Notes on a Changing General Equilibrium "Middle"

Did increasingly polarized income structures, in the guise of a "squeezed" middle class, strongly affect the election outcome? It's difficult to know for certain, and plenty of individuals with high incomes also supported Trump. Prior to these latest discussions concerning regional unemployment, the broad discussions regarding inequality mostly took place before Trump's internet dominance shifted the focus elsewhere.

However, a changing "middle" likely contributes to areas now lacking in economic complexity, which extend well beyond the rural areas now in the spotlight. Despite these structural shifts, Democrats apparently aren't inclined to change direction. But is the lackluster response really all that different, for Republicans? Even though Trump's personality means uncertainty, he'll still be staffing Washington with plenty of folk who have little reason to change their stripes, regardless of structural economic shifts.

Some of these shifts have actually been apparent for decades. As Tyler Cowen noted in "The Great Stagnation", wages for the American family have been stagnant since the seventies. Recently, I complained that Tyler had chosen a cultural/political response to a clearly economic problem involving rural economies. But while reviewing some of the material from a few years earlier, I remembered how discussions re a "declining middle class" had also taking place on similar terms. No wonder it was difficult then - and of course still is - to envision an organizational equilibrium response, to the reality of wages which have been stagnant for more than four decades! People have forgotten how to free a marketplace so as to move closer to wages, when it becomes difficult to move wages toward societal expectations.

Nevertheless, it is difficult for policy makers of any ideological persuasion to respond to this reality, in part due to the fact their representatives belong to the population segment whose income levels have gradually shifted upward. Hence it's easy for conversations which one hopes to find economically helpful, to devolve into discussions of identity and culture.

Meanwhile, the macroeconomic effects of an increasingly secondary market dominated economy, are continuing apace. In all of this, the non tradable sector organizational capacity which consists of knowledge properties and real estate holdings, is vastly different from the broader societal wealth which naturally accrues from tradable sector activity. The problem goes beyond the fact this form of non tradable wealth is proving difficult to disperse and/or replicate. Rather, the bigger problem is this present structure now limits the output capacity of general equilibrium, for all concerned.

The social effect of this phenomenon is a vast amount of people who can't expect to take part in or contribute to the present economy, on similar terms as before. Already, the agglomeration effects of a mature general equilibrium, result in time based services which are increasingly limited to prosperous areas. And life expectancies in the U.S. are beginning to falter, accordingly. As Aaron Carroll (The Upshot) noted:

What no one seems to be debating is that we have a shortage of services.

I've been shouting that very fact from the rooftops, for more than three years. Argh, has anyone noticed?

As someone with healthcare providers in their extended family, I can only surmise it must be threatening to openly discuss a (mostly hidden) lack of services capacity, given today's hierarchical forms of time based services. Six or seven years earlier, I attended a voluntary healthcare event which provided free dental care. It was astonishing to see the thousands of hopefuls in attendance, waiting for their chance to relieve conditions which in many instances were already impacting their daily lives. The fact that so many people would wait in long lines for dental care they could not otherwise receive, was unsettling enough. Further, many of these individuals were likely U.S. citizens. How much longer would they need to wait...might they still even receive voluntary care at all, should that already limited care need to be apportioned to "outsiders", first?

I'm not saying I'm anti-immigrant, for I don't have strong feelings in that regard. However, the last time I made a concerted effort to return to the workplace, I finally realized the extent to which my chances of employment were also diminished, because of a large pool of immigrants who lived close to that same area. One could say they were also "competing" for a number of service jobs I would gladly have taken, if offered. Finally, when I was not able to procure work, I ended up returning to my rural hometown (after a near 40 year hiatus), something previously difficult to imagine. Did immigrants limit my chances for economic access? I'd prefer to think not, but then we still approach the workplace as though it has to be a zero sum world.

Why not generate new economic environments for living and working, that are more conducive for all comers. Why not treat time and knowledge based services as free markets, just as we treat tradable sectors as free markets. Right now, it's not easy for people to discuss matters on these terms, but it's important to do so while there's still time. I hope that soon, it becomes easier for economists to discuss economic matters again, instead of retreating into political divisions on the "worthiness" or "non worthiness" of group or identity based culture.

Govern by Reason, Compensate Through Reason

In other words, make the world of reason and knowledge use, a valid part of economic life for all concerned. Without this knowledge use option, the local education of areas which lack economic complexity, is beginning to lose its meaning in a larger sense. As things stand, such education can devolve into a sad enticement for aspiring individuals to emigrate to local prosperous regions (or distant nations) just to gain economic validity.

Worse: when rural residents find it difficult to move to (or remain in) prosperous areas, policy makers can make some unfortunate assumptions: 1) the ones left behind aren't motivated enough to matter in the scheme of things. 2) the places that lack economic complexity, aren't worthy of serious consideration. How do we know those assumptions are true? No one can afford to randomly assume that citizens don't desire to take part in knowledge based challenges, just because of the ways these challenges are currently expected to occur in workplaces and marketplaces.

No society can expect to maintain knowledge based wealth, when large numbers are expected to live their lives without the economic compensation that would reward their own reasoning abilities. Yet today's knowledge use rights are mostly sealed within the confines of general equilibrium expectations. And political constituencies which normally highlight the importance of free markets and property rights, remain largely silent, regarding the support of knowledge production rights. This silence becomes all the more deafening, as knowledge takes center stage in a 21st century economy.

Regarding the rural areas which contributed to Trump's win, I was a bit disappointed with a recent post from Tyler Cowen, who responded to Tim Duy. First, from Duy's thoughtful post, which deserves to be read in its entirety:

We don't have answers for these communities. Rural and semi-rural economic development is hard. Those regions have received only negative shocks for decades; the positive shocks have accrued to the urban regions. But he at least pretends to care.

What I could not understand is why Tyler Cowen, who is an economist, provided what he believed to be a useful political and cultural response (instead of an economic response) to this plight. Even though an earlier election of Mitt Romney might have meant more "common sense" than can be expected from a Trump presidency, what, specifically did that have to do with the economic situation of rural residents?

And why did Cowen think that less cultural emphasis on alcohol and drugs, could lead to crucial differences in the lives of the disenfranchised? Even though this may well be true, it does not detract from the fact both alcohol and drugs are also used as escape, from a society which has too few means for individuals to participate on economic terms. No economic terms? Few social terms, either. In such circumstance, if drugs and alcohol aren't used as escape, something else is likely to take their place.

Put simply, I had hoped for some economic reasoning from Tyler Cowen in his response to Duy, given the fact at root this situation is distinctly an economic problem. Granted, not everyone is capable of solid reasoning faculties to a degree their efforts can be compensated on a regular, ongoing basis. But most people are capable of reasoning to an extent, that many of their efforts on behalf of others, could count as an economic plus. This, instead of allowing people to languish in categories where they are "written off" as a constant negative on society. After all, the loss isn't actually "written off". Society invariably has to pay, somehow.

Why not compensate reason wherever it is possible to do so, instead of constantly denying citizens the opportunity to participate in the use of knowledge. Whenever the use of reason becomes a central part of economic frameworks, it provides means to move society forward. Meanwhile, as more people are being denied the use of their reasoning faculties, the less reasoning that societies are able to apply to the good of all, regardless of who happens to hold political offices in Washington.

Some Benefits of Resource Linked Money

One responsibility for the equilibrium corporation as an institution, would be accounting for the new wealth which a marketplace for time value could generate. In this scenario, time value enters the marketplace as a basic commodity, and it brings new money into the economy which is also resource linked. Resource linked money would specifically focus on resource sets which are important for all individuals, in order to as closely approximate monetary compensation as possible, for one's workplace efforts. By utilizing internal organizational capacity for these resource sets, good deflation would finally become possible for non tradable sector activity. This particularly matters in a macroeconomic context, since it provides a way for time based services generation to sidestep the problems of Baumol's cost disease.

Baumol's cost disease is a general equilibrium problem, in that the income levels of (relatively) less productive time based services, nonetheless need to rise to meet equivalent work offerings in local primary market employment. This organizational capacity for time based services (as secondary market  formation) is externally based, due to its dependence on the valuations of primary market positions. Consequently, the amount of time based services possible (on these terms) is determined by the amount of primary market resource capacity (and valuation) which is available.

This secondary market resource structure, which reflects local aggregate income and real estate value, may also include state and national revenue. While these additional income flows are positives, the valuations they create are nonetheless a double edged sword, for economic access. Further: the most prosperous regions include international resource connections which contribute to local equilibrium values as well. Steve Randy Waldman recently noted Baumol's cost disease as a factor for population density limits, and in a post last month I also wrote about some of the challenges for generating more density in cities which are particularly composed of secondary markets.

Far more is at stake in general equilibrium conditions, than simple building costs or personal time use considerations. Multiple markets tend to overlay the ones which are obvious, and these additional markets operate according to their own sets of supply and demand constraints. The availability of resource capacity which flows from other nations and regions, translates into higher local costs than would otherwise result for working and interacting in the most prosperous regions. Yet these aren't the only additional cost factors, since traditional construction in many locales, has seen little innovation for materials, design or even mass production.

The sticky markets (and wages) of general equilibrium, make it difficult for non tradable sector factors to be organized as a clean slate that could extend across multiple categories. However, it is possible to achieve good deflation for non tradable sector activity, when the process is channeled through an alternative equilibrium, which would create a clean slate for both services generation and local asset formation.

Doing so would allow building construction to more closely approximate actual costs. Meanwhile, these costs can be further trimmed through innovation in materials and design, along with mass production of the more basic building components. This physical environment makes it possible to approach knowledge use as an internal coordination mechanism. Due to the lower local costs of living, the level of income one normally associates with knowledge based endeavour is no longer necessary.

Consider how resource linked money can contribute to this scenario. In alternative equilibrium, time based services - regardless of the level of skill involved - would no longer have to directly compete with the productivity requirements of prosperous regions, because these services would operate in a time based continuum which exists solely in relation to overall group time value. The resource link is made explicit, in that it is institutionally connected with the time continuum social benefits, alongside lower costs for the physical components of local environment. Even though this time value is monetarily compensated at less than minimum wage, it does not face the housing or time based services costs which are expected in general equilibrium conditions - particularly in prosperous regions.

Another important consideration: the compensation of resource linked money, creates a coordination space for individuals, which accrues from the first workplace efforts of one's youth. After all: how much of what is sought in today's prosperous regions, really consists of more than one's personal space for coordination with others? This lifetime position is flexible to an extent that portions of it can be rented to others, when not currently in use. Should any group begin anew elsewhere, each individual's coordination space remains intact, within the overall structure.

Resource linked money would make it possible for more individuals to enter knowledge based work and services in regions that now lack economic complexity, yet without having to sacrifice basic life amenities just to do so. Resource linked money could provide means to grow knowledge and time based services directly, without having to transfer wealth from other sources in order to do so. Indeed, should knowledge become more closely associated with wealth creation, much of the political confusion of the present, might very well subside.

If the Fed Doesn't Like Inflation...

Why not give them (and everyone) a viable non tradable sector option, to otherwise naturally occurring internal inflation? By making room for greater productivity in non tradable sector activity, the productive potential of tradable sectors could remain strong as well - wherever tradable sector activity happens to take place. Plus, the Fed's "let's just cut off everyone" response to today's non tradable sector inflation, helps no one, regardless of whether non tradable sector activity "eats" everything in its path. How might production reform be considered, given the problems of a mature general equilibrium?

First, any time governments and central bankers attempt to reduce price inflation arbitrarily, they end up reducing marketplace capacity and the ability to participate in the economy, at the same time. This has already occurred to some degree, in both healthcare and housing. The main difference between governments and central bankers - given policy makers' propensity for price ceilings, price floors and monetary tightening - is that monetary authorities in this instance are creating losses in marketplace capacity too slowly for everyone to notice (thus far). That said, people are beginning to notice the lack of economic participation, because of the decline of so many places that were once full of economic vitality.

The best response to present day sectoral imbalance is a free market response. And - as many readers know - I believe a marketplace for time value to be a useful long term approach. A new group centered time continuum for time based product, could occur in settings where first mover (innovative) activity need not threaten already existing patterns. When potential innovations are suggested that are useful, but no alternative equilibrium exists to accommodate them, perhaps one can be created. Eventually, this approach could translate into greater domestic vitality. Flexible forms of property ownership, would further augment the process.

Otherwise, today's relatively fixed positions of real estate and time use (in general equilibrium), will only continue to limit growth capacity for nations as a whole. It's a problem which is further exacerbated, when nations respond by trying to regain the very tradable sector activity which is nonetheless being crowded out at an international level, by today's non tradable sector patterns. Meanwhile, central bankers have responded by reducing everyone's marketplace capacity and participation.

Just the same, economic balance between tradable and non tradable activity can be difficult, when much of the latter takes place through imposed - rather than free market - conditions. There's also a natural resource aggregating component to this problem. The same competitive cost strategies which contribute to tradable sector competition at an international level (competing with everyone), often present problems for non tradable sector activity (competing locally), in local forms of general equilibrium.

Higher (relative) pricing strategies not only make it easier for non tradable sectors to establish dominance, they result in greater monetary resources for local organizational capacity. However, many of the non tradable sector pricing mechanisms which contribute to regional vitality through internal inflation, manifest elsewhere in the form of problems for economic access, along with higher levels of both public and private debt than would otherwise be necessary, for nations, businesses and citizens alike. The lack of (customer driven) non tradable sector innovation, has resulted in healthcare, education and housing inflation which has finally reached a point capable of threatening international economic stability.

Whereas an alternative equilibrium that generates internal good deflation for local production and consumption, is capable of creating positive externalities which multiply over time. Further, those who would reduce both producer and consumer costs through innovation, would not create the first mover issues which otherwise disrupt local organizational patterns in general equilibrium. When small alternative equilibrium settings mature quickly, as of course they sometimes will (with their own unique marketplace rigidities), create new small alternative equilibrium settings. The object is to reach for more productive economic complexity, wherever it is possible to do so, instead of forcing people, arbitrary pricing and the most important forms of knowledge use into already productive spaces.

If the Fed doesn't like inflation, and of course it doesn't, an alternative equilibrium option is one way to ultimately restore growth for economic activity in all sectors. Even though alternative equilibrium would generate a closely coordinated - hence internal - marketplace for time value, this is aggregate growth which can be replicated by further decentralization, for vital knowledge use and time based services creation. Nevertheless, these are organizational patterns which hold potential to create good deflation for non tradable sector activity. Good deflation in non tradable sector activity, could finally convince today's central bankers to let go of their losing game of gradual monetary tightening, in the hopes no one is really paying close attention.

Are Economists to Blame for Economic Stagnation?

A definite "yes" or "no", is not so simple. And any answer, depends on where one's point of reference actually lies. Economists can hardly bear the entire burden of responsibility, given the societal shifts which now affect economic access. One problem in this regard, however, is little societal agreement as to the "legitimacy" of average (non credentialed) individuals who attempt to solve problems in their stead. Meanwhile, regarding the travails of the working class, Dr. David Ruccio recently wrote, in "Why Mainstream Economists are Responsible for Electing Donald Trump":

...mainstream economists, in their zeal to push globalization forward, ignored those problems and concerns. They thus paved the way and deserve a large share of the blame for Trump.

Granted, I've expressed concerns about mainstream economic thought and how it could contribute to populism, in previous posts. Nonetheless, there are dangers in carrying this rationale too far, since it encourages voters all along the political spectrum, to reject more mainstream agendas than actually warrant abandonment. Only stop to consider where broad attacks on neoliberalism can gradually lead, for instance. Hence it's discouraging to find more rational, balanced arguments about globalization such as Dani Rodrik has presented, used as attacks against capitalism and the like. No one gains if useful economic concepts are destroyed, just because it becomes politically possible to do so. Why not look closer instead, to discover where common ground exists between the old and the new.

It may be that little structural progress was made during the Great Recession, because the economist role in developed nations is mostly that of a passive observer. Thankfully, economists are not free to impose top down blanket "solutions" on populations. But that doesn't mean they couldn't begin the process of lending support to populations at a grassroots level. After all, there's a world of difference between decentralized and exploratory local economies, and the kinds of economic planning which caused such widespread harm in the twentieth century.

One public conversation which has yet to even occur at a political level, is of a high tech future which leaves too little room for people to participate. The fact that everyone needs to have a valid role in this economic vision of the future, has been difficult for economists and policy makers alike. No one is prepared, for the fact it's past time to address the reality of our own destinies. When will populations finally get a go ahead from their governments, to begin the discussion? According to Stephen Hawking:

If communities and economies cannot cope with current levels of migration, we must do more to encourage global development, as that is the only way that the migratory millions will be persuaded to seek their future at home.

While some think of migration problems as other's problems, local migration is now increasingly limited in developed nations, due to structural problems with similar causes. The same evolution in economic development, deserves a chance to proceed at home in our own developed nations as well. Interestingly enough, prior to the Great Recession, private industry was already trying to get the message out, that "business as usual" would no longer be able to fulfill the employment roles which many would be workers still hoped for. If it seemed difficult back then to make such an important message heard, even those who speak of structural unemployment today, note how few are willing to approach the subject on these terms.

Economists aren't to blame for the massive structural shifts of our times. And fortunately, they still have a chance to regain their respect in the eyes of the public. After all, there should still be time for everyone to take part in a grassroots effort, to rebuild a better economic future. What sort of work do people wish to participate in? How do those of limited means, wish to build better, more respectful lives among one another? These questions might not be as difficult to answer, as many presently imagine.

Getting Beyond General Equilibrium Restraints

Grassroots reform, such as I have touched on in numerous posts, could allow those who often appear to need help, a chance to eventually learn how to help themselves in meaningful ways. Such an approach would also make it possible to recreate economic complexity, in many forgotten regions of the country.

Most important, grassroots reform would create much needed growth and output for the economy. How might one think about greater economic vitality at a grassroots level, versus the "preservation" of existing jobs? According to Justin Wolfers in a recent NYT article ("Trump and Carrier: How a Modern Economy is Like a Parking Garage"):

A parking garage stays full, and an economy stays healthy only if it is constantly refreshed.

Part of the problem for mature general equilibrium conditions, is the fact too many special interests are now at work, to prevent the "refreshing" that normally takes place for further economic inclusion. For instance, our most prosperous regions now have a "closed" sign, in the form of high real estate costs. When economies become dominated by secondary market formation, it becomes increasingly difficult for individuals with middle range skills to work among others with high skill levels.

Hence further growth and output now depends on extending the range of economic complexity, instead of "forcing" more economic inclusion into places where productive complexity already exists, as Adam Ozimek (HT Steve Randy Waldman) noted in recent posts. Again, Justin Wolfers, utilizing the parking garage example in which Trump sought to make certain parked cars "stay longer":

Rather the long-term strategy of such business is to try to attract a larger clintele by offering a more convenient experience. They understand that there are many more potential customers outside than inside the garage. In this analogy, the government's best hope for creating jobs is to create a positive business climate.

However, something needs to be considered about his otherwise apt explanation. He's right that when tradable sector formation exists in a competitive state, it benefits from the fact there are "many more potential customers outside than inside the garage". The problem in this regard is non tradable sector activity. Today's prosperous regions - because of their dependence on existing revenue via secondary market formation - serve as a prime example of not wanting additional producers and consumers from elsewhere, due to how their resource utilization is already structured.

This results in a form of non tradable sector wealth capture which crowds the very primary marketplace it relies on, instead of contributing to (further) growth and output. Since tradable sector activity obviously contributes to growth and output, not to mention the revenue that sustains today's secondary market formation, it appears more and more as though the goose which lays the golden egg.

Here's the problem. Many assume that presently existing tradable sector activity can produce both greater employment and output as desired, wherever such activity may happen to be. However, the internal organizational capacity of tradable sectors now requires fewer employees, relative to output in general. This results in a lower labor force participation level, which in turn limits the amount of tradable sector output that is needed, due to the smaller customer base which results from low labor force participation. Since today's non tradable sector activity remains in a dependent secondary market formation, it too is forced to limit labor force participation. This further limits the potential customer base which is able to engage in primary market activity.

Yet it is completely possible for non tradable sector activity to organize in a non dependent primary market formation, by recognizing time value as a product in its own right. This form of institutional structure would eventually restore labor force participation and consumer base levels, which in turn would allow tradable sector activity to increase output levels along with the relative level of employment capacity they remain able to offer, given present day automation. In the meantime however, the dependence of non tradable sector activity on tradable sector wealth, means less ability to contribute to the employment that nations increasingly seek for their citizens.

In other words: one could say that today's extensive (secondary market) non tradable sector organizational capacity, is not yet positioned to "attract a larger clientele by offering a more convenient experience", either in terms of time based services product or building component asset formation. Yet these are precisely the areas which could generate new economic vitality, beyond the present day "parking garage" of general equilibrium.

Best, the alternative equilibrium of local services production, could function as a primary marketplace which - because it is not dependent on the revenue or employment of tradable sector activity, can actually contribute to both, by generating new growth and marketplace output. Even though deregulation always disrupts the sticky markets of a mature general equilibrium, there can be new zones for minimal sets of regulation which not only make sense for all involved, but are less of a threat to established interests. This would be a critical step, for the inclusion of population that is now needed to contribute to a broader level of employment, than what is now capable of supporting the economic activity of the present.

Before wrapping up this post, there's something else that deserves to be said about Trump's efforts, whatever one may think of either the individual, or what he now seeks to make happen. It's too easy to point out the fact anything he attempts, likely won't work. Oddly, that is the same response most everyone else has received as well in recent decades, regardless of their level of skill, intelligence or job description. The blogosphere could have been a place - after the Great Recession - where productive structural adaptations had a recognizable beginning point, especially in those initial years of online engagement. Unfortunately, little changed, and the political retreat back into tribal positions is most unhelpful. We still have a long way to go, before we gain secure means to hope for a better economic future.

Economic Stagnation: Build a "Fire" That Will Last

Even though there are multiple structural factors, today's economic stagnation has a strong monetary policy component (the Great Recession as beginning point) with a continuing residual effect, due to tight monetary reasoning. Central bankers never fully honored aggregate spending capacity when it was most needed, during the negative shock of rising oil prices. In all of this, the financial fallout was an effect, not a direct cause. Nevertheless, what would likely have been a garden variety recession, consequently turned into the Great Recession. What, however, are also some real economy contributions to this unfortunate circumstance?

There is a lack of understanding about the organizational capacity which contributes to direct wealth creation, as opposed to economic activity which presently "piggybacks" earlier wealth in order to take place. Consequently, there are problems for overall output in relation to debt structures. While a certain degree of secondary marketplace activity is a positive in terms of economic complexity and income levels, it is dangerous to rely on this mechanism without sufficient first market activity, for too long. First market activity might also be thought of as the kindling for a sturdy fire, along with the application of logs which burn for the longest periods.

Today's economy is reminiscent of a fire which is blazing brightly, but not enough sturdy hardwood has been contributed to make the process long lasting. Suddenly, such a fire, while appearing quite substantial at the time, could quickly die down. Indeed, the secondary market wealth of nations is vulnerable to these conditions, if and when primary market organizational patterns are not sufficient to maintain economic "warmth". What about the "filler" responses that policy makers are resorting to, for a quick blaze?

1) The mercantile response is one of the more unfortunate, given the fact Adam Smith explained how protectionism could reverse wealth creation processes, before the United States was recognized as a nation. What could explain a reversion to this antiquated reasoning? Again, think of the fire. Even though what is sought is sturdy hardwood (primary market activity) tradable sector activity that is reduced at an international level can be likened to a fire in which the damper has been shut, so the fire does not have sufficient oxygen, to burn. In particular, present day general equilibrium needs a tremendous amount of "oxygen" in order to work properly.

It has proven easier thus far, for politicians to take the short sighted and backward mercantile approach, than to initiate a serious public dialogue regarding growing automation in today's basic employment structures. Automation ultimately affects every job description, if and when a public does not work together to redefine employment on new sets of terms. And it's the response to automation which nations and their citizens need to fully address now. There is a simple way of doing so. Acknowledge the importance of time value as valuable as any other product in existence. Do so, before time value is essentially done away with in more aspects of productive organizational capacity, than is already the case. Turn time value into a local hardwood well suited for burning, so that policy makers back away from the idea of "reclaiming" hardwood from other nations.

2) A low interest rate environment as a "bonus" for government spending, response. Both private and public debt become problematic, when secondary market formation threatens to overwhelm primary market activity. This secondary market dependence can also quickly dampen what appears as though a sturdy fire, should populations find reason to doubt their nation's ability to fulfill collective fiscal obligations. The low interest rates of the present are not an economic positive. Not only does this low interest rate environment contribute to confusion regarding monetary policy theory, it lends false hope to fiscal responses and financial reform as structural means for problem solving.

Too much of the marketplace has become structured along secondary market lines, which greatly contributes to the initial investment problem, and (in this instance) the low interest rate environment. Again, planting more hardwoods (organizational capacity for knowledge use) for a sturdy fire, would contribute the needed real economy response which could eventually lead to more investment, and a higher natural rate of interest.

3) The negation of the importance of supply and demand in a changed economic environment, is also wishful thinking writ large. Whereas the wrongheaded response of mercantilism at least recognizes the reality of primary market activity for fiscal transmission, this supply and demand reasoning ("money doesn't matter"), misses the importance of supply side organizational capacity. In fact, public and private organizational capacity can both be problematic, when they take advantage of resource constructs that are not their own to rightfully assume.

Negation of the importance of supply and demand, also goes hand in hand with the wishful thinking that governments are able to tend to long term growth and output via their own means, when real market actors prove recalcitrant to do so. One reason it can be easy for progressives to bash supply and demand, is the fact too few free market advocates on the right have highlighted the lack of free market supply, for knowledge based wealth creation. And the size of the fire (an economic environment) will ultimately be limited by the good hardwoods which are planted for this purpose. Let's plant more hardwoods for the fire.