Does Money Still Function Well as "Half of Every Exchange"?

So long as money is mostly representative of tradable sector activity, prices serve as a fairly good measure of societal coordination. However, when time is arbitraged in the marketplace with no direct relationship to its existing aggregates, and time based services become more prominent in relation to tradable goods, total societal coordination eventually becomes less effective.

While listening to a podcast between David Beckworth and Steve Horwitz re monetary disequilibrium, I was reminded of some of the implications, when Horwitz stated that money is "half of every exchange". Even though this representation is perfectly suited for tradable sector activity; alas, it has only proven a partial solution for the introduction (and consequent dispersal) of knowledge use in the marketplace. A different set of dynamics comes into play, for money as representative of the non random nature, of economic time.

Since human capital investment makes additional claims on (all) existing resource capacity, the result in total factor productivity terms, has been additional input requirements in relation to aggregate output. These demand requirements translate into additional claims on existing revenue, such as what also occurs in recessions. As a result, monetary disequilibrium is no longer limited to recognizable recessionary conditions.

Which means today's increased dominance of time based service activity, includes disequilibrium effects which extend beyond the recession conditions Horwitz referred to in his podcast with David Beckworth. Recent recessions are increasingly a result of monetary tightening on the part of central bankers. This almost imperceptible tightening, may also represent an attempt to manage a gap which continues to grow, between the monetary value of finite time, versus that of "infinite" resource capacity. Presently, monetary tightening continues at an almost imperceptible level, even though economies may appear as normal or in recovery.

Inflation targeting in particular, is a blunt tool for central bankers to respond to the Baumol effect, which adjusts the value of time based services to to tradable sector income, in prosperous areas. The Baumol effect helps to explain the difficulties of adopting a productivity norm (as explained by George Selgin), which could take the good deflation of tradable sector activity, into account. The inability to do so, helps to explain the constituencies which oppose today's fiat monetary systems.

Yet interestingly enough, consider why the Baumol effect is actually a natural outcome, of the fact that money has functioned as half of every economic exchange! Since money has to coordinate for both "infinite" resource capacity and "finite" or limited time, policy makers are increasingly faced with a need to adjust nominal income as if time aggregates could somehow remain in a constant relationship with other resource aggregates. Yet this is not possible in general equilibrium settings. Fortunately, however, it is possible to account for time constraints in relation to other resource capacity, in alternative equilibrium scenarios.

Decades earlier, the monetary expectations of non tradable sectors, weren't so problematic. After all, tradable sector dominance included a domestic (national) monetary framework which was easier to understand. For centuries, time based product demands could readily be coordinated via the expanding revenues of tradable sector output. Whereas now, the production norm which would have worked well for a tradable sector dominant economy, is difficult to implement at general equilibrium levels, given the revenue requirements of non tradable sector dominant economies.

Meanwhile, aggregate output as measured by all resource capacity, continues to pull away from the finite limits of time aggregates - not to mention their representative asset formation, as banks become anxious to unwind balance sheets. When money has no choice but to "stand in" for more direct forms of coordination for time based product, the random and growing nature of total resource capacity, introduces elements of political and social uncertainty, for the continuation of knowledge use throughout the marketplace.

Even though spontaneous coordination of time based product (at national levels) remains desirable, limits to growth in this form of knowledge use dispersal, are becoming evident. It's important to maintain fiat money for spontaneous national coordination of time and knowledge value, but with a caveat: make room for local coordination of time based product, in which a unit of time functions as half of every time based exchange.To make this possible, a new institution would allow money to further back these transactions, as newly generated commodity wealth. Time value would finally receive the formal recognition that it deserves, as a basic economic activity.

Indeed, time arbitrage could gradually contribute to a productivity norm for time based services at equilibrium margin. Margin equilibrium adjustments would gradually decrease total factor productivity imbalances. This would allow the gap to grow - undisturbed by monetary tightening - between the valuations of total resource capacity, versus aggregate time value.

By allowing money to reinforce time value in relation to itself as a commodity good, no policy maker need be compelled to shorten (or tighten) the gap between time aggregates and other resource aggregates, in order to fight the Baumol effect. Doing so, is only unnecessary constraints on long term growth. Instead of attempting to manage the distance between finite time value and "infinite" resource value, it would be more conducive to allow money to assume an additional function, as commodity wealth for economic time value.

Notes for Time as (Formalized) Value in Use

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

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

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

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

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

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

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

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

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

Solving for (Basic) Equilibrium

By basic, I'm referring to the simplest equilibrium possible: small communities with few extra amenities. There are stark contrasts between the basic equilibrium environments of today's developed nations, versus the managed resource capacity of earlier local communities. Early basic equilibrium was non monetary and self sufficient, even if precariously so. Today's basic equilibrium environments often appear less precarious by comparison, given their general equilibrium dependence (retirement, disability, etc).

Basic equilibrium could be a useful construct, in that it suggests conceptual framing for the evolution of general equilibrium conditions. General equilibrium is often expressed either in terms of concrete mathematical formulas, or assumed to be complex beyond comprehension. How to think about the matter differently?

Regular readers won't be surprised that I imagine basic equilibrium, as local sets of non tradable sector housing and time/knowledge based services. It's interesting that these now burdensome aspects of our lives, evolved prior to money. Money became necessary as tradable sector activity grew more complex. Not only did tradable sector activity appear random as contrast with non tradable sector activity, it started society down the path to long term growth and progress. Gradually, the (constantly) changing relationships between tradable and non tradable sectors, generated the complexity which makes it difficult to categorize general equilibrium dynamics.

Over time, the basic equilibrium of local sectors gradually become enmeshed with governmental budget burdens, which feature in today's growth limits. Nevertheless: While governments contribute to economic stagnation, by no means are they alone. They don't have a monopoly on the economic activities which lead to income capture or excessive human capital requirements (input). As more inputs are required in relation to output, governments are left with fewer output results to redistribute. Both public and private interests have inadvertently reduced aggregate output potential and marketplace expansion. Albeit by different means, different sectors often emphasize aggregate input over aggregate output - a problem which likely impacts both total factor productivity and the natural rate of interest.

A notable feature of today's basic equilibrium settings, is the dearth of locally derived income. Yet those earlier, non monetary basic equilibrium communities were self supporting because they had to be. They had to solve for basic equilibrium as best they could. Hence survival meant awareness of the vital relationship, between aggregate inputs and aggregate outputs.

While national dependence still appears safer than risky self supporting alternatives, communities are nonetheless vulnerable to the growing budgetary battles of the present - especially the struggles which involve healthcare. In the modern version of nationally defined basic equilibrium, one's personal time value may not provide adequate survival options, in the event of budget breakdown. Is it possible to change this circumstance? No matter how small, a local community needs the same understanding re inputs to output ratios, as their governments.

There's a childhood game called "Red Light Green Light", which provides what I hope is a simple way to envision total factor productivity, aggregate inputs and outputs, and the natural rate of interest. I'll briefly explain the game. First, we drew a line at the end of the street, where the person making the calls would stand. Everyone else faced the caller from a distance, and approached the line on the green light announcement. If they were still moving when "red light" was announced, they had to back up and start over.

Now, imagine the game as an economics scenario. Perhaps one could think of the person making the calls for red or green light, as referring to recessions and recoveries. Each sector is represented, as a person approaching the line. Each step forward by a sector participant, represents an output gain over the required inputs, which in turn means extra resource capacity beyond what was needed to begin with. The steps taken by all sector participants during the course of the game, is total factor productivity. The line is the natural rate of interest. As each sector crosses the line, their additional resource capacity ("left over" outputs) becomes available for redistribution, whether for savers, governments, firms or others.

Why is it so difficult, for the time based product of non tradable sector activity to cross the line? More inputs are being required, in relation to the total output these participants gain before they can proceed forward. Yet this handicap in total factor productivity is hidden, by others who have already crossed the line where their additional gains become available for redistribution. Another sector which experiences difficulty crossing the line, is loan formation which focuses on the income capture of consumers, instead of generating new growth potential.

By turning more time value (input) into output, during the entire process of human capital investment, sectors which feature time based product could also cross the line, thereby making their contribution to the natural interest rate. As more total output once again becomes available for redistribution, growth could resume, and monetary policy could return to a true normal. Let's solve for basic equilibrium.

"Compensating" for Missing Participation, Isn't Easy

Since there's too little direct participation in the marketplace, can today's institutions somehow "compensate"? In other words, can (existing) economic time value, maintain a stable relationship with total resource capacity?

Prices reflect existing scarcities. Still, important scarcities which affect underlying structural dynamics, aren't always taken into consideration. In particular, what sometimes appears as though "too high" asset prices, could instead be indicative, of scarce productive agglomeration. Why is the Fed getting this wrong? Scott Sumner echoed Tim Duy's concerns re excessive monetary tightening, and muses:

It seems to me, that the Fed is wrong about both inflation and asset bubbles...In recent decades, the Fed has pretty consistently overestimated the natural rate of interest. If the natural rate is lower than the Fed assumes, then both of these claims are true:
1.  Equilibrium asset prices are higher than the Fed believes.
2.  The Fed's current policy stance is tighter than the Fed assumes, and hence unlikely to deliver on target inflation going forward.

Equilibrium asset prices, ultimately reflect how society values productive agglomeration, in relation to other resource potential. Housing - as a primary income destination - is one of the most important costs of economic access. Yet if broader economic complexity could be generated, what presently appears as "excessive" high housing costs, would eventually spread across new destination points for productive agglomeration. This would also serve as a relief valve, on the price pressure of today's most highly valued areas.

With too many individuals stuck on the economic sidelines, some institutions are attempting to "compensate" in ways that are confusing or even counterproductive. The Fed's insistence on normalization is disconcerting, as policy makers attempt to curb forms of inflation which have nothing to do with monetary representation - particularly as it is currently practiced. The relative scarcity of productive agglomeration, has yet to be recognized for its monetary implications. Meanwhile, some observers still believe too much money is being printed, which in term generates excessive housing costs.

In spite of an economy which needs substantial structural assistance, the Fed is beginning to unwind its balance sheet, even as IOR is left intact. George Selgin recently noted that if the Fed is serious about reducing its balance sheet, it would need to quit paying interest on reserves to banks. Yet the fact banks have grown dependent on this revenue source, suggests they are not ready to return to a real normal - one in which bank revenue revenue is derived from traditional sources.

Of course, the semblance of a normal life was lost for too many, with the onset of the Great Recession. Given the fact extensive nominal representation was lost, with nary a public explanation, this unfortunate circumstance might have served as a warning for tradable sectors. Could the Fed be counted on to maintain nominal stability, especially during negative shocks when economic stability was most needed? Lingering uncertainties such as this, likely contribute to the recent trend in maintaining increased cash holdings, which would allow quick adjustments in inventory when necessary. Even so, this is a simple form of institutional compensation for economic uncertainty, and one which is easier to understand, than IOR.

Thus far, governments have mostly "compensated" for falling labour force participation, by adding more burdens to their budgets. But what happens if they lose this option? Narayana Kocherlakota, in "Someday Congress Won't Raise the Debt Ceiling", notes that voters in both parties already oppose increasing limits on federal borrowing. He sums up:

My own prediction is that Congress will yield to the administration's demands and raise the debt ceiling sometime this summer. But the aging of our population means that the federal debt is only going to grow, and it would be surprising to me if voter concerns about the debt, didn't keep pace. If economists don't like the debt ceiling, they'd better come up with some other mechanism that allows voters to impose a credible cap on the size of the national debt. Otherwise, I expect that, sometime in the next decade, Congress is likely to yield to constituent pressures and not raise the debt ceiling, despite the attendant economic turmoil that is sure to ensue.

Admittedly, it's difficult for me to imagine an alternate policy scenario that would suffice, given everyone's desire that governments run smoothly in the short run, yet also manage to maintain accountability in the long run. And budgets especially become difficult to manage, when too few citizens are meaningfully engaged in their economies. A gradually falling participation rate will need to be approached directly, if the above mentioned compensation measures are to ultimately be reduced. Even though it is difficult to address the need for full economic participation, ultimately it's simpler to do so, than dealing with the burdens of institutional compensation measures which fail to work properly.

Democracy as Means for a Better Outcome

Democracy as means - even if not always understood on such terms - is the democracy which includes economic and social opportunity. Unfortunately, democracies are put in jeopardy, if basic means of production which include human capital, are too closely held. When this occurs, citizens can become locked in a struggle with one another, as they attempt to ration the increasingly judgmental outcomes of limited means.

Regular readers know that my earlier posts re direct democracy potential, include a broader management of means for human capital as resource capacity. Democracy is a more viable long run option, when production means for basic non tradable sector activity, and their related asset structure, are not limited at the outset. Nevertheless, democracies come under threat, once supply side production limits are so taken for granted as to not be part of active discussion, "hidden" as they are under extensive tax redistribution. And once political parties become reduced to "forcing" their preferred outcomes, any semblance of rational political discourse can be lost.

Even though some of our country's founders understood what could happen, should too much production become the purview of special interests, it took a long time for this supply side problem to reach proportions which now, finally, threaten further economic progress. Yet redistribution struggles are scarcely understood as a means problem. This is particularly important, since no democracy can last indefinitely on redistribution alone.

While some are beginning to insist that democracy can't last, many onlookers assume that struggles over outcome are inevitable, as if means need not be part of the public debate. Perhaps this helps to explain, why even the idea of economic opportunity, has diminished. When democracies are approached in terms of votes for the redistribution of outcome, the concept of democracy may not even appear as though particularly linked (or beneficial) to economic outcomes. For instance, in a recent discussion with Robin Hanson regarding democracy's shortcomings, Bryan Caplan adds:

I'll happily agree that democracy has little systemic effect on economic growth - and that economic growth is the closest thing humanity has to a panacea.

It would appear that growth can continue, in spite of a nation's political and social shortcomings. And growth is a panacea, to the degree it allows more participants - whether or not greater participation was the voter's direct intent. What is neglected in this assessment, however, is that further growth may not be possible, if neither citizens or leaders look beyond their immediate desires, to redistribute already existing outcome.

In particular, Republicans bear considerable responsibility for means of production - some of which limits aggregate outcome potential. Their reluctance to change this approach, is beginning to stand in the way of their rationale for holding power, as James Pethokoukis notes in "Are supply-siders losing their hold on the Trump GOP?" Indeed, the fact that Republicans may even consider raising taxes in the years ahead so as to make healthcare more accessible for working classes, indicates a long standing reluctance, to reform knowledge based production.

Should this be the case, we would be in the odd position of both Democrats and Republicans struggling over who has the most access to outcomes, instead of focusing on long term growth. If so, the difficult task of reforming means, could remain on the back burner. Is there a way to overcome this impasse? After all, so long as human capital remains excessively protected, populations are more likely to react in kind, as their leaders attempt to "protect" the wealth capacity of their tradable sectors.

Communications, Expectations and Equilibrium Dynamics

Are expectations important for monetary policy? Arnold Kling appears "frustrated" with modern macro, and not surprisingly, some of Scott Sumner's market expectations discussion in particular. Kling writes:

In modern macro, we have everybody working in the GDP factory. And we have everybody forming expectations about the price of the output from this GDP factory, or about the total nominal value of that output. And booms and recessions are caused by changes in their expectations...

I know that almost nobody who reads Specialization and Trade buys into my view that movements in aggregate price indices mostly reflect habits and inertia, rather than central bank operations. But when you see the contortions that monetary theorists have gone through over the years, I think I have a fair case.

Granted, for Kling and others who are all too used to the inertia of our nation's capital, ingrained habits can seem as though key economic drivers. Even so, tradable sector activity doesn't have the luxury of "standing still" for societal inertia, no matter how entrenched. Tradable sectors are going to reflect whether consumers and policy makers expect a dynamic economy to continue, even if all concerned are like rusted lug nuts when it comes to non tradable sector preferences. And - with today's digital communications - societal expectations continue to shift in real time.

Why should expectations matter? Why can't Kling's "GDP factory" exist as a mostly objective, "real economy" phenomenon? Tradable sector activity - in spite of it's primary position for wealth creation - is always affected by the subjective dynamics of non tradable sector activity. For instance: While time based services are often uninterrupted as they "wait" for budget reconciliation during economic downturns, tradable sectors lack that option. Other equilibrium dynamics for tradable/non tradable sector activity affect nominal income as well; and consequently, the marketplace structure which is maintained in any given time period.

Indeed, this is hardly the first era, that expectations proved important for economic activity and its associated monetary representation. When communications time between nations was shortened by the first transatlantic telegraph cable, marketplace expectations doubtless became more prominent, in the first globalization which lasted from approximately 1870 to 1914.

Prior to modern communications, it was a simpler matter to anchor tradable sector activity via a gold standard, especially since non tradable sector activity mostly consisted of informal norms which didn't make extensive claims on equilibrium territory. However, once non tradable sector activity grew in complexity and formality, it began to impose both time and political constraints on other sectors, which affected overall output and wealth formation. Even though today's non tradable service structure is still dependent on tradable sector revenue and redistribution, the fact the latter remains the starting point of wealth creation, is hidden by the general equilibrium effects of non tradable sector activity.

Services have always generated important macroeconomic effects, even though they aren't sufficiently emphasized in the literature. For instance, Carlo M. Cipolla noted that economists don't always give services their due. In the quote below: What I describe as primary market activity, Carlo M. Cipolla identifies as primary and secondary market activity. Likewise, he describes as tertiary activity, some of the activities which are included among my secondary market designations, in "Before the Industrial Revolution":

The primary sector normally includes agricultural activities and forestry. Sometimes fishing and mining are also included. The secondary sector consists of manufacturing. The tertiary sector includes the "remainder". Like all residual categories, this one is a source of ambiguity and confusion. In industrialized societies, the tertiary sector is mainly represented by the production of services such as transport, banking, insurance, the liberal professions, advertising and the like. Some years ago, an Australian economist, Colin Clark, put forward the theory of a highly positive correlation between the general level of development of an economy and the relative size of the tertiary sector. But other economists with firsthand knowledge of certain primitive societies have shown that in a preindustrial society, the tertiary, or "residual" group, is also fairly large, with the difference that, instead of including bankers and insurance agents, it includes a picturesque variety of people with trades ranging from dealers in stolen goods to gatherers of used items.

What has changed since the Industrial Revolution? Again, much of what once took place on informal terms (particularly service coordination and home building), was increasingly formalized. Also, as bankers and insurance came to dominate, they did so in ways which lent further confusion, given the interdependence of primary and secondary marketplace activity which defines fiat monetary policy.

The expectations of non tradable sector equilibrium circumstance, often weigh heavily on tradable sector formation. Yet in the 20th century, fiat money made it possible to expand the use of knowledge, beyond what might otherwise have occurred in a tradable sector dominant economy. The challenge now, is to make service formation and knowledge use less equilibrium dependent, so that state and national budgets can be reduced without extensive deflation. These misplaced fiscal policy expectations, will also need nominal stabilizers in the meantime. As Ben Bernanke noted in a recent speech:

Since 1977, real output in the United States has expanded by a cumulative 80 percent, and yet during that time, median weekly earnings of full-time workers have grown by only about 7 percent in real terms.

Marketplace expectations will only become increasingly important in the years ahead. Even though some degree of fiscal policy "bailout" might become necessary, it is vitally important to maintain nominal stability. Short term, such bailouts would place further strains on national budgets. The sooner that time based services can contribute to equilibrium dynamics via less equilibrium dependence, the better.

"Equal" Income Presupposes Abundance. Equal Time Value, Scarcity

Time arbitrage is a form of equal time value, which could provide means for groups and individuals to better manage and coordinate mutual responsibilities, by using the actual time at their disposal. Such options are becoming all the more important, given the present day struggles of budget obligations. Only consider that when economic time value doesn't have an equivalent for money's medium of account function, policy makers end up "hiding" extensive time based requirements in default policy positions.

However, it's important not to confuse the equal resource management capacity of time value, with redistribution arguments such as "more" equal pay. Income based approaches to inequality, are a never ending chase to meet what are essentially self imposed consumption requirements. Whereas equal time value is a supply side response to adjust consumption requirements, through better managed (time based) production.

Arguments for more "equal" income distribution at the lower end, include an implicit assumption there is sufficient wealth in aggregate to continue shifting income downward, for existing consumption needs. Yet this approach is becoming more problematic, as nations begin to follow the lead of the U.S. for further monetary tightening. Income adjustment arguments, tend to assume the rewards of material abundance have not already been assigned to functions involving high value skill and merit. Whereas time arbitrage, with its recognition of time scarcity, reorients the focus on time as a central scarcity which needs to be acknowledged in relation to other existing resource capacity.

A rationale of existing abundance, as though held back by lack of will, was also reiterated in a recent Project Syndicate Post, "Should We Be Worried About Productivity Trends?" The authors begin:

Economists trying to explain the apparent structural slowdown in productivity growth have been asking the following question. Where is the missing increase?

One mentioned possibility was "a paucity of investment opportunities". However, there's a flood of extensive human capital investment in the marketplace, which has yet to be recognized for what it actually suggests in terms of production potential. Education for time based product, is production input. Today's educational losses are quite similar to other investment losses. It would be as though a factory were expected to invest (purchase capital) for up to two decades  - such as today's formal educational processes - before it could begin to even sell its product in the marketplace.

This circumstance is all the more problematic, given the scarcity of our time use potential in relation to other forms of resource capacity. Michael Spence and Sandile Hlatshwayo continue:

But it may also be useful to consider a more fundamental question. How much productivity growth do we really want, and at what cost?

Perhaps what's being missed in this argument, is the still dependent state of non tradable sector activity, on strong output levels via tradable sector activity. A self sufficient marketplace for non tradable sector activity, could add to wealth creation and possibly increase the long term growth trajectory, without leaving lower income levels behind - as is currently the case. Again, from the Project Syndicate article:

All of this suggests that a substantial share of the decline in productivity growth may not be the result of some deep problem with resource allocation...governments should devote resources to reducing inequality, regardless of the shifting preferences of the average citizen.

Apparently, according to their argument, I've been suggesting there is a "deep problem" with resource allocation. Plus, I believe the "shifting preferences of the average citizen" are of utmost importance for time based service product outcomes. Who doesn't want - and deserve - a say in their service accommodations when they experience failing health, for instance?

We have to be careful in assuming structural income coordination issues can be solved away, by shifting resource flows between skills sets which presently hold wide variations in marketplace value. Even if it were possible to do so, this wouldn't increase access to high skill time based product, for those who are presently left with low marketable skill. Aggregate resource abundance is not the same thing as potential availability for time based product. It's best to acknowledge existing time scarcities for what they really are, in order to achieve a better result.

At first glance, one might confuse arguments for "more" income compensation, with the equal time value of time arbitrage, given their emphasis on a common value. Nevertheless, these two resource constructs are completely different in nature. Coordinated time value is subject not only to the limits of what an individual can provide for others in the course of a day, week, month or year, but also the fact that individual's time is already being coordinated with a limited set of individuals. One only need imagine the rural doctor (where they do exist) who can accept a mere fraction of potential local patients.

Last but not least: Some assume that you can't expect much productivity out of a service economy if people perform those services. Fortunately, this does not have to be true. Productivity is currently being lost, because too many human capital inputs are not being accounted for, as the first phase of a services production process. Economic time value needs a position in which it can incrementally proceed, or generate new marketplace output, via the purchase of other time value. Without economic options to pay for human capital as it is acquired, time scarcity issues will continue to weigh  heavily, on those whose time value is insufficient, to purchase the high skill time value that requires decades of inputs before output is possible.