Wrap Up for January 2022

Don't reason from a change in profit margins.

"are traditions that no one cares about worth preserving?"

Prices for used vehicles are no longer rational.

Alan Cole questions the logic of 95 year copyright protection.

Paul Krugman and David Beckworth on inflation.

The pandemic will leave long term behavioral effects.

Timothy Taylor highlights some points from an online draft of Olivier Blanchard's upcoming book on low interest rates and fiscal policy.

Perhaps the Fed isn't sufficiently worried about the labour force participation trend line.

Some basic elements for 1000 year structures.

"These places can recover." Edward Abbey would be relieved.

The labour shortage is real. And, the Fed is drifting away from what market monetarists had hoped for in terms of accurate NGDP targeting.

The deep state as a tool for redistribution.

Reflections from Adam Tooze on The Mushroom at the End of the World.

Scott Sumner explains his preferences to fiscal policy.

Solving the "duck curve" of renewables. And Noah Smith is optimistic about renewable electricity.

Noah Smith interviews Tyler Cowen.

It was once more difficult to determine whether a car might be a lemon.

Will NGDP stay close to the 4% growth trend that stabilized in 2010?

Why has book reading declined?

Builders are reaching a point where they can no longer pass cost increases on to consumers. My thought: Is it still possible to explain the ways we might reconfigure the nature of housing definition and composition? 

"the real estate market in the U.S. now resembles the car market in Cuba: A stagnant supply of junkers is being forced into service long after its intended life span."

The recent increase in goods demand is unprecedented.

"When should international boundary lines change?"

Cutting through the noise of inflation.

How to think about excess savings?

Some recommendations on books about GDP from Fivebooks.

18 charts that illustrate the U.S. economy.

Batch versus flow in production methods.

"Crypto and the politics of money" 

So, what is left? "Dreams and kindness are all we have."

"holding AD constant, eliminating shortages with higher prices means reducing output."

In the UK, demand for healthcare has been outstripping resources even prior to COVID.

Housing is too important, for societies to leave its present market framing in such stagnant circumstance. I tried to write another post about housing this month. But after my Blogger format "swallowed" several days of efforts, I fortunately recalled this Works in Progress article which is definitely worth reading.

What is meant when we say something is inflationary? Part one and part two.

We are not experiencing inflation in a conventional macroeconomic sense.

Might a 2024 coup actually happen? Some weaknesses in our election system.

Old style monetarism was marginally successful in 2021.

How are stablecoins different from other cryptocurrency? 

Some thoughts on The Tyranny of Merit.

Polarization is a Problem for Progress in General

Today's lack of political good will is worrying enough, but it also comes with plenty of economic ramifications. For that matter, both NIMBYism and culture wars tend to reduce economic dynamism. Just as the "not in my backyard" mentality turned housing markets into major headaches, it even affects technological change such as transitioning to electric vehicular transportation. Many aspects of our lives and environments come down to what people of all political stripes don't want us to successfully engage in, as opposed to what could be accomplished.

In all of this, whatever happened to the hopes and dreams of centrist politicians and citizens? After all - even a decade earlier - moderates were still a meaningful part of public dialogue. While centrists occasionally held alternative views, they were often able to bring opposing parties to the table to get things done. 

Indeed, moderates have been important for societal progress up until recently. A relative few remain who still highlight economic progress and the benefits of growth. Unfortunately however, the majority of such gains became associated with prosperous citizens and regions rather than average citizens - let alone those with limited incomes.

If polarized landscapes weren't already dangerous enough, what might that mean for younger generations? Indeed, will they eventually become receptive to the idea of civil war? Don't forget also that younger generations aren't convinced of the future viability of Social Security in the U.S. Even though I hope Social Security continues to function as a glue for economic stability and common purpose, one can't be too certain. Should Social Security benefits be reduced in the near future, that might further destabilize political desires to remain united.

Polarization also represents a loss of what was once known as Third Way political thought. For instance, when I was much younger, Bill Clinton's presidency was associated with this line of reasoning. Alas, other than environmental protection, who still believes such rationale is relevant? From Wikipedia:

The Third Way supports the pursuit of greater egalitarianism in society through action to increase the distribution of skills, capabilities and productive endowments while rejecting income redistribution as the means to achieve this. It emphasises commitment to balanced budgets, providing equal opportunity which is combined with an emphasis on personal responsibility, the decentralisation of government power to the lowest level possible, encouragement and promotion of public-private partnerships, improving labour supply, investment in human development, preservation of social capital and protection of the environment.

Why was much of this abandoned? Part of the problem is how advanced education became a place for elite dialogue at the expense of economic dynamism. Meanwhile, active knowledge use - since it lacks any grassroots equivalency - is being confused with information and flawed logic mostly meant to circumvent action. Formal education is certainly not the place for increased distribution of skills and capabilities! Instead, the "gateway to the good life" hoards its limited slots according to what monetary compensation might amply reward. Worse, few policymakers remain willing to balance budgets, since abandoning financial restraint means squeezing a few more lucky participants onto the gravy train of human relevance. And decentralisation? The only decentralisation my state government is interested in, is the powers it can remove from both Washington and cities which might otherwise function better if they were allowed rights to do so. 

I continue to believe the best way to overcome polarization, is to create a knowledge based economy that can bypass the culture wars of educational access. However, while I remain guardedly optimistic, my hopes have radically diverged from what many once considered optimal paths for abundance and success. Is it still possible to use knowledge in more practical ways, instead of wielding it as the ultimate weapon for income divisions and urban rural divides? Perhaps we will find out soon enough. 

Wants are Sometimes a More Relevant Form of Demand

When it comes to market design for low income consumption potential, perceived needs are often a logical starting point. Certainly I've emphasized needs focused design for lower income groups over the years. But what about circumstance when consumer wants are the more relevant factor? 

It's a consideration which matters when resources are not only scarce but also include experiential characteristics. Economic time commitments are a great example. Not every individual is going to seek out the kinds of knowledge and skills from people that others might happen to deem most practical. 

However, the importance of consumer choice especially holds true for energy resource options. In particular, both consumer needs and wants will determine aggregate energy demand (not to mention supply) in coming decades. Consequently, both should be factored into market and community design, so that resource scarcities can be fully accounted for. Even though we are beginning the shift from fossil fuels to electrically generated transportation, the processes involved won't always go smoothly. No one really knows yet who will remain able to travel as frequently via electric vehicles, as was possible with gas powered vehicles. What's more, energy use patterns and their fluctuations will remain important for central bankers when it comes to inflation management and economic stability. How might potential energy consumption for low income groups contribute to greater economic stability via supply side innovation? 

Community design in the near future could address such concerns. In all of this, our routine transportation offers a straightforward example. The natural consumer preference for vehicular transportation as a special activity, could contribute to positive energy use outcomes. Most everyone, regardless of income level, prefers driving for fun (such as vacations and weekend trips) over the hassles of driving to and from work. Even though it's presently difficult to translate this reality into walkable communities for higher income levels, there's been a dearth of low income community design in recent decades. Hence the good news: these missing design elements make it easier to create new communities from scratch for lower income groups. In the process, we would be able to reduce needs based (work related) automotive transportation in favour of walkable communities. Yet low income groups could strive for energy based transportation options specifically designed for the wants of experiential travel.

At an aggregate level, community design for energy wants with reduced energy needs, leaves more room for all citizens to benefit from transportation, despite impending energy scarcities. Creating walkable communities could make it feasible to better manage overall energy demand. Walkable communities can also make it easier for low income groups to maintain more efficient control over their (already) scarce time. We are fortunate indeed that it is easy to discern what holds greater personal value, in terms of energy resources for transportation. Let's follow through on that knowing, to ensure more meaningful energy consumption for all concerned in the decades to come.

Wrap Up for December 2021

"Booms and busts affect low-wage workers the most."

Data finally show when people move from unemployment to self employment.

The placebo effect is apparently stronger in the U.S. than in other nations.

Despite recent appearances, migration remains historically low. "For three years running, the national migration rate has stood below 10%.

Net worth has soared in relation to actual economic growth.

China's lack of water could prove an unfortunate game changer for its manufacturing capacity.

China "doubles down" on its property sector.

Early on, healthcare was still responsive to deindustrialization. "In historical perspective, the process appears in close parallel to mass incarceration."

A book review of Grand Transitions by Vaclav Smil.

Are there ways to increase the cost of Nimbyism?

Low paid healthcare workers are in especially short supply now. And, why are physicians faced with such struggles?

The Biden administration is inexplicably raising the cost of building homes (NPR).

Alas, there's not much Christmas spirit in Washington this year.

"Drug lords would be horrified if we ended the drug war."

If only more communities had a monthly ritual like this.

There's an app that lets you lend your eyes to a blind person.

Noah Smith returns to techno-optimism.

The first year of the Great Depression was "100% tight money".

China doesn't really have a safe route forward.

There is increasing pressure on the Fed to take up what are populist goals.

What happens when everyone demands employment that's solely high skill human capital?

What makes a quarter point so important?

The new Medicare model keeps up to 40% of revenues for its own profit.

Another area of life which could benefit from time arbitrage: the lost art of listening to others.

The "Great Resignation" has been more of a Big Switch than a Big Quit.

Timothy Lee explains the "expectations channel" in easy to understand terms.

Inflation affects high income versus low income populations somewhat differently.

Democratic rights gains over time: First, the good news. However, democracy in the U.S. can no longer be taken for granted in the near future. Plus, a negative international trend towards lost freedoms, began in 2006.

When oil prices rise, the resulting inflation is only temporary.

A crisis of capitalism? On the contrary, its production methods remain both dominant and stable.

Since healthcare in the U.S. is not free market, both low income groups and other markets have suffered the consequence.

Not all flood proofing infrastructure has to be government planned. Also, creating drinkable water from the atmosphere.

Scott Sumner highlights some immigration issues.

Climate change responses include their own opportunity costs.

What made this recent supply chain problem so different?

An introduction to economic complexity.

What happens when producers simply "demand" their own goods?

David Andolfatto interviews David Beckworth in this end of year podcast.

There's not really a truck driver shortage, after all.

However, there is definitely a car shortage. And dealership expectations amplified the problem.

Who should we be keeping up with in 2022?

Wrap Up for November 2021

Did Baby Boomers really ruin it for everyone else?

30 percent of Republicans now believe violence may be warranted.

A different knowledge systems approach is needed for public health labs which sometimes require more education than can realistically be compensated.

How relevant are supply and demand for macro level inflation?

Could deglobalization also prove problematic for inflation?

When it comes to economic growth, governments sometimes imagine they are the ones in control.

Prior to the pandemic, Texas led every state in rural hospital closures.

Some capitalism basics from Miles Kimball.

"Is economics fit for the modern world?"

Algorithms could do a lot of good, but not if bias is built into their design.

The evidence has only grown that the Great Recession caused the housing crisis, not the other way around. "There was never a national housing glut."

Many traffic stops are really about increasing municipal revenue. One might even designate this as a "highway robbery" example of the Baumol effect.

Dementia is a major public policy challenge.

A closer look at supply side bottlenecks in U.S. healthcare.

Private insurance for aging needs is no longer a realistic option on a middle class income.

Medicare and Medicaid are subject to more billing uncertainties than private insurance.

This "inflation problem" is actually a lack of real GDP growth.

Disparities in state level health outcomes have grown in recent decades.

An update on economic conditions from Matthew Klein.

Is the U.S. well positioned for AI adaptation?

Difficulties in hiring are leading to further automation. Robots for "unpopular night shifts" sounds like a particularly good idea.

It doesn't take much for excess demand in manufactured goods to result in bottlenecks.

When it comes to politics, the adults have left the building. Will democracy survive?

The pandemic has left many healthcare workers worried about the future of medicine. Alex Tabarrok also highlights how many have left the profession.

A closer look at international convergence.

An in depth consideration of state capacity.

The China trade shock reached a plateau in 2010.

What construction innovation is actually getting utilized? And, "The assembly line was part of a long series of efforts to streamline the production process, all built on a foundation of interchangeable parts."

Will minerals for the renewable energy transition become accessible in the U.S.?

China's growth trajectory continues slowing down.

Childcare as an apt example of services needs: When the personal time of others is the product we're seeking, "You can't raise wages without raising costs." 

When, and how, is social mobility a positive outcome?

The likelihood of job loss due to automation, is also a factor in radicalization.

Recycling may come early to electric vehicle batteries.

Agriculture as an echo of technological progress in general.

Supply side circumstance aren't as simple as they sometimes appear.

Few people are taking on the role of distilling research.

Matthew Klein explains to David Beckworth why we shouldn't be worried about inflation right now.

Macroeconomics would be less confusing with a nominal spending/real output model.

Wrap Up for October 2021

U.S tariff rates are now insanely high.

Our working lives in time based services are being reconsidered.

A look at the productivity slowdown which took place in the seventies.

Too much of China's power needs are still being met by coal.

Peter Boettke on efforts to "repair a broken world".

"Increasing the national debt is not popular."

Staying open while still controlling Covid, has been a delicate balance.

Is drama over the debt ceiling more than "just theater" this time?

We are far more polarized than we were in the past.

Even though meritocracy is problematic in multiple respects, it is still better than the alternative.

Some reasons for deficit worries are more reasonable than others.

"Do Not Blame Trade for the Decline in Manufacturing Jobs."

Sketching out a theory of construction productivity.

Durable goods as a more reliable source of recession recovery.

"A Nobel Prize for the Credibility Revolution." And, "David Card on the return to schooling" Timothy Taylor also discusses causality.

The goals of fiscal policy aren't as easy to pin down as the goals of monetary policy.

Scott Sumner discusses his new book with David Beckworth.

There's plenty of reasons it's not really working to tax the rich. Plus a related discussion re opportunity zones as tax havens.

How high will house prices go in 2022?

Efforts to reduce overfishing in the U.S. have proven successful.

Everywhere you look there are bottlenecks. But goods have rebounded more than services.

Stagflation? We're not even close to what the seventies were like.

If the nation defaults on debt payments, what are the consequence? How to respond?

When it comes to supply chains for electric vehicles, there's plenty of work to be done.

Jason Furman considers why recent productivity is higher in the U.S.

"A Critique of Interest Rate-Oriented Monetary Economics" Also, "The Princeton School and the Zero Lower Bound"

Ryan Avent suggests a "Commonwealth of the Americas".

What does meaningful work consist of?

Taking proactive steps for climate change.

Hopefully the Fed will not overreact to higher inflation.

States benefited in the 1850s when they slaughtered special interests.

Community ownership has reduced deforestation.

Without fiscal assistance, the economic effects of the pandemic could have been worse than the Great Depression.

Which will prevail, robots or full employment? 

Are sugar subsidies here to stay?

States are waking up to the fact non-compete agreements create unnecessary burdens.

Services are evolving. But how will they contribute to productivity gains?

The labour market has changed in unexpected ways.

"The Rise of Pass-Throughs and the Decline of the Labor Share" When it comes to tax avoidance, plenty of undeclared high skill self employment hours remain hidden.

Diane Coyle reviews Radical Uncertainty.

Extreme political polarization makes the U.S. an unreliable geopolitical partner.

Lessons learned from the Great Recession helped the Fed respond to the pandemic. Also, a closer look at recent progress.

Unique circumstances led to the creation of GDP as an economic measure.

Is Time Arbitrage Feasible For Post Covid Economies?

Even though time arbitrage would be a complex undertaking (particularly for large scale versions), today's time based services are nevertheless being called into question, as post Covid realities gradually emerge. Plus there's plenty of unknowns in time based service markets which represent a wide range of knowledge, skill, and yes, physical activities as well. How will societies ultimately respond?

While problems were already evident in secondary markets such as healthcare before the pandemic, there's also recent troubles for time based services that are directly linked to originating (primary market) wealth. For instance, both manufacturers and home improvement retailers have limited incentive to compensate the time based labour involved in installations and repairs at private residences. Worse, these resulting service labour shortages are amplified by resistance among service workers who were never really keen on commuting to outlying areas in the first place! Indeed, a CEO for Whirlpool expressed concern that labour shortages may in fact be structural. Likewise, Zillow, recently had to stop purchasing homes when it struggled to secure sufficient timely labour in order to resell at a profit.

More specifically, what can be done at local levels, should time centered services become increasingly difficult to procure from a distance? Just as time arbitrage could function as a primary market substitute for some of today's secondary markets in knowledge and skill, it could also shore up missing services associated with traditional primary markets. In many instances, time arbitrage could benefit coordination patterns in local services where strength and physical stamina may be just as important as knowledge and skill. Since many manufacturers and retailers have become compromised in terms of services employment potential, they could shift towards establishing commodity and goods specific educational support for their product to local community levels. Doing so would also allow local citizens to more meaningfully incorporate home renovation and appliance maintenance needs in their (time symmetric) educational settings Even though local citizens would not be employed by home improvement manufacturers and retailers, they still have incentive to work with these firms for an outcome that would help both groups. Best, a hub and spoke (or city to country) educational approach could help recreate formal services economies where they are most needed. 

Better use of coordinated time symmetry could eventually help restore structural balance to economic conditions in general. Chances are, efforts to bring time value to the table for market outcomes, would result in greater general equilibrium representation for direct forms of wealth creation than is presently the case. After all, there's a good chance that 80 percent monetary representation for services was too much to begin with, to maintain long term economic stability. Only consider the prominent example of structural imbalance in our healthcare knowledge use patterns. Even Noah Smith recently challenged "shoveling money at overpriced service industries", hence has become one of many who wonder why governments continue to subsidize vital services purposely made scarce in the twentieth century.

Long term economic stability may well depend on whether societies are able to make time value a more important component of formal economic activity. All the more so, since many communities already struggle to provide the kinds of local services which are so beneficial for citizen outcomes. When it comes to general equilibrium dynamics, time arbitrage might at least be able to reduce the discrepancy between monetary representation for services versus traditional wealth sources, to 70 percent versus 30 percent. 

A more reasonable sectoral balance could improve the long term odds of good economic complexity in our formal activities. One way to think about the processes involved, is how such efforts might ensure reliable forms of societal coordination to transfer knowledge and skill which can be understood by most citizens. Otherwise - if and when service markets become distorted - people understandably react with DIY measures instead of - for example - benefiting from healthcare services provided by others. Granted, DIY is often the most practical strategy. But done in excess, extreme self reliance might put the long term preservation and transfer of knowledge use through society, in doubt. And should too many of us end up resorting to DIY, when might the process eventually evolve into a tipping point of informal economic activity, even in places where it was never expected? Alas, informal economies have their problems (such as oppressive amounts of gang activity) and often prove difficult to change once entrenched. If we can avoid it, let's just not go there. Hopefully, societies will learn to better coordinate services so that knowledge and skill can be preserved, hence remain part of our formal economies in the foreseeable future.