pays more. Adam Smith aptly explains what happens, in the chapter "Inequalities Occasioned by the Policy of Europe" ("The Wealth of Nations"):

The government of towns-corporate was altogether in the hands of traders and artificers, and it was in the manifest interest of every particular class of them, to prevent the market from being overstocked, as they commonly express it, with their own particular species of industry; which is in reality to keep it always understocked. Each class was eager to establish regulations for this purpose, and provided it was allowed to do so, was willing to consent that every other class should do the same. In consequence of such regulations, indeed, each class was obliged to buy the goods they had occasion for from every other within the town, somewhat dearer than they might otherwise have done. But, in recompense, they were enabled to sell their own just as much dearer; so that, so far it was as broad as long, as they say; and in the dealings of the different classes within the town with one another, none of them were losers by these regulations. But in their dealings with the country they were all great gainers; and in these latter dealings consist the whole trade which supports and enriches each town.

While economic circumstance today are much changed since the time in which Smith wrote, the consumption requirements of national governments continue to echo this equilibrium imbalance. For one, the "losers" are still countryside residents, due to the knowledge based services these folk are expected to purchase from more prosperous regions. Not only is it difficult for rural populations to gain the option of living and working in today's low density U.S. cities, it has also been difficult to either access or create knowledge based services where they actually live, with the resources at their disposal.

Even though local corporate structure would only reclaim discretionary production/consumption choice at the margin (through alternate equilibrium), the fact such a structure is in operation would help to gradually restore economic growth. This is all the more important, given the fact central bankers have shifted to inflation targeting as a way of indicating they are no longer willing to provide adequate monetary representation for all concerned. Inflation targeting is an arbitrary cutoff point, which functions for the benefit of credit origination and governments, instead of citizens.

And consider what has not been publicly addressed in this regard. The societal consent which once existed for all producers to continue raising their own sets of production demands, is no longer in effect. Are central bankers no longer willing to respond to the commitments of nominal expenditure, on the part of the public?

Today, the nation state gains from the limitations on free markets that exist for both time based product and housing. Just the same, national definition of consumption expectations only distorts the reality of wage and income potential, on the part of many citizens. By introducing a public awareness of wage potential that is better aligned with resource potential, consumption expectations and consumption realities can finally come back into a better balance for all concerned.

Tending the Lesser Fields

Part of what made commodities so accessible to populations in recent centuries, was a level of marketplace commitment in developed nations that benefited producers and consumers alike. How did tradable sector production affect wages, stock and profit? In "The Wealth of Nations", Adam Smith wrote:

The rise and fall in the profits of stock depend on the same causes with the rise and fall in the wages of labor, the increasing or declining state of the wealth of the society; but those causes affect the one and the other very differently. 

The increase of stock, which raises wages, tends to lower profit. When the stocks of many rich merchants are turned into the same trade, their mutual competition naturally tends to lower its profit; and when there is a like increase of all the stock in all the different trades carried on in the same society, the same competition must produce the same effect in them all.

This all inclusive form of free competition also contributes to good deflation, over time. However, more recent forms of production have been approached differently, with negative results for both marketplace output and nominal income. In many instances, the merchants of knowledge created harsh production limits, much as guilds were once able to limit tradable sector production.

Good deflation (on the part of earlier maturing equilibrium conditions) included the "lesser fields", or a (relatively) smaller profit yielding potential. Adam Smith stressed how the profits of the best fields also provide the impetus of quick growth in newly emerging economies. Of a gradually maturing equilibrium, he explained:

As the colony increases, the profits of stock gradually diminish. When the most fertile and best situated lands have all been occupied, less profit can be made by the cultivation of what is inferior both in soil and situation, and less interest can be afforded for the stock which is so employed...As riches, improvement, and population, have increased, interest has declined. The wages of labor do not sink with the profits of stock. The demand for labor increases with the increase of stock, whatever be its profits; and after these are diminished, stock may not only continue to decrease, but to increase much faster than before. It is with industrious nations, who are advancing in the acquisition of riches, as with industrious individuals. A great stock, though with small profits, generally increases faster than a small stock with great profits.

Non tradable sector production has gradually changed the marketplace conditions that Smith described. In today's mature equilibrium, stock conditions for non tradable sector product are threatened, even as their profit continues apace. Today, the "lesser fields" of the marginalized can neither contribute or bear full responsibility, for marketplace supply or demand. As production has shifted towards less employment, the trajectory of labor has gradually drifted away from that of profit. And unlike the quantifiable stock of tradable sector goods, quantification for the marketplace output in terms of knowledge use, is increasingly in doubt.

Unlike the lesser fields which contributed to the tradable sector era, the lesser fields of non tradable sector primacy were purposely left out, due to their diluting effects on profits. Few employers have been particularly interested in the profit potential of the lesser fields. Further, in an era of time and knowledge based product, lesser fields are real human beings, along with the potential of their time aggregates in complete context.

When the actual fields of yesterday's economies were allowed to lie fallow, those fields gained the opportunity to regenerate, and eventually result in greater profit. Not so with people. When people are left to "lie fallow" - when they miss their timely roles in the selection processes of life - they tend to become like a barren wasteland of lost potential. When people have little opportunity to tend to the wants and needs of others, it becomes difficult to tend to their own. Among the mistakes of our era, is an erroneous assumption that human progress and prosperity can somehow continue, without the tending of lesser fields.

If the fortunate could walk for any length of time in the shoes of the neglected, they would discover that days, weeks and months may go by that few others speak to these individuals, look them in the eyes or otherwise show respect. Fortunately, there's an exception: People who are actually paid to do so. And often, the ones who are compensated for treating the marginalized much as anyone else, usually aren't really paid a lot to do so. It's not a bad thing to receive a small wage. What's bad is the complete refusal on the part of all concerned, to encourage a marketplace that responds to the small wages employers can actually pay.

Non tradable sector good deflation isn't the only issue, of course. What's really at stake is that a better world is possible, just by compensating people for helping one another. A marketplace for time value, would provide the chance once again, to tend the lesser fields.

Free Competition as "Random" Innovation

What if no one anticipates real innovation in the future, because substantive change would prove too disruptive for general equilibrium conditions? While "sticky markets" have their own problems, they contain elements of stability that can't be ignored. Free competition for infrastructure, building components and time based services, would be too random in many frameworks. Even knowledge use systems need to make infrastructure choices at the outset, hence couldn't use a full range of options in each instance. Instead, each community could provide variations for building components and infrastructure choice, rather than replicating the same choices over and over again.

Meanwhile, marketplace innovation (of a sort) continues apace in less disruptive forms, such as adult coloring books. Ah well! Joshua Gans writes:

We don't speak of it very often but economists face a fundamental challenge with respect to innovation: if innovation is something no one has anticipated, then the (Savage) axioms upon which we base our rational choice decision-making cannot apply. Let me explain. Decision-making is all about actions and their consequences. Leonard Savage created the framework by which economics deals with this by assuming that all agents "look before they leap". That is, an agent would choose amongst actions available taking into account all possible states of the world and the consequences in each state. This requires agents to have complete knowledge of the state-action space.

He notes that while rationality is bounded, innovation is random, hence it's fundamentally impossible to plan everything out. I would add that in general equilibrium conditions, the "irrationality" of innovation can also disturb interconnecting price structure. Further, any desire to maintain given structural "knowns", can lead to the cost issues which occur with naturally arising monopolies. As Adam Smith explained:

The price of monopoly is upon every occasion the highest which can be got...free competition, on the contrary, is the lowest which can be taken, not upon every occasion indeed, for any considerable time together. 

Even knowledge use systems would need systematic organizational capacity, to allow free competition for time value in understandable context. In such a marketplace, layered sets of options for time based product would be staged in regular intervals, thereby making it easier for individuals and groups to coordinate preferences and desires. While some forms of time based product would occur on spontaneous terms, others are ongoing and more fixed in nature. By coordinating for time value, innovation becomes a reference to broad organizational capacity. Still, the primary innovation is coordinating for mutually desired cost savings in a non tradable sector environment.

While knowledge use systems aren't completely random, they nonetheless incorporate free competition to a degree that a base wage structure can be highly effective. By moving a combined set of common costs (mutual goals) closer to the participants involved, fewer resources are needed in aggregate which would otherwise force everyone to "move further" to reach local non tradable sector costs. This makes it possible for all concerned to focus on the life challenges of disposable income, instead of losing disposable income options to non tradable sector formation, as so often occurs in general equilibrium conditions.